Apple on Wednesday announced a major change to its App Store policies, which will allow ‘reader apps’ to include a link to their own website to let users manage their accounts and even pay directly for subscriptions. This comes at a time when Apple is facing class actions suits for its mandatory cut on developer earnings.
Why is this change significant, and how does it impact Apple, developers and users?
Apple said it was making the change as part of the conclusion of an investigation by the Japan Fair Trade Commission (JFTC). Under Apple’s agreement with the JFTC, developers of ‘reader apps’ would be allowed to include in-app links to their websites for users to set up or manage an account. Apple says while the agreement was with the JFTC, it was implementing the policy globally.
In a statement, Apple has clarified that ‘reader apps’ includes all apps that provide previously purchased content or content subscriptions for digital magazines, newspapers, books, audio, music, and video. This means apps such as Netflix, Spotify, etc will be covered as well. Apart from being able to include an in-app link for users to purchase a paid account, developers can also avoid the 15-30% developer commission that Apple charges them.
So how does this impact developers of ‘reader’ apps?
When this policy comes into effect in early 2022, developers will have the ability to skip payments via the App Store and thus can avoid paying Apple a cut for all transactions.
Apple is however underlining how in-app purchases are still safer. “While in-app purchases through the App Store commerce system remain the safest and most trusted payment methods for users, Apple will also help developers of reader apps protect users when they link them to an external website to make purchases,” it said.
Also, while a Spotify can now let users set up their premium account from the iOS app itself without having to rely on Apple’s payment system, for gaming apps with options for in-app purchases, nothing really changes. In-app purchases in all other kinds of apps will still need to rely on Apple’s payment systems and hence be subject to the cut.
So, why is this change significant for app developers?
To charge users, app developers currently need to use Apple’s payment system for which Apple exacts a 15-30% commission. Apps such as Spotify, Epic Games (creator of Fortnite) have for long called these rules unfair.
The new policy gives concessions to media companies, which can allow paying customers to set up accounts from the iOS app itself and have an option to bypass Apple’s payment systems. The new policy allows these apps to introduce a link to an outside payment system at the time of setting up the account.
How have media companies reacted?
Spotify’s CEO and founder Daniel Ek tweeted: “This is a step in the right direction, but it doesn’t solve the problem. App developers want clear, fair rules that apply to all apps. Our goal is to restore competition once and for all, not one arbitrary, self-serving step at a time. We will continue to push for a real solution.” Spotify has held that Apple’s 30% commission is unfair given the company’s own Apple Music app is not burdened by such a commission.
This is a step in the right direction, but it doesn’t solve the problem. App developers want clear, fair rules that apply to all apps. Our goal is to restore competition once and for all, not one arbitrary, self-serving step at a time. We will continue to push for a real solution https://t.co/vzIoBpZQr1
— Daniel Ek (@eldsjal) September 2, 2021
Tim Sweeney, the founder of Epic Games which is suing both Apple and Google over their payment practices, has called it a “special deal” for these reader apps. Epic Games’ popular game Fortnite was pulled from the App Store when the company implemented changes to add its own payment systems bypassing Apple’s in-app purchase system.
Sweeney wrote, “In Apple’s carefully-worded statement on safety, it’s hard to discern the rationale that this is safe while Fortnite accepting direct payments remains unsafe…”
In Apple’s carefully-worded statement on safety, it’s hard to discern the rationale that this is safe while Fortnite accepting direct payments remains unsafe.
Even more so if Apple deems Roblox, a game from 2006-2021 that became “an experience” mid-trial, a reader app.
— Tim Sweeney (@TimSweeneyEpic) September 2, 2021
How have regulators dealt with Apple charging app developers?
Apple (as well as Google) has been under scrutiny from governments and regulators across the world on their policies around app developers and payments. In India too, app developers have called the 30% commission unfair. Paytm’s Vijay Shekhar Sharma has called it a lagaan (tax).
In a victory for app developers, South Korea this week passed a Bill that allows developers to select which payment systems they prefer for in-app purchases. This will effectively allow them to bypass the cut imposed by both Apple and Google. According to CNBC, an Apple spokesperson said the Bill “put users who purchase digital goods from other sources at risk of fraud, undermine their privacy protections, make it difficult to manage their purchases and features like ‘Ask to Buy’ and Parental Controls will become less effective”.
In India, the Competition Commission of India is probing an antitrust case filed against Apple by a non-profit based in Rajasthan over the 30% commission.