Ever since the launch of the iOS App Store, Apple has taken a 30 percent revenue cut from developers. Now known as the ‘Apple Tax’, Epic Games is attempting to challenge this revenue split in court. As it turns out, executives within Apple had their doubts that they would be able to maintain a 70/30 revenue split and some suggested dropping it as far back as 2011.
Internal emails amongst Apple executives were made public as part of the Epic Games v Apple trial. In one such email sent in July 2011, App Store head, Philip Schiller, asked Apple Services head, Eddy Cue, and former CEO, Steve Jobs, if the 70/30 revenue split was sustainable and even suggested dropping to 80/20.
The document, which was first publicised by Bloomberg, shows Shiller saying: “I don’t think that 70/30 will last that unchanged forever. I think someday we will see enough challenge from another platform or web based solutions to want to adjust our model”.
Later in the email, Schiller adds “once we are making over $1B a year in profit from the App Store, is that enough to then think about a model where we ratchet down from 70/30 to 75/25 or even 80/20 if we can maintain a $1B a year run rate?”
This just goes to show that Apple executives saw this challenge to its revenue model coming nearly a decade ago. At this point, Apple is making well over $1 billion per year from the App Store. In fact, in 2020, App Store revenue rose as high as $64 billion.
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KitGuru Says: Apple is facing more pressure now than ever before to adjust its App Store business model. Day 2 of the Epic v Apple trial is kicking off this afternoon, so it’ll be interesting to see what else comes out from the court proceedings.