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App Store Chief Says Apple is Aiming to Level the Playing Field for Developers

By Stephen Nellis

July 28, 2008 (Reuters) - Apple Inc Chief Executive Tim Cook will be challenged by U.S. lawmakers on Wednesday about whether Apple's App Store practices result in it having a disproportionate control over independent software developers.

Apple tightly controls the App Store, which is the core of its $46.3 billion annual services business. Apple's commissions vary between 15% and 30% on a lot of App Store orders and its ban on attracting customers for outside sign-ups, as well as the opaque and unpredictable app-vetting procedure have been criticized by developers.

But when the App Store was launched in 2008 with 500 apps, Apple executives saw it as an experiment in offering a compellingly low commission rate to draw developers, Philip W. Schiller is Apple's senior vice president of global marketing and the top executive for the App Store said to Reuters in an interview.

"One of the ideas we have come up with is that we'll treat all apps in the App Store the same way. That's one set of rules for everyone There are no special deals, no specific terms, no special code every rule applies to all developers in the same way. This was not the case with PC software. Nobody thought like that. It was a complete reverse of how the whole system was supposed to function," Schiller stated.

Software sold in physical stores meant that software was required to be purchased for shelf space and prominentness. These costs could account for up to 50 percent of the retail cost. Small developers were unable to get into.

Bajarin stated that the App Store's predecessor was Handango. Handango was a service that allowed developers to offer applications over cellular networks, to the Palms of users in exchange for 40 percent commission.

With the App Store, "Apple took that to an entirely new level. At 30%, they were a better value," Bajarin said.

However, the App Store had rules: Apple reviewed each app and mandated the use of its own billing system. Schiller said Apple executives believed that users would feel more confident buying apps if they felt their personal information regarding payment was safe with Apple.

"We believe our customers privacy should be protected in this manner. Imagine having to input credit cards and payment details to every app you've ever used," he said.

Apple's rules started as an internal list, but were published in 2010. 886LV

Developers have complained to Apple about commissions over the years. Apple has since reduced the areas that developers are allowed to apply. In 2018, it permitted gaming companies, such as Microsoft Corp , maker of Minecraft, to let users login to their accounts so long as the games also included in-app payments from Apple as an option.

"As we spoke with some of the most well-known game developers, such as Minecraft and Minecraft, they told us that they understood the reason why users should be able to buy the subscription directly on their device. But we have a lot of users coming who bought their subscription or their account somewhere else such as an Xbox, on the PC, on the web. This is a huge obstacle to accessing your store,'" Schiller explained. "So we came up with this exception to our own policy."

Schiller said Apple's cut helps to fund a vast system for developers: Thousands of Apple engineers run secure servers to host apps and develop the tools necessary to develop and test the apps.

Marc Fischer, the chief executive of mobile technology firm Dogtown Studios, said Apple's 30% commission felt justified in the beginning of the App Store when it was the cost of global distribution for a then-small company like his. However, now that Alphabet Inc's Google have a "duopoly" on mobile app stores, Fischer said, fees will be much lower - possibly the same as the single-digit charges that payment processors charge.

"As an entrepreneur, you have no choice but to accept that charge," Fischer said.

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