Apple Refutes Claims Of 75% App Store Profit Margin, Says They’re Unaware

Apple’s new CFO was swiftly thrust right into a courtroom, the place he was tasked with defending the corporate in a category motion lawsuit. Kevan Parekh said that the corporate lacks readability on its revenue margin from the App Retailer.

This isn’t the primary time Apple has adopted this place. Apple Fellow Phil Schiller beforehand asserted he was unsure whether or not the App Retailer was even worthwhile…

Antitrust Lawsuits within the UK

Apple is at the moment coping with two lawsuits within the UK, each claiming that the corporate exploits its monopolistic maintain on the sale of iPhone apps by imposing extreme commissions.

The first competition in each circumstances is that, till lately, builders had no selection however to promote iPhone apps and in-app purchases via the official App Retailer. This case granted Apple monopolistic authority over iOS app gross sales and allowed it to dictate fee charges that builders needed to adjust to. Though there have been some modifications on this regard within the EU and US, the established order stays within the UK.

A billion-dollar lawsuit was initiated on behalf of builders in 2023, whereas a second lawsuit representing shoppers is at the moment in course of.

App Retailer Revenue Margin Estimates

Unbiased estimates counsel that Apple’s revenue margin on the App Retailer falls between 75% and 78%.

An knowledgeable witness throughout the Epic Video games lawsuit in 2019 proposed that the margin was 78%. A British knowledgeable within the ongoing case has calculated that it’s “greater than 75%.”

If correct, this determine considerably surpasses the revenue margins typical of even premium companies. For context, Apple’s total margins hover round 37%. A revenue margin over 75% might substantiate claims that the corporate costs extreme commissions attributable to its management over iPhone app gross sales.

Apple’s Claims of Ignorance

Apple has persistently maintained that it’s unaware of the particular revenue figures. The corporate explains that it doesn’t segregate its Service income into distinct classes; whereas it understands the general margin for that sector, it lacks a share particularly for the App Retailer.

This was the muse of Phil Schiller’s assertion final 12 months, the place he urged he didn’t even know if the enterprise was worthwhile. He famous that the corporate doesn’t preserve minutes of gatherings amongst senior executives discussing such issues.

The Monetary Instances reported that incoming CFO Parekh echoed this sentiment yesterday when questioned concerning the 75% and 78% estimates.

Parekh said: “I wouldn’t say they’re correct.” In his testimony, he indicated that Apple “can’t allocate all oblique prices to particular services or products.” He elaborated: “Any try to allocate a majority of these prices would contain imprecise and subjective judgments.”

DMN’s Perspective

The assertion that an organization of Apple’s magnitude doesn’t interact in simple profit-and-loss monitoring for certainly one of its most important divisions is tough to understand.

Whereas senior executives wouldn’t commit perjury, probably the most believable rationalization is that Apple is unaware of this determine just because it doesn’t need to comprehend it. This might stem from an consciousness that the revenue margin is considerably excessive, probably jeopardizing its standing in associated authorized issues.

The authorized proceedings are ongoing.

Picture by Jakub Żerdzicki on Unsplash