Analysis: The end of Apple's 30% monopoly tax and $30B of revenue
A federal ruling forces Apple to allow external payments and threatens $30B in App Store revenue.
Gm Fintech Architects —
Today we are diving into the following topics:
Summary: We explore the landmark U.S. court ruling against Apple’s App Store practices, which may dismantle its 30% commission model and unlock $10–20B in annual revenue for third-party payment providers. The decision follows a legal battle with Epic Games and compels Apple to allow developers to direct users to external payment options without punitive design or fees. This undercuts Apple’s Services segment — its primary growth engine — and weakens its financial engineering capacity via buybacks. For fintechs like Stripe, PayPal, and Coinbase, the decision creates a new battleground to replace Apple Pay with lower-cost alternatives. The ruling also parallels broader policy debates, showing how breaking economic tollbooths can accelerate innovation and unlock market opportunities.
Topics: Apple, Epic Games, Spotify, Amazon, Patreon, Stripe, PayPal, MoonPay, Coinbase, Plaid, Revolut, Wise, Shopify, MicroStrategy, FTC
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Long Take
The fortress of solitude
It’s hard to be king.
The most commercial thing in the world is high technology. Apple has been holding on to a $3 trillion market capitalization crown, battling Microsoft, Google, Amazon, and NVIDIA for cultural relevance.
But is it possible that we are starting to see the faultlines caused by the absence of Steve Jobs? Where is Apple in Artificial Intelligence? Where is Apple in self-driving cars? Where is Apple going in China? The last several years of massive high-tech break throughs have left Apple’s P&L largely flat.
It retains legendary craftsmanship and incredibly tight business model. However, such control comes at a cost — of love and spirit.
The iOS app store is loved by users for its infinite variety, and hated by serious developers for its 30% tax. No other payments provider can claim to charge a third of revenue on all transactions, all the while barring any other payments provider from delivering a competing service at 3% + interchange, or in the case of blockchains, nearly free. Only vertical integration across hardware and software will give you this pricing power. Imagine Visa owning not just the payment rails, but literally all the merchants.
This has stifled third party payment services, as well as raised prices across the board for various applications. In addition, the policy chilled (1) anyone trying to offer their own store, like Amazon selling books, (2) and any real integration from crypto apps that must pay for onchain gas transactions or facilitate purchase of digital objects.
This was our cry for help 3 years ago.
The egregious nature of Apple’s policies were widely known, and regulators had been chipping away at its monopoly over several years.
But what has happened last week is truly material.
In a case between Epic, the maker of Fortnite, and Apple, a US judge has ruled that Apple can no longer collect fees on purchases made outside of apps or prevent developers from directing users to external purchasing options. Here are the main takeaways from the ruling.
Apple was found in contempt of a federal injunction prohibiting it from blocking app developers’ ability to direct users to external payment options.
Despite the court order, Apple implemented a 27% commission on off-app purchases (where it had previously charged 0%)
Apple added design and UX barriers: static URLs, “scare” screens, vague warnings, and generic messaging designed to make users abandon the external payment flow. These changes were meant to dissuade users, not protect them and Apple internally modeled the expected drop-off rates.
The court found Apple’s changes intentionally anticompetitive, aimed at preserving its App Store revenue stream while appearing compliant.
Internal documents and testimony revealed Apple knowingly misrepresented facts and withheld evidence — prompting a referral to the U.S. Attorney’s Office for potential criminal contempt proceedings.
Apple plans to appeal but stated it would comply in the meantime.
In response to the ruling, Epic Games announced that Fortnite will return to the U.S. iOS App Store next week. Epic CEO Tim Sweeney also proposed a global settlement, offering to drop all litigation if Apple implements the court's directives worldwide.
This kicked off a flurry of companies celebrating the decision and offering workarounds to Apple’s payment systems. Spotify is rolling out an update that lets people get cheaper subscriptions.
And Amazon Kindle is offering direct purchase of books in the Kindle app itself. This unbundles consumer choice from having to buy everything through Apple, and powers up others platforms to leverage iOS as an operating system, rather than as a commercial venue.
Another company, Patreon, is working on an update to put in a payment method that avoids the 30% fee and increases payouts to creators. We expect any and all subscription services to go this route as soon as they can.
Not only this, but there is now a Bill in the House of Representatives called the “App Store Freedom Act” backed by the Republican Kat Cammack. Now if you know anything about the United States, the word Freedom is like an automatic victory.
The Act targets large platform owners like Apple and Google by requiring them to open up their mobile ecosystems. If a company controls both an app store and the underlying operating system with over 100 million US users, it must allow users to install third-party app stores, delete pre-installed apps, and set non-native apps as defaults. These companies must also provide developers with equal access to system APIs, hardware features, and documentation, leveling the field between platform owners and external developers.
This is the key bit for us — the bill prohibits forcing developers to use in-house payment systems or match App Store pricing across platforms, and bans retaliation against those who distribute outside the native app store.
Enforcement would fall to the FTC and state attorneys general, treating violations as unfair or deceptive practices with penalties up to $1 million per violation.
That Republicans are the ones pushing for trust-busting of high-tech platforms is yet another sign of how strange the current political climate has become.
Where Does it Hurt?
Should Apple care?
First of all, one mystery is why Apple has seen its marketcap go from $1T to $3T in the course of 5 years, while its revenues have largely stayed flat.