Apple executives discussed not ‘leaving money on the table’ when setting Apple TV subscription fees

In Apple and Epic’s continuing legal battle over App Store fees, one of the main points of contention was Apple’s insistence on maintaining a 30 percent cut as the store’s cornerstone.

But Apple’s recently revealed executive emails about the case show that the App Store rules that Apple disregards as essential to the fairness of the app economy have been carefully negotiated over time in a way that has ensured that Apple doesn’t “Leave money on the table. “

The emails date from a 2011 discussion, which included Apple’s software and services leader Eddy Cue, about how Apple would handle subscription video applications on Apple TV – an important conversation given the rise in popularity streaming services. And while the discussion doesn’t offer much insight into Apple’s existing 30 percent fee for the App Store, it reveals how malleable those rules were when it came to maximizing profit.

The company examined a variety of options, including a single cut of 40%, a single cut of 30%, a continuous rate of 30% or more individualized agreements with services such as the NBA and MLB.

An email in the discussion details the different forms of content partners that would be offering subscriptions on Apple TV. He reflects on which partnerships would be fruitful to try to gain a share (like new streaming services) and which ones (like “entrenched” cable and satellite companies).

The Apple team decided that all transactions or subscriptions based on iTunes should have the same 30% cut from the App Store. But there is more discussion about how the company will handle referrals, where Apple TV apps connect to a service website for customers to subscribe directly to the service.

The topic discusses how fees should work when Apple appoints a new subscriber. Should the company insist on 30% of the initial subscription? 30 percent in the first year? Just insist that all subscription apps direct subscribers to the App Store? Concerns arise that Hulu Plus may not be able to afford this type of cost. Cue replies that Apple should order 40% of the first year, but that it may need to make some deals first.

A point of concern for Apple was to structure the new fees in a way that they would not harm the payment structure defined in the App Store. “I don’t want to do business where we receive less than 30%. That’s what’s on the app store and we can’t do a different deal here. If that is not possible, then I want a single reward, but we need to be very careful here so that it does not spread to the app store ”, wrote an executive. (Emails are grouped in a way that is difficult to tell who is responding to whom.)

It is important to remember that, in 2011, Apple TV did not have an App Store – just individual apps that Apple worked with on a case-by-case basis. And the discussion seems to emphasize the ad hoc nature of platform development here: Apple doesn’t seem to go into it with any definite idea of ​​what it needs to make the platform successful, just a vague goal of maximizing profit and shaping the rules for the platform. achieve this in the best way.