SAN FRANCISCO (BLOOMBERG) – A kickback against the app stores of Apple Inc. and Google is gaining momentum, with a growing number of companies saying tech giants are charging too much tax to connect consumers with developer products.
Netflix Inc and video game manufacturers Epic Games Inc and Valve Corp are among companies that have recently tried to evade the app stores or complained about the cost of the toll charged by Apple and Google.
Grumbling about the economy of the app store is not new. But the number of complaints, combined with new ways to reach users, undermining regulatory oversight and competitive pressures are undermining what has now become digital gold mines for Apple and Google.
"It feels like something that bubbles up here," says Ben Schachter, analyst at Macquarie. "The dollars are just going to be that big, they just do not want to pay billions from Apple and Google."
Apple and Google launched their app stores in 2008 and quickly became powerful marketplaces that matched the creations of millions of independent developers with billions of smartphone users. In return, companies absorb up to 30 percent of the money that consumers pay to developers.
For most of the decade, companies have been praised for their contribution to building an app economy that will grow to $ 157 billion in 2022, from US $ 82 billion last year, according to App Annie projections. But more recently, smartphones and apps have become so important to reach customers that these app stores are being criticized for conquering too much of the loot.
Instead of supporting innovation, Apple and Google are being discussed as tax collectors that block the flow of dollars between creators and consumers.
"They are very aggressive to ensure that companies are not trying to work around their invoices," says Alex Austin, co-founder of Mobile Company Branch. "They have entire teams that review these flows to ensure that they receive their taxes."
Last week, Mr Schachter co-authored a report arguing that current app retail prices were unsustainable. Apple and Google take 30 percent of the subscription budgets and in-app purchases on iPhones and Android phones with the Google app store (in fact, all outside of China). About two years ago, the companies reduced that discount to 15 percent in some cases.
If app storage fees were to drop to a mixed rate of 5 percent to 15 percent, that would drop to 21 percent from estimates of Apple's revenue before interest and taxes to budget 2020, Macquarie estimates. Google could lose up to 20 percent according to the same measure, according to the brokerage firm.
This is particularly worrying for Apple investors who expect the App Store to support the growth of the company's services business. Apple often emphasizes the financial success of its App Store in conference calls with analysts.
Google from Alphabet Inc is sensitive given its legal problems. According to a recent anti-trust rule from the European Union, the company has to stop bundling its app store with Google Search and Chrome on Android phones in Europe (Google fights against costs).
This may force more app makers to circumvent Google, attract customers to the internet or through collaborations with other companies. "All over the world everyone is looking for ways to push back against American technology," Schachter said. "This feels like a natural way to tackle it."
Complaints about taxes on the app store became louder in 2015 when Apple and Google went deeper into the digital content activities, making them rivals and not just digital distribution partners. In 2015, music streaming company Spotify Technology SA began emailing customers with the fact that they had to cancel subscriptions purchased through Apple's app store.
On Tuesday, video stream company Netflix said it is testing a way to bypass Apple in-app subscriptions by sending users to their own website. Currently, Netflix users on iPads and iPhones can subscribe via the App Store's in-app purchasing system. This makes subscription simpler, but also gives Apple a 15 percent discount on those subscriptions. And from May, Google Play billing for Netflix was not available to new or returning customers, according to the Netflix website.
On iPhones in the US, Netflix was the # 1 entertainment app of consumer spending and the most downloaded entertainment app in the Google Play Store for the past 90 days, according to App Annie, who follows the industry.
The video game industry has also worked to avoid app taxes this year. Valve & # 39; s Steam, the largest distributor of video games for PCs, was planning to release a free iPhone app that allows gamers to keep playing while they are away from their computer. Apple has blocked the app.
Shortly thereafter, the tech giant has updated the app rating guidelines to ban everything that looks like an app store in an app or gives users the ability to browse, select, or buy software that is not already owned or licensed belongs to the user. .
More recently, Epic Games, the maker of hit video game Fortnite, has chosen to dump Google's app store. Epic executive Tim Sweeney said the 30 percent app costs are "high prices" in a world where publishers have to bear the costs of developing, operating and supporting their games.
"Intermediaries distributors are no longer needed," he added.
Fortnite has extrapolated US $ 200 million to the Apple App Store since its release there in March, according to Sensor Tower, which tracks app purchases. Apple could earn as much as US $ 135 million in title rewards, Sensor Tower estimates, while Google misses at least US $ 50 million. A Google spokeswoman did not want to comment.
Earlier this week, Facebook Inc canceled a 30 percent discount that involved in-app purchases made on some games played through its Android app.
In defense of the app store model, Apple and Google have made clear their ability to filter out fake apps and malicious software and distribute apps extensively. The companies process identity and payment data, which disrupts the registration process. Promotion in their app stores can transform a company's assets from one day to the next.
Indeed, only the most popular online services can run the risk of being in the app stores of Apple and Apple. Skipping these powerful distribution channels is a & fool & # 39; s message & # 39; for most publishers, according to Danielle Levitas, a senior vice president at App Annie. And some other game developers join Epic. Electronic Arts Inc and Glu Mobile Inc hold on to their current distribution system, including app stores.
According to the co-founder of the department, Austin, this shows how broken the system is. Most developers want to use the app stores, but some hesitate to pay Apple and Google, so they have to use their chances on the internet, he said. His company offers software tools that allow companies to identify paying subscribers before being directed to their apps.
"If you're a small, up-and-coming business, you can not really sell subscriptions to the mobile internet," he said. "Reducing the app store's load would effectively reduce the last hurdle for a large proportion of businesses."