Apple’s App Store Margin was 78% in 2019, Says Epic’s Expert Testimony

According to Bloomberg, an expert witness brought in by Epic Games has testified during the pretrial information-sharing process that Apple’s App Store enjoyed operating margins of around 78% in its 2019 fiscal year.

Ned Barnes, a finance and economics researcher, came to the conclusion after reviewing documents “prepared by Apple’s Corporate Financial Planning and Analysis group and produced from the files of Apple CEO Tim Cook” and making additional calculations.

Apple charges a 15% or 30% commission on every transaction being made through the App Store, from paid app downloads to in-app purchases and subscriptions, generating tens of billions in revenue every year.

Epic Games is suing Apple for violating antitrust laws, alleging that the tech giant runs the App Store like a monopoly and uses its market power to all but extort a hefty, more-than-reasonable tax from developers generating revenue through its platform.

Epic experts’ “calculations of the operating margins for the App Store are simply wrong and we look forward to refuting them in court”, said Apple in a statement on Saturday.

Apple has said on multiple occasions that the company does not track or report profit and loss statements for individual business units, and the App Store happens to be exactly that.

Apple’s Chief Compliance Officer, Kyle Andeer, said the following at a congressional hearing last month:

When we look at the App Store, it’s not a separate standalone business for us. It’s an integrated feature of our devices.

Any internal company documents outlining revenue from the App Store do not disclose expenses, which renders any calculations based on the estimates at best and ‘shots in the dark’ at worst.

Apple has also urged the court to prevent Epic Games from discussing App Store financial data, saying that doing so may “unduly confuse the securities markets and participants in those markets, including the many pension funds, mutual funds, and other ordinary investors who own Apple stock”.

The high-profile Epic Games trial is slated to begin on Monday, May 3, with U.S. District Judge Yvonne Gonzalez Rogers presiding in a three-week-long trial without a jury, all while Apple faces scrutiny from antitrust watchdogs on numerous fronts across the globe.