On September 6th (local time), there was a report that the company may be considering reviewing the way the App Store generates revenue. This is not a report on an increase in commission rates, but rather a policy update on how Apple plans to increase its profit margin. However, the review of the revenue structure will also affect the payments of iPhone users in Japan through app prices and monthly subscriptions. We will organize what has been reported and what remains unconfirmed.
What will happen to App Store fees?
At this time, there have been no decisions regarding revisions to commission rates or billing conditions. What has been reported is that the matter is being considered internally.
Even if something were to work, the impact would first be felt by the developer, and then indirectly by the user. The fee information will not appear directly on the payment screen. What is likely to come first is not an increase in commission rates, but a review of fixed costs and peripheral services on the developer side. In addition, in Japan, the depreciation of the yen and changes in the payment method system are occurring at the same time, so the way the changes are manifested may be different from that in the United States.
The price of apps will not rise immediately, and we are now looking at whether conditions for developers will change over the medium term.
What was reported and the executives who appeared
According to foreign media reports, Apple is looking for ways to increase profit margins on the App Store and generate additional revenue on an ongoing basis. The people said to be at the center are John Tarnas, who has been appointed as CEO, and Eddie Cue, senior vice president who heads the service division. The specific details of the changes have not been disclosed.
The same report also states that the transfer of Philip Schiller, who retired from his role as head of the App Store and events, is not unrelated to this review. Mr. Schiller believed that a move to prioritize profits would only lead to backlash from developers and regulators, and although there were no conflicts within the company, he did not want to get involved.
The background lies in the structure of the App Store business, where profitability is high, but decisions to increase numbers directly increase regulatory risk. The fact that a person who has been at the brunt of regulations for many years distanced himself from the company suggests that there was a difference in temperature within the company.
Reasons why raising commission rates is difficult to choose
Even if you were to increase your profits, the most obvious option, “increasing the commission rate”, would probably be your last option. This is because commission rates have long been an issue that competition authorities in each country have viewed as an issue. If you raise the price, you could end up handing over material for investigation or litigation.
What is realistic is to increase fixed costs and peripheral services on the developer side. It is important to note that this is not what was reported as Apple’s plan. As examples of possibilities, overseas media have cited a review of the developer program fee, which is $99 a year in the United States, and charging large-scale developers based on the scale of use. In this direction, you can increase revenue without touching the price list that is visible to users, and you can keep regulatory friction to a minimum.
Impact on iPhone users in Japan and two routes
The impact on iPhone users in Japan will be felt through developers. There are two routes: passing it on to prices and changing exchange rates and payment methods.
Transfer to app prices and subscriptions
Developers may add the increased fixed costs to the price of the app itself, the monthly subscription fee, or the amount of advertising. It is thought that the more convenient an app is developed by an individual, the thinner the profit margin, and the more easily the impact will surface. It is expected that there will be a slight price increase or a reduction in the functionality of the free version.
Weak yen and the spread of external payments
Apple determines App Store prices in each country’s currency, and there is no mechanism in which exchange rate movements are directly reflected in prices. As the yen depreciates, prices in Japan will tend to rise as Apple reviews prices in each country. If costs increase on the developer side, the impact on Japanese users is likely to be different from that in the United States.
On the other hand, Japan has also enacted a law regarding the promotion of competition regarding specific software used in smartphones (Smartphone Software Competition Promotion Law). This law requires the creation of an environment where users can be guided to payment methods other than in-app purchases. The more Apple strengthens its revenue measures, the more developers are expected to step up their efforts to offer payment options on their own sites. Increasingly, users are choosing where to pay cheaper.
Meanings that emerged just before the announcement event
It cannot be overlooked that the report came out just before the announcement event on September 9th (September 10th, Japan time). Shortly after the person who led the hardware division became CEO, the topic of services revenue came up. It stimulates interest in whether to focus on products or services.
However, what has been reported is only the existence of consideration. If something actually happens, it seems likely that it will start with less obvious changes to the terms and fees for developers. As a user, you should definitely check to see if the price display or billing information of the apps you use regularly has changed quietly.
Photo:9to5Mac
Source: iPhone Mania
