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Apple Warns That Reduced App Store Cut Would Hurt Results

Mark Gurman
·2 min read

(Bloomberg) -- Apple Inc. warned investors that the company’s financial results would be hurt if the amount paid from App Store downloads and subscriptions is reduced or eliminated.

The warning in a regulatory filing Friday came amid criticism from lawmakers and others about the cut of as much as 30% that Apple takes from third-party developers selling software through the App Store across the iPhone maker’s devices.

“If the rate of the commission that the company retains on such sales is reduced, or if it is otherwise narrowed in scope or eliminated, the company’s financial condition and operating results could be materially adversely affected,” Apple said in the filing with the Securities and Exchange Commission.

Apple reported fourth-quarter earnings on Thursday that included record revenue of $14.5 billion from its Services segment, which includes fees generated by the App Store. Still, the stock fell as much as 6.4% Friday after sales in China declined 29% from a year earlier and iPhone revenue was lower than anticipated.

Since the App Store began in 2008, Apple has taken a 30% cut of paid software downloads. It expanded the policy to subscription apps and in app-purchases, although the company reduced the amount it receives to 15% for users who subscribe to an app for longer than a year.

Apple hasn’t said it plans to reduce or remove its percentage fees, but the Cupertino, California-based technology giant may be concerned about continued pushback from developers or government. The company altered its App Store review guidelines this year to allow some cloud-streaming games and narrowed the types of apps that must pay the fee.

The company was criticized earlier this year for charging the 30% cut to developers such as Facebook Inc. and Airbnb Inc. for services that moved from offline to digital because of the Covid-19 pandemic. Apple gave those developers relief from the fees through 2020.

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