The tech world seems to be hosting an early Festivus for Apple. Starting with Elon Musk’s brief spat with the company on Twitter, companies are lining up to air grievances with the lords of Cupertino.
Complaints about Apple’s business practices aren’t exactly new. App developers have grumbled for years about the so-called “app tax”: the 30% cut of profits Apple (and Google, for the record) require to feature an app in its stores. That’s a sizable chunk of profits for a service that, in effect, is simply providing the digital storefront where other manufacturers create and sell the actual merchandise.
Understandably, developers have had objections. Epic Games famously sued to force Apple to allow in-app purchases and more or less won. More recently, crypto mainstay Coinbase has taken a swing at Apple, accusing the manufacturer of taking an unreasonably broad swath out of its profits, particularly as they pertain to the unique costs of new market propositions like cryptocurrency and NFTs.
Bites from the apple
Coinbase complained that Apple’s insistence on its cut unreasonably interfered with its business.
Coinbase’s argument was largely the same as Elon Musk’s, and the basis of Epic Games’ aforementioned lawsuit. According to all of the above, Apple was half of a duopoly: with Google, it controlled the global app marketplace. The “duopoly” part of the argument is pretty much incontrovertible: As of October 2022, both Apple and Google control 99.43% of the global smartphone market between them (via StatCounter). Both get a 30% cut of everyone’s action on its marketplace. From the perspective of Coinbase, that took too much money out of too many elements of its business.
You might have noticed you can’t send NFTs on Coinbase Wallet iOS anymore. This is because Apple blocked our last app release until we disabled the feature. 🧵
— Coinbase Wallet (@CoinbaseWallet) December 1, 2022
Epic sued over that and, as noted above, won with an asterisk. Apple had restricted in-app purchases, and courts found that anticompetitive, but did require that Apple get a 30% cut of the profits, even though they took place in someone else’s app. In short, according to the Verge, the court said that if you’ve found a way to make money using iOS, you owe Apple 30%, period.
Epic thought in-app purchases should be exempted from the tax. Coinbase thinks elements of the NFT development process — in this case, gas prices to run the processing equipment necessary to mint NFTs — should be exempt from Apple’s app tax. Apple treats all user expenses on an app as in-app purchases and, per the Epic court decision, in-app purchases mean Apple gets a cut.
It’s not a simple problem, and it’s not likely to be solved anytime soon. Stakeholders and regulators have barely begun to integrate cryptocurrency and NFTs into the conventional marketplace. Who gets paid for what is likely to be a conversation for years on end. For now, all that’s certain is that conversation has begun.