Why developers are protesting ‘taxes’ on app stores

COMPANIES are fighting back against the high taxes imposed for hosting apps on Apple’s and Google’s app stores. Amongst the complainants are Netflix and game makers Epic Games and Valve.

It’s not unusual for companies to complain about being charged hefty tariffs on revenues from apps they put on the online stores. However, the voices of disgruntled developers are getting louder, as the stakes increase.

Both Apple’s AppStore and Google’s Play Store serve as platforms that allow consumers to discover apps created by millions of developers worldwide. The fees for hosting them is up to 30 percent of any payments made to developers.

For a while, that was a driving force for boosting the app economy, which is said to be worth US$950.6 billion, according to The App Association.

However, as smartphones gain prominence, apps have become the main point of engagement between consumers and businesses. The 30 percent has become too big a slice of the pie.

Both Google and Apple have responded by lowering some of the tariffs to about 15 percent two years ago. Analysts argued that lowering the rates was an unsustainable move.

It is estimated that reducing the so-called “tax” can cost Google and Apple around 20 percent of their revenue, Bloomberg reported.

Given that Apple has often highlighted the successes of its AppStore, this fall in revenue would concern investors, who are expecting the AppStore to drive business growth.

Google itself is also riddled with legal problems. Just last month the tech giant was fined US$5 billion by the European Commission for unfairly pushing its apps into smartphones, breaching antitrust laws.

The noise on app store taxes took off in 2015, when Apple and Google began investing more heavily in digital content, making them rivals more than digital distributors. This has prompted Spotify to urge customers to cancel subscriptions purchased via Apple’s AppStore.

Just a few days back, Netflix started trialing a way to bypass Apple’s in-app subscriptions. In-app purchase systems make it easier for users to subscribe, however, the cost borne by the developer is proving a bit too high. Google Play billing for Netflix has been disabled since May this year for new or rejoining customers.

Earlier this year, popular PC-based video games distributor Valve failed to release its Steam Link app on Apple’s AppStore. Soon after, Apple updated its guidelines to “explicitly say apps cannot host anything that looks like an app store within an app or give users the ability to browse, select, or purchase software not already owned or licensed by the user,” reported Reuters.

In defense of Apple and Google, app stores provide a safety net for users; malicious apps are filtered while allowing legitimate developers access to a massive user base. By handling the identity and payment details, users also benefit from a secure and seamless sign-up process.

The app stores provide invaluable market access for many developers, who wouldn’t manage to gain a huge community base otherwise. Leaving the marketplace on the grounds of the high “tax” rates is a huge risk that most developers can’t afford to take.

However, in the case of bigger name developers like Netflix, the 30 percent cut that Apple and Google take can translate into billions of dollars. Paying out that amount in return for market access becomes a bit too expensive, especially when the money is better off invested back into product development.

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