Apple’s Services business has been growing at a rapid pace and with every passing year, it is posting record revenues. In fact, the Services business itself is now raking in over $12 billion in revenue for Apple every year. The App Store has been a major reason behind the growth of the Services revenue. However, Apple’s tight grip over the App Store and its revenue-sharing policies are affecting app developers which have made the store such a big success.
Apple takes a cut from every sale or transaction that occurs on the App Store. This is fine when one purchases an app, but not really an ideal solution for subscriptions and IAPs where Apple wants a 30% cut. This means that if you subscribe to a service or app on the App Store for $10/month, Apple will be taking $3 from it every month. That’s a lot of money and given that app developers behind services are not exactly swimming in it, they lose a significant amount of their revenue earned. The percentage cut is so high that the likes of Spotify and Netflix have removed the in-app subscription option from their app entirely. Sure, some large corporations might not mind paying Apple a 30% cut for using the App Store, but for indie developers, this could be a difference between them paying their bills or not.
As if this is not already bad enough, App Store policies forbid developers from promoting or using another source for payment in their app. For example, Spotify or Netflix cannot simply tell users to head over to their website to subscribe to their service. The 3.1.1 policy in App Store guidelines also makes it clear that developers must use Apple’s payment system for all transactions. This is also the reason as to why you cannot sign up for Spotify or Netflix using the iOS app. What’s unfair is that unlike others, Apple is not having to pay a 30% fee when a customer subscribes to Apple Music or purchases a movie from the iTunes Store on an iPhone or Mac.
If you want to unlock features or functionality within your app, (by way of example: subscriptions, in-game currencies, game levels, access to premium content, or unlocking a full version), you must use in-app purchase. Apps may not use their own mechanisms to unlock content or functionality, such as license keys, augmented reality markers, QR codes, etc. Apps and their metadata may not include buttons, external links, or other calls to action that direct customers to purchasing mechanisms other than in-app purchase.
Then, there’s also the fact about how rules are interpreted. Apple allowed the Hey.com email app on the App Store but is rejecting updates for it until the app gets around to adding IAPs for its service. Hey.com is an email service launched by Basecamp founders where one can get a two or three letter email ID starting from $99/year. The Cupertino company later accepted that it should not have even allowed the app on the App Store in the first place. As Protocol points out, Apple allows apps where one can sign in, but not sign up for business services without IAP on the App Store but not consumer products.
On Tuesday afternoon, Apple sent Basecamp a slightly softer written notice. “We noticed that your app allows customers to access content, subscriptions, or features they have purchased elsewhere, but those items were not available as in-app purchases within the app,” it said. Because Hey didn’t qualify as a “Reader” app, Apple said that existing subscribers could log in as normal but Hey needed to make all subscriptions available to new users as in-app purchases.
At this point, as a developer, you are basically on Apple’s whims and its decision on whether it believes your app is a “Reader” app or not.
Then, there’s the question of size. If you are someone like Amazon, you could get strike a deal with Apple behind the scenes and have your way as well. The Prime Video app did not allow one to rent or download movies from the iOS app but in April this year, Amazon started offering Prime members the option to do so. This was because Amazon was taking part in an “established program for premium subscription video entertainment providers” by Apple to achieve this. There are no details about this “established program” which would allow Netflix and other streaming services to take advantage of it as well.
Apple’s behavior has not exactly gone unnoticed. Spotify and a number of other app developers have already filed a complaint against the company with the European Commission which has finally launched an antitrust investigation about this. While its too early to say, the chances of the results of this investigation going in Apple’s favor are pretty slim. Given the control that Apple has over the App Store and how it uses it to its own advantage, it is important that a regulator steps in and levels the playing field for all.
What are your thoughts on how Apple handles App Stores guidelines and twists them in its favor? Do you think it is being a bully here?
