During the week in which companies have been talking about their financial results for Q2 of 2020, Apple’s CEO Tim Cook is busy with something quite different. He’s participating in hearings regarding big tech’s potentially anti-competitive practices. Amazon, Facebook, Google and Apple all have to answer questions from government officials.During the hearings, emails dating back to 2016 were released, showing negotiations between Amazon’s CEO, Jeff Bezos, and Eddy Cue, Apple’s senior vice president. The high-level talks were meant to set the conditions under which Apple and Amazon would cooperate to sell each other’s products.
Probably the most interesting part of the agreement, which was brought to light yesterday, was that Apple agreed to cut its App Store share from the usual 30% to just 15% for Prime Video subscriptions, in order to make the deal more lucrative for Amazon, Bloomberg reported.
When Tim Cook was asked if that isn’t proof that some apps on the App Store are getting preferential treatment, he answered: “That is not correct … We treat every developer the same.”
The Amazon deal is a rare case of Apple sacrificing profits to secure a partner. Other giants such as Netflix and Spotify couldn’t get similar conditions and eventually moved their subscriptions away from their iOS apps and to their respective websites, in order to avoid paying the 30% fee completely.
Of course, Amazon is in a league of its own and has plenty to offer in return. After the deal was announced, Amazon started officially selling Apple products, bringing billions of dollars in revenue to Cupertino.
Other emails, sent between Apple executives as far back as 2011 showed that a higher, 40% cut was considered. One of the bosses at Apple thought the company “may be leaving money on the table if we just asked for about 30% of the first year”.
The committee leading the investigation is yet to announce its final decision, which might be pivotal in the way major tech companies are doing business.
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