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Nov 17, 2022 8 min read

The Battle For Taxing The Internet: Epic Games v Apple Round Two

The Battle For Taxing The Internet: Epic Games v Apple Round Two

🔒When Epic Games decided to take on Apple over its 30% tax on the internet, they knew they were taking on a giant protecting a $20 billion cash cow. This was never going to be easy. But for round 2, Epic have the DOJ on their side.

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The App Store: Apple’s Unfair Advantage

Whilst the Twitterarti are getting vexed about Elon Musk’s plan to charge Twitter users $8 per month (currently on hold until the end of November) because he’s got to make money somehow, there’s one a crucial detail that’s being missed  in the discussion: 30% of the fee will end up in Apple’s pocket.

That’s the fee/tax (depending on your POV) that Apple charge/take for any app that runs on an iOS device. Of which there are are 1.25 billion in the world.

What's worse/better (depending on your POV) is that Apple tales 30% on EVERY transaction. That means every month, when a Twitter Blue subscriber pays their $8, Apple are going to get $2.40...for doing nothing other than providing the iOS ecosystem. Which iPhone users have already for anyway, havn't they?

Apple’s tactic is to force all app developers to use the Apple payment system for all purchases. When you own the rails, that's exactly what you're able to do.

It's a situation that hasn't escaped Musk's attention before. In 2021, he called it a “tax on the Internet.”

  • It's a tax that is estimated to earn Apple at least $20 billion a year!  

Since introducing it’s privacy tracking changes in iOS14, Apple has been aggressively upping the ante when it comes to the App Store. In its latest move, Apple updated the rules to take a cut of ad campaigns that are managed through its platform.

In other words, this means that every time a business buys an ad on Facebook through the app on iOS, Apple take 30% straight out of Mark Zuckerberg’s pocket. Kick a man when he’s down, why don’t you!

And there’s no reason to think that Elon’s new blue check subscription won’t have to pay the Apple toll too. Although frankly, it probably won’t amount to much with current estimates I’ve seen hovering around $40-50 million a year, hardly enough to cover the $4 million a day that Twitter is losing!

Apple and Epic Games Go Back To Court

However, this may all change in the next round of the Epic v Apple titanic tussle.

On Monday 21st November, Apple and Epic Games go back to Court. This time Epic has been joined by market regulators.

The DOJ says it’s worried that “errors” by the lower-court judge in the first trial, who mostly sided with Apple last year, may weaken its hand in future enforcement actions.

The case, which is about online marketplace policies for transactions related to apps and services, is being closely watched as US regulators continue to scrutinise big tech companies in their role as gatekeepers to the digital economy.

  • In other words, if you have an iPhone, everything you do has to go through the App Store - the AppStore is the gate and it's 100% controlled by Apple.

This week, at the James R. Browning Courthouse in San Francisco, the Ninth Circuit Court of Appeals heard oral arguments in Epic Games v. Apple, Inc. This is Round 2 of the David v Goliath battle that will have huge implications for all mobile app developers if it goes Epic's way.

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