Apple appears to be having an early Festivus in the tech world. Companies are lining up to air grievances with the lords of Cupertino, beginning with Elon Musk’s brief Twitter spat with the company.
Apple’s business practices have long been criticized. For years, app developers have complained about the so-called “app tax”: the 30% cut of profits required by Apple (and Google, for the record) to feature an app in its stores. That’s a sizable profit margin for a service that essentially serves as a digital storefront for other manufacturers to create and sell their products.
Developers, understandably, have raised concerns. Epic Games famously sued Apple to force them to allow in-app purchases, and they won. More recently, crypto mainstay Coinbase has slammed Apple, accusing the company of taking an unreasonably large slice of its profits, particularly for the unique costs of new market propositions like cryptocurrency and NFTs.
Apple’s insistence on its cut, according to Coinbase, interfered with its business unreasonably.
Coinbase’s argument was like Elon Musk’s and served as the foundation for Epic Games’ aforementioned lawsuit. According to all the preceding, Apple was half of a duopoly, controlling the global app marketplace with Google. The “duopoly” portion of the argument is unarguable: Apple and Google will control 99.43% of the global smartphone market by October 2022. (via StatCounter). Both receive a 30% cut of all activity on their marketplace. That, according to Coinbase, took too much money out of too many aspects of its business.
Epic sued and won with an asterisk. Apple had restricted in-app purchases, which courts deemed anti-competitive, but it required that Apple receive a 30% cut of the profits, even if they occurred in someone else’s app. In short, the court ruled that if you’ve discovered a way to make money with iOS; you owe Apple 30%, period.
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Epic believed that in-app purchases should be exempt from taxation. Coinbase believes that certain aspects of the NFT development process, in this case, gas prices to power the processing equipment required to mint NFTs, should be exempt from Apple’s app tax. According to the Epic court decision, in-app purchases are all user expenses on an app.
It’s not an easy problem, and it’s not going away soon. Stakeholders and regulators have only recently integrated cryptocurrency and non-traditional financial instruments (NFTs) into the traditional marketplace. Who gets paid for what will most likely be a topic of discussion for years to come. For the time being, the only certainty is that the discussion has begun.
