Epic expert's testimony, based on internal Apple docs, estimates that App Store had an operating margin of 77.8% in 2019; Apple says the estimates are wrong
- Apple: Calculations are “simply wrong,” will refute in court — App Store's profits at heart of allegations of Apple monopoly
BloombergMark Gurman
Context & Ripple Effects
The margin estimate puts a number on the profitability question already central to Epic’s challenge of Apple’s commission model. Related court documents show [[a:965930|Apple had considered whether a lower 30% fee could still preserve a $1 billion annual profit target]], making the underlying economics more than an abstract accounting dispute.
Apple had also enlisted economists to defend the competitiveness of its commissions. The later Epic ruling preserved Apple’s fees and iOS’s closed store model, but the profitability methodology continued to be contested in later proceedings.
First-order effects
Epic gains a specific, document-based profitability claim to support its argument that Apple’s App Store rules and commissions are monopolistic.
Apple must rebut both the 77.8% estimate and the cost-allocation method behind it as it defends its App Store commission structure in court.
Second-order effects
The dispute shifts attention from the headline 30% commission to which App Store costs belong in a standalone profit calculation, strengthening the importance of Apple’s economic defense of its commissions.
Developers challenging Apple’s terms gain a litigation record focused on the gap between commission revenue and the costs Apple says support the store’s operation.
Third-order effects
The later outcome—no forced fee cut or third-party iOS app stores—shows that a high-margin claim alone does not determine the remedy; control of distribution and the legal standard for anticompetitive conduct remain decisive.
Apple’s later assertion that standalone App Store profitability cannot be accurately measured indicates that platform accounting itself is becoming a durable battleground in challenges to app-store take rates.
The trend: App-store regulation and litigation are increasingly testing not just commission levels, but the accounting and market-control arguments used to justify them.
The secret number at the heart of the Apple-Epic trial has potentially been revealed: Testimony from an Epic witness says Apple docs show an about 78% profit margin for the App Store in 2019, with additional calculations pointing to an about 80% margin. https://www.bloomberg.com/…
I'd be surprised if the operating margin were this high but... The App Store has near zero COGS. Gross margins of software are very high! I assume relatively low costs for app reviewers, servers, etc. The whole investment thesis in Apple is that services have stellar margins. htt…
Apple Inc.'s App Store had operating margins of nearly 78% in fiscal year 2019, according to testimony from an Epic Games Inc. expert witness https://www.bloomberg.com/... https://twitter.com/...
This is the sort of margin you see when you have a duopoly while most struggle to make 20% and pay 10x more tax and without using child labour. https://twitter.com/...
Margins like in the drug trade: #Apple's App Store had a 78% operating margin in 2019, according to an Epic Games expert witness. https://www.bloomberg.com/... https://twitter.com/...
80%. Since, as Apple insists, that there is no separate P&L for the App Store, it wouldn't be unreasonable to conclude that Apple uses a portion of the same fees it charges developers to directly & unfairly — through both policy & technical means — compete with those developers h…
“Apple had said on numerous occasions that it has one profit and loss statement for across the company and doesn't track individual business units.” Doesn't track individual business units. Definitely sounds like Tim Cook amirite. Not a details oriented guy, more of a visionary. …
Analysts, and everyone else, have known for years that Apple's App Store mints money. Now we have an actual number from company documents. Silly to pretend that this somehow doesn't exist just because there's no official P&L for the biz https://www.bloomberg.com/... via @markgurm…
Apple's response on this: “Epic's experts calculations of the operating margins for the App Store are simply wrong and we look forward to refuting them in court.” https://www.bloomberg.com/...