The Commission EngineNarrow moat

The commission Apple takes on sales made through the App Store — historically around thirty percent, reduced to fifteen for smaller developers¹ and for the later years of a subscription — is the mechanism that converts gatekeeping into profit, and it is a wonderful engine indeed. On a great deal of what changes hands inside the store, Apple simply takes its cut, and because the cost of running the store is small relative to the sums flowing through it², the commission is extraordinarily high-margin. It is a large part of why the Services business is so profitable and so richly valued, and why Services gross margin rose from 55.0% in fiscal 2017 to 75.4% in fiscal 2025⁴.

What makes the commission so attractive as a business is that it is paid for almost entirely by other people's effort and other people's risk. The developers build the apps, take the chances, and bear the costs of creating something people want; Apple built the road and the storefront and collects a percentage of the traffic between them. It is closer to a royalty on the labor of others than to a conventional product business, and royalties, requiring little incremental effort to grow, are among the finest economics there are.

The engine also scales beautifully. As more of economic life moves onto phones — as games, media, services, and commerce increasingly happen inside apps — the base on which Apple levies its commission grows without Apple having to do much of anything at all. The store handles more transactions, and the cut compounds, at very little added cost. A business that grows its take simply because the world it sits astride is growing occupies an enviable position.

The vulnerability, of course, is that the commission is precisely what everyone is fighting over. Developers resent it, regulators question it, and courts are pressing to lower it or to let developers avoid it by steering customers to outside payment methods. The commission is the richest strand of the whole franchise and therefore the most exposed — the number a legislator's pen could most directly reduce. But for now it remains a remarkably lucrative engine, humming along on the effort of a million developers³.