Apple-backed study finds developers kept savings meant for consumers
A $35.8m windfall from reduced app store fees has gone straight to overseas developers' pockets, while consumers paid the same prices as before.
Hopes that potential regulatory cuts to app store commissions will lead to lower prices for Australian consumers have been dashed by new analysis of the European market, finding app developers pocketed a multi-million-euro windfall.
A study examining the European Union’s legislated cuts to app store commissions found app developers, mostly from overseas, retained the savings rather than passing them on to their customers.
The report, prepared by Analysis Group with support from Apple, revealed 91 per cent of consumers saw no price drop, casting doubt on similar measures being considered by the Australian Competition & Consumer Commission.
The ACCC has been scrutinising the market power of major technology platforms and considering mechanisms to address competition concerns, including the fees charged to developers.
Even without regulatory changes, tech titans have been under pressure to lower commissions developers pay after US billionaire Tim Sweeney won key parts of his multinational fight against Google and Apple in Australia.
The Analysis Group report focused on developers who opted into new business terms in the EU introduced in response to the Digital Markets Act – new laws, which are aimed at promoting more competition.
Apple has been highly critical of the changes, saying they have unleashed “unintended consequences”. This includes Meta using the laws to access the Wi-Fi logs of European Apple customers, enabling the Facebook owner to step up its tracking efforts.
Apple has also accused the European Commission of forcing it to abandon critical App Store measures that stop children accessing harmful content, including pornography, and protect adults against fraud – a problem it now wants Apple to fix.
An Apple spokesman said the EU’s Digital Markets Act has “failed to live up to its promises, delivering less security, less privacy, and a worse experience for consumers”.
“This study provides further evidence that the DMA is not benefiting consumers in the form of lower prices. At the same time, we know the regulation is creating new barriers for innovators and start-ups while exposing consumers to new risks,” he said.
In an effort to open up Apple’s tight ecosystem and promote competition, the EU laws included a typical commission rate reduction of 10 percentage points for developers selling digital goods, services, and subscriptions through the App Store to Europeans.
The report found that despite benefiting from this substantial decrease in their cost of sale, developers showed a profound reluctance to lower consumer prices. The study found that developers kept prices the same or increased them for an overwhelming 91 per cent of products.
In the minority of products where prices fell, the decreases were often modest and appeared consistent with routine price fluctuations observed before the regulatory change, suggesting they were unrelated to the commission savings.
The total estimated commission savings for the cohort of developers analysed — comprising approximately 21,000 unique paid apps and in-app purchases — totalled €20.1m ($35.8m) over a three-month post-enrolment period. The data strongly indicates that this multi-million-euro windfall did not accrue to consumers through lower monthly subscriptions or one-off purchases.
This pattern runs contrary to the public arguments advanced by many app developers and third-party groups, who have long contended that app store commissions are a significant cost that must be incorporated into prices, and that a reduction would directly translate into consumer savings.
Should the ACCC or state governments move to mandate similar commission cuts on app store sales within Australia, the evidence suggests the financial benefit would flow directly into the profit margins of global app developers, with Australian customers seeing no material change to the price of their favourite applications or digital content.
The analysis found that the overwhelming majority of the commission savings — more than 86 per cent — flowed to developers based outside the EU.
This raises an additional red flag for Australian policymakers, suggesting that any domestic commission reduction would predominantly benefit major international corporations, potentially bypassing smaller, local Australian developers the regulation is often intended to assist.
Developers’ reluctance to lower prices is not isolated to the EU’s new laws. The study noted a mirrored outcome following Apple’s Small Business Program, which reduced commission rates from 30-15 per cent for tens of thousands of small developers globally beginning in 2021. Even in that instance, less than 5 per cent of affected apps had a price cut.
The battle over commissions has also been playing out in the courts. Epic Games – maker of the popular Fortnite app and which Tim Sweeney owns – accused Apple of abusing its market power by charging 30 per cent of all money made on mobile apps and not allowing third-party payment services.
In August, Justice Jonathan Beach found Apple breached section 46 of Australia’s Competition Act by engaging in conduct that had the “effect of substantially lessening competition in such markets, prohibiting downloading of native apps, and prohibiting developers using alternative payment methods”.
But Justice Beach rejected Epic’s allegations that Apple engaged in unconscionable conduct, and he said its ban on rival app stores did not break the law.
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