Apple Offered Amazon Steep Discounts On App Store Fee To Lure Its Video Streaming App

Apple Inc. AAPL offered fellow technology giant Amazon.com, Inc AMZN a 50% lower cut on the subscription revenues from the latter's streaming video-on-demand app over what it charges other third-party developers.

What Happened 

A correspondence between Apple Senior Vice President Eddy Cue and Amazon CEO Jeff Bezos from 2016 was unveiled by the House Antitrust Subcommittee on Wednesday, as reported by Bloomberg.

The Cupertino-based tech giant offered Amazon a 15% fee on Prime Video subscriptions garnered through its App Store on iOS and on Apple TV, while it normally charges a 30% fee to other developers.

Cue’s email also extended a deal, wherein, if Amazon sold the Showtime service or other similar services within its app, the consumer electronics giant would only take a 15% fee in cases where the customer had originally signed up through Apple.

Prime became available on Apple TV in 2017, and had been available on iOS since 2012.
In a separate email from 2011, Cue suggested that the company “should ask for 40% of the first year only but we need to work a few deals to see what is right,” Bloomberg noted.

Why It Matters

The internal documents were made public as part of the House probe into antitrust allegations against the two companies, along with Facebook Inc FB and and Alphabet Inc GOOGL GOOG.  The CEOs of the four companies testified before a House committee on Wednesday.

Spotify Technology SA SPOT last year filed a complaint against the iPhone maker with the European Union alleging anti-competitive practices saying its made to pay a 30% tax to the U.S. tech giant.   

Last month, Apple said it would allow app makers to challenge its policies after developers expressed outrage at what they perceive as unjust rules imposed on them by the company.

At the House hearing,  Apple CEO Tim Cook was asked if the company would give other app developers the opportunity to bypass the 30% sales cut that it takes after it reached an agreement with Amazon Prime. The chief executive acknowledged that the discount is available to developers “meeting the conditions.”

Price Action

Apple shares closed 1.9% higher at $380.16 on Wednesday and traded about 0.2% in the after-hours trading. Amazon shares closed nearly 1.1% higher at $3,033.53 and rose another 0.4% in the after-hours trading the same day.