Apple defends App Store amid antitrust investigation

The U.S. Justice Department is investigating iPhone maker Apple Inc. (NASDAQ: AAPL) for alleged antitrust practices within its App Store business. But on Wednesday the company fought back with a new study showing its practices are not much different from other digital platforms, The Wall Street Journal reported.

Apple’s services business is a cash cow

Apple’s App Store generates around $15 billion in revenue annually and collects money through a 30% commission when a user pays for an app. Investigators are looking at the business given it generates twice as many sales as the Google Play Store despite holding a smaller share of the U.S. and global market.

Economists at the Analysis Group were tasked by Apple to take a deep dive into its services business practice. The analysis found that Apple’s App Store commission rate is “similar in magnitude to those of other app stores and digital content marketplaces.”

Marketplaces that distribute digital content include videos, podcasts, eBooks, and audiobooks that charge more than Apple’s 30% rate. Also, commission rates charged by broader e-commerce marketplaces are known to exceed 30% as well.

In fact, sellers that rely on brick and mortar stores to sell their goods receive a lower share of total revenue from distribution than through a digital marketplace like the App Store. 

Mr Cook goes to Washington with plenty of defense

Apple CEO Tim Cook is scheduled to offer testimony in front of the U.S. House Judiciary Committee next Monday. The company noted that Wednesday’s study shouldn’t be considered as a preview of Cook’s remarks, rather it will serve as validated third-party data and findings he can use.

Cook will also be joined with top executives at Amazon.com, Inc. (NASDAQ: AMZN) , Facebook, Inc. (NASDAQ: FB), and Google’s parent company Alphabet Inc (NASDAQ: GOOG).

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Cook may also point out that app developers can sell directly to their users value-added content, services, or subscriptions outside of the App Store. When this is the case, Apple collects zero commission.

The study also found that streaming music and video apps engage with customers twice as much in terms of in-app purchases. This figure is even higher for media outlets like newspapers, magazines, and audiobooks.

App makers can also monetize their business by selling directly to the customer’s home physical goods or services. In total, $90 billion worth of incremental sales of physical goods and services were generated by app makers and Apple’s cut was zero.