Elon Musk isn’t the first or necessarily the most powerful executive to take Apple’s App Store payments.
Industry insiders, from developers to CEOs, have long balked at the so-called “App Store tax” of 30%.
Lawsuits, regulators, corporations, and many others have failed to make much of a difference.
Elon Musk publicly railed against Apple this week, rejecting the iPhone maker’s “hidden” 30% fee for all in-app transactions on the iOS platform.
While Musk is new to this particular fight, it’s part of a war that’s been going on in the tech industry for years: Over the years, everyone from independent software developers to CEOs have denounced Apple’s “monopoly” over the App Store. using its internal payment processing service.
Still, Musk is arguably the most prominent public figure challenging Apple, and his very outspoken stance on the issue shines a light on a relatively niche issue for app-dependent businesses. The 30% drop could be a significant drag on business for Musk, who has said he intends to turn Twitter into an “everything app” that combines social media with shopping and other forms of online payment.
“It’s a very unique thing for someone who’s the richest man in the world to have the same problems as a small software developer — maybe one or two employees,” said industry executive Rick VanMeter. The Coalition for App Fairness, a group that often criticizes the so-called “Apple Tax.”
Meanwhile, Musk’s wealth and influence may not be enough to turn the tide and turn Apple around. Over the years, Apple has fended off lawsuits, regulators around the world, and peers in the tech industry—none of which has managed to get Apple to change its approach to in-app payments.
But history may not be on the side of the new Twitter owner. High-profile litigation, global regulators and major companies have tried to change Apple’s app payment systems with little success.
Epic Games challenged Apple even more directly
The most high-profile issue with Apple’s payments came in 2020, after Epic Games’ mega-popular game “Fortnite” was pulled from the App Store for offering discounts to users if they used non-Apple payment methods to purchase digital goods. The time has come to sue.
A decision on the lawsuit came in late 2021, when a judge ruled in Apple’s favor, except for a concession that the iPhone maker must allow developers to connect to non-Apple payment methods. Both sides are currently appealing the decision, leaving the final outcome and impact of the legal battle uncertain.
However, Epic’s challenge succeeded in developing a larger reason to pressure Apple to change its ways. Shortly after the lawsuit was filed, a group of companies including Spotify, Tinder parent Match Group, Tile, and Blockchain.com formed the App Fairness Coalition with the mission of advocating for a more balanced dynamic between apps and their markets. .
The coalition laid out 10 principles it wants all app marketplaces to adhere to, including a requirement to get rid of “unfair, unreasonable or discriminatory fees or revenue shares” and a more fundamental requirement to allow developers to communicate more directly with their users.
Apple has strongly resisted the regulations
VanMeter of the App Fairness Coalition said the App Store’s renewed focus on the 30% transaction fee re-emphasizes the problem and the need for legislative solutions.
Regulatory agencies in the US, Australia, Japan, South Korea, Russia and other countries with significant iPhone users have also taken a look at Apple’s App Store payment structures. The European Union, Japan, South Korea and the Netherlands are just some of the jurisdictions that have successfully passed laws targeting the “Apple Tax”, and others such as the UK are expected to follow suit soon.
However, the US has not yet joined – although a bill called the Open Application Markets Act has been stalled on the Senate floor since it was introduced in February.
“If the United States doesn’t act, it really risks falling behind these other jurisdictions that are moving forward to address competition issues in the app market,” VanMeter said. “The United States has a real opportunity to be a leader in this discussion here.”
Even where Apple faces new laws that limit some of its power, the tech giant isn’t always fully compliant. Dutch and South Korean regulators have clashed with Apple, Apple has yet to make any changes to the way it does business in those countries.
All of this means that Musk and his followers have been joining the fray in the public and private spheres for some time now, and it’s unclear whether he’ll succeed in forcing Apple to rethink things. But Mark Mahaney, an analyst at Evercore ISI, also says the weight of his influence changes things at least a little.
“I don’t know that it’s any different,” Mahaney said. “I don’t know that he’s going to make a quick decision on this anytime soon, but his voice will matter.”
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