Apple is trying to convince a judge that it’s not milking the App Store for all it’s worth, and today the company dropped some big numbers to help make its case. Apple claims that its App Store drove $400 billion worth of physical purchases in a single year in 2019, and that — unlike digital purchases and subscriptions — Apple doesn’t take a cent of that money.
That’s according to App Store boss and longtime Apple marketing exec Phil Schiller, who also testified that the company spends a staggering $50 million a year to throw its Worldwide Developer Conference (WWDC) event. The company’s also building a new developer center at its Apple Loop headquarters in Cupertino, he says, though I didn’t catch how much the company’s investing in that. None of these are included in the App Store’s budget, Schiller testified.
Schiller says in 2019 App Store drove $400 billion+ in transactions of physical goods, so food delivery, Amazon, Uber/Lyft, etc.— Nick Statt (@nickstatt) May 17, 2021
Judge interjects. “Billion with a b?” It’s a big number, and Schiller confirms Apple doesn’t take a cut of that.
Schiller’s going over the explanation Apple has given before for why it doesn’t take a commission on physical goods: it can’t guarantee they actually arrive. (This logic goes for things like Lyft/Uber as well, per earlier discussion.)— Adi Robertson (@thedextriarchy) May 17, 2021
Why isn’t Apple trying to take a cut of physical purchases? During his testimony, Schiller explained that Apple couldn’t guarantee they would actually arrive.
But I also imagine it might have been a hard sell with developers: can Apple really argue that it drove those $400 billion in purchases by itself? If I’m going to buy something online, I’ll probably start by whipping out my phone, but I’ve got a laptop with a perfectly good web browser right here to buy those same items, if an app doesn’t immediately do the job. Amazon knows this, and used it to bypass Apple’s digital cut on movies and shows, too, until it got a better deal. (Digital books are a different matter.)
Even without a cut of physical purchases, Apple’s App Store cut is estimated to rake in $64 billion for the company each year, with profit margins approaching a ludicrous 78 percent. Apple seems to attempting to argue that because things like WWDC aren’t included in the App Store’s costs, the real profit margin is lower.
basically, we are establishing in the law’s tedious way there are lots of App Store benefits that aren’t really… the App Store itself. attempting to undermine Epic’s claims about the profit margin, and establish that the App Store can’t be separated from the phone itself.— Elizabeth Lopatto (@mslopatto) May 17, 2021
Schiller testified that 84 percent of all App Store apps are completely free, with roughly 75 percent of all games on the App Store completely free. Of those games, approximately 17 percent are freemium (requiring in-app purchases to unlock content) and 6 percent are paid, leaving just 2 percent on a subscription model if we do the math.
Schiller also said today that Apple has spent $100 billion on research and development over the past fifteen years, $18 billion of that just last year in 2020.
Update, 6:00PM ET: Added line and embedded tweet about the point Apple appears to be trying to make today by touting all of its investments in the iPhone and iOS.