Phil Schiller Suggested Reducing the App Store Fees to 20-25% in 2011

iPhone App Store

Phill Schiller, head of the App Store at Apple, considered reducing the App Store fees back in 2011 when the store generated over $1 billion in profit for the first time.

In an email in July 2011, Phil Schiller asked Eddy Cue, SVP of internet software and services, if the “70/30 split will last forever?” While he was a “staunch supporter” of the fee, the executive was unsure if it would remain “unchanged forever.”

Schiller suggested that if Apple eventually had to make changes to the App Store fees, it should be from a position of strength. He suggested the company could reduce the App Store fees to 20-25%, provided it would still generate $1 billion in profit annually.

Apple is currently in the middle of a court battle against Epic Games over the App Store fees. Both companies are presenting their argument in the court this week as the case heads to trial.

“I know that this is controversial, I just tee it up as another way to look at the size of the business, what we want to achieve, and how we stay competitive,” Schiller wrote in the email presented Monday during the trial.

Apple argued that Schiller’s mail never said if the App Store made $1 billion in profit in 2011 and that there’s no indication if the App Store fee was tied to the profit it generated.

Five years after that email, in 2016, Apple tweaked the App Store fees to charge developers who offered subscription services 15% commission. In 2020, it announced a Small Business Program that reduced the App Store fees to 15% for businesses generating less than $1 million in revenue yearly.

Apple has never explicitly revealed how much profit the App Store generates for it. A recent report based on internal documents suggested the App Store had a profit margin of 79% in 2019. Another estimate from Sensor Tower claims the App Store generated $64 billion in revenue in 2020.

[Via Bloomberg]