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Tim Cook's gut says the App Store is profitable, but Apple won't back it up with data

Tim Cook's gut says the App Store is profitable, but Apple won't back it up with data

May 21, 2021 | By Alissa McAloon

Apple CEO Tim Cook finally took the stand during today's block of the Epic Games v. Apple trial, fielding questions about App Store curation, profit, and policies as Epic Games attempts to prove to the court that iOS is anticompetitive to the point that the legal system needs to step in.

Since much of Epic's accusations deal with how Apple conducts business through the App Store, Cook's testimony as Apple's boss is a crucial moment in a weeks-long trial that could have significant ramifications for digital storefronts that sell games and apps.

An expert witness provided by Epic ahead of the trial calculated that the App Store saw a 78 percent profit margin in 2019 however when pressed today to share how much Apple makes from the App Store directly, Cook was unable to say.

Apple generally takes a 30 percent of all App Store revenue generated by third-party developers, including premium app purchases, subscriptions, and in-app purchases. As of last August, that cut was reduced to 15 percent for publishers earning under $1 million annually (though Cook maintains that change was a result of the pandemic, not Epic's lawsuit or anti-trust concerns).

Cook argues that Apple doesn't calculate profit or revenue on a division-by-division basis, so there's no telling how much of Apple's cash comes from the App Store. An internal Apple document reviewed during the trial (but not shared publicly) seemingly attempts to gauge profitability, but Cook argues it was a presentation looking at trends over time rather than a detailed report with accurate figures.

Despite not having concrete numbers, Cook says he believes the App Store to be profitable: "I have a feel, if you will." That lack of clarity on exactly how well the App Store does continues throughout the exchange. At one point, Cook is asked if in-app purchases make up the bulk of App Store revenue, to which he responds "I think so."

Cook's testimony today aims to prove that Apple's decision to operate iOS as a closed platform is what's best for both developers and iPhone users, while Epic Games wants to prove that Apple's 15 to 30 percent cut of all app revenue and its unwillingness to allow outside stores and payment methods is anticompetitive behavior that ultimately hurts both groups.

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