Apple Criticized by Korean Game Developers for its App Store Refund Policy

[nicho]

And what exactly are people "stealing" by "returning" 100 gold coins in an app - a couple bytes of database space?

I operate my own small business, a small hardware device with an online system connected - getting in on the "smart home" craze. Manufacturing is outsourced, so we don't have to deal with manufacturing shrink, we just pay a per-unit contracted cost. The online service, as with any of these games, is practically zero cost-per-unit. If someone cancels a service, or asks for a refund (which we always offer). Yes, hardware space and bandwidth cost money, but there is no "direct cost" per-user.

Hardware-wise, in the past month, we've had $2388 which I'd classify as shrink at retail price, $912 at cost price. That includes:

- 1 unit damaged in warehouse
- 3 units lost by couriers shipping to customer
- 4 "change of mind" hardware returns that couldn't be re-sold
- 1 unit that was bought via PayPal with a stolen credit card (we had to swallow the cost)
- 3 units that were returned as being faulty, which we determined was fraudulent - 1 had a smashed screen which couldn't have happened during qa/shipping (impact mark), one which was obviously dropped and cracked but otherwise seemed to work fine, and 1 which was returned because apparently only the accessories were in the box, not the unit itself (even though we could see the unit was online, and connected to our service - not for long though!)

At cost price, for us that was around 0.9% shrink vs revenue, and around 1.4% vs per-item profit margins (not taking into account operating costs here). That's something we have to budget for - we *know* it's going to happen, and we take that into account. 100% of our shrink costs come from hardware, not software. Out of that, only a third of shrink was down to "fraud".

Saying shrink can't happen with a digital product is silly. Of course it's going to happen. If you're dealing with people, at some point you're going to deal with fraud. Fact of life. The only difference is the physical cost behind it doesn't scale the same way as with physical products.

Here's two examples:

1. Company A sells a video streaming service for $10/month. Someone purchases a subscription uses a stolen credit card, and watches 50 films. The credit card company (rightfully) does a chargeback 14 days later, and the company cancels the service. A movie averages at 1.5GB, using 75GB bandwidth. They pay AWS $0.06/GB for bandwidth, which equates to $4.50. They also have to pay the rights holders $0.10 per viewing as part of their agreement. That's $5, meaning that the total cost of the fraud is $9.50 - that's $9.50 worth of shrink.

2. Company B offers a mobile video game for free on the App Store, and sells packs of "100 gold coins" for $5. When a user buys coins, they can use them to buy items in the store - the transaction is purely in the game, and the only result of buying the coins is a database entry to tell the game "hey, user X bought 100 coins". Somebody buys 100 packs of coins for $500, buying all sorts of virtual items for their character, again, all database entries. The user claims their child accidentally bought the coins, and Apple refunds the $500. Company B hasn't lost money, other than perhaps a couple of cent in bandwidth costs. Shrink is effectively 0.

That's why I don't understand them chasing so much - unless there is a physical per-unit cost behind it, it's really not worth it. So what if someone buys a game or coins and returns them, they've lost a sale, sure, but they haven't lost money.

you work for company A and i'm another customer. i don't give a flying f*** if Fred next door can or can't watch the latest Star Wars movie because of his fraudulent dealings with you. it literally has no material affect on the outside world.

you work for company B and i'm a customer on the same server as Fred. While you haven't lost money, what you've done is enabled Fred to gain an unfair advantage over me and many others who have not bought the coins and got the stuff for free. of course, we don't know that he hasn't paid for them - perhaps he's just a mr moneybags. but word gets out, the big spenders get upset that people competing with them are doing so by fraud and a ********* goes down on the game's message boards. shrink isn't measurable in terms of lost sales - yet - but is high in terms of lost reputation and goodwill. it could well have a material effect an order of magnitude higher than company A's issues going forward.

comparing a video streaming service which serves one end user at a time, to a MMO game where the actions of one gamer affect the others is silly.

 

[Ma2k5]

And what exactly are people "stealing" by "returning" 100 gold coins in an app - a couple bytes of database space?

I operate my own small business, a small hardware device with an online system connected - getting in on the "smart home" craze. Manufacturing is outsourced, so we don't have to deal with manufacturing shrink, we just pay a per-unit contracted cost. The online service, as with any of these games, is practically zero cost-per-unit. If someone cancels a service, or asks for a refund (which we always offer). Yes, hardware space and bandwidth cost money, but there is no "direct cost" per-user.

Hardware-wise, in the past month, we've had $2388 which I'd classify as shrink at retail price, $912 at cost price. That includes:

- 1 unit damaged in warehouse
- 3 units lost by couriers shipping to customer
- 4 "change of mind" hardware returns that couldn't be re-sold
- 1 unit that was bought via PayPal with a stolen credit card (we had to swallow the cost)
- 3 units that were returned as being faulty, which we determined was fraudulent - 1 had a smashed screen which couldn't have happened during qa/shipping (impact mark), one which was obviously dropped and cracked but otherwise seemed to work fine, and 1 which was returned because apparently only the accessories were in the box, not the unit itself (even though we could see the unit was online, and connected to our service - not for long though!)

At cost price, for us that was around 0.9% shrink vs revenue, and around 1.4% vs per-item profit margins (not taking into account operating costs here). That's something we have to budget for - we *know* it's going to happen, and we take that into account. 100% of our shrink costs come from hardware, not software. Out of that, only a third of shrink was down to "fraud".

Saying shrink can't happen with a digital product is silly. Of course it's going to happen. If you're dealing with people, at some point you're going to deal with fraud. Fact of life. The only difference is the physical cost behind it doesn't scale the same way as with physical products.

Here's two examples:

1. Company A sells a video streaming service for $10/month. Someone purchases a subscription uses a stolen credit card, and watches 50 films. The credit card company (rightfully) does a chargeback 14 days later, and the company cancels the service. A movie averages at 1.5GB, using 75GB bandwidth. They pay AWS $0.06/GB for bandwidth, which equates to $4.50. They also have to pay the rights holders $0.10 per viewing as part of their agreement. That's $5, meaning that the total cost of the fraud is $9.50 - that's $9.50 worth of shrink.

2. Company B offers a mobile video game for free on the App Store, and sells packs of "100 gold coins" for $5. When a user buys coins, they can use them to buy items in the store - the transaction is purely in the game, and the only result of buying the coins is a database entry to tell the game "hey, user X bought 100 coins". Somebody buys 100 packs of coins for $500, buying all sorts of virtual items for their character, again, all database entries. The user claims their child accidentally bought the coins, and Apple refunds the $500. Company B hasn't lost money, other than perhaps a couple of cent in bandwidth costs. Shrink is effectively 0.

That's why I don't understand them chasing so much - unless there is a physical per-unit cost behind it, it's really not worth it. So what if someone buys a game or coins and returns them, they've lost a sale, sure, but they haven't lost money.

There is more than physical worth actually, there is the issue of peoples time that was needed to create what you refer to as bytes. These virtual items as you call them don't come out from nothing. Physical stores may be hit hard due to losing both man hours and materials, but doesn't make the loss of software companies any less, especially as salary costs are one of the largest overheads for nearly every organisation. Then there are fixed overheads such as property/office costs to operate from, including all the PC's/laptops/software costs associated. Then you got all sorts of other bills to. So no, it isn't just loss of some "bits" of information. It is a loss of time and revenue to counteract all those associated costs.

Working at a software house, we usually charge people £750-£1500 a day for each employee, so that should give you an idea of the cost of time. Much more than me having to manufacturer individual goods of items, from beds, washing machines etc. I actually feel the loss is more in specialist software houses.

 

[nicho]

These Korean developers whining about this issues are no real developers, if they can't figure it out a away to take away whatever people get a refund for... They sound like scripts kiddies to me...

the issue isn't an inability to take away what people get refunded for. it's being told what people have been refunded for, such that they can then take it away. i have heard EA also have the same issues, so it's not a case of "script kiddies" - a game I play has people who've requested refunds from apple for various legitimate or illegitimate reasons and not one of them has had action on their account because Apple just doesn't tell the developers who had a refund and for what.

 

[Xgm541]

And what exactly are people "stealing" by "returning" 100 gold coins in an app - a couple bytes of database space?

I operate my own small business, a small hardware device with an online system connected - getting in on the "smart home" craze. Manufacturing is outsourced, so we don't have to deal with manufacturing shrink, we just pay a per-unit contracted cost. The online service, as with any of these games, is practically zero cost-per-unit. If someone cancels a service, or asks for a refund (which we always offer). Yes, hardware space and bandwidth cost money, but there is no "direct cost" per-user.

Hardware-wise, in the past month, we've had $2388 which I'd classify as shrink at retail price, $912 at cost price. That includes:

- 1 unit damaged in warehouse
- 3 units lost by couriers shipping to customer
- 4 "change of mind" hardware returns that couldn't be re-sold
- 1 unit that was bought via PayPal with a stolen credit card (we had to swallow the cost)
- 3 units that were returned as being faulty, which we determined was fraudulent - 1 had a smashed screen which couldn't have happened during qa/shipping (impact mark), one which was obviously dropped and cracked but otherwise seemed to work fine, and 1 which was returned because apparently only the accessories were in the box, not the unit itself (even though we could see the unit was online, and connected to our service - not for long though!)

At cost price, for us that was around 0.9% shrink vs revenue, and around 1.4% vs per-item profit margins (not taking into account operating costs here). That's something we have to budget for - we *know* it's going to happen, and we take that into account. 100% of our shrink costs come from hardware, not software. Out of that, only a third of shrink was down to "fraud".

Saying shrink can't happen with a digital product is silly. Of course it's going to happen. If you're dealing with people, at some point you're going to deal with fraud. Fact of life. The only difference is the physical cost behind it doesn't scale the same way as with physical products.

Here's two examples:

1. Company A sells a video streaming service for $10/month. Someone purchases a subscription uses a stolen credit card, and watches 50 films. The credit card company (rightfully) does a chargeback 14 days later, and the company cancels the service. A movie averages at 1.5GB, using 75GB bandwidth. They pay AWS $0.06/GB for bandwidth, which equates to $4.50. They also have to pay the rights holders $0.10 per viewing as part of their agreement. That's $5, meaning that the total cost of the fraud is $9.50 - that's $9.50 worth of shrink.

2. Company B offers a mobile video game for free on the App Store, and sells packs of "100 gold coins" for $5. When a user buys coins, they can use them to buy items in the store - the transaction is purely in the game, and the only result of buying the coins is a database entry to tell the game "hey, user X bought 100 coins". Somebody buys 100 packs of coins for $500, buying all sorts of virtual items for their character, again, all database entries. The user claims their child accidentally bought the coins, and Apple refunds the $500. Company B hasn't lost money, other than perhaps a couple of cent in bandwidth costs. Shrink is effectively 0.

That's why I don't understand them chasing so much - unless there is a physical per-unit cost behind it, it's really not worth it. So what if someone buys a game or coins and returns them, they've lost a sale, sure, but they haven't lost money.

So by your view, I could download movies and music illegally because it's just a few bytes? The content creator is completely taken out of the transaction because they don't pay for the bandwidth. They don't even have to maintain any database so it's even less time consuming. Heck I wouldn't watch the movie or listen to the song if I didn't get it for free so I'm doing THEM a favor.

 

[emailnotebox]

Very true. I wish these Korean companies would get a life and wake up. They are probably losing far more money from employee theft and laziness than a few app users.

Have you read the whole article? It says that there are busineses that are abusing the loophole at the industrial level.

 

[69Mustang]

And what exactly are people "stealing" by "returning" 100 gold coins in an app - a couple bytes of database space?

I operate my own small business, a small hardware device with an online system connected - getting in on the "smart home" craze. Manufacturing is outsourced, so we don't have to deal with manufacturing shrink, we just pay a per-unit contracted cost. The online service, as with any of these games, is practically zero cost-per-unit. If someone cancels a service, or asks for a refund (which we always offer). Yes, hardware space and bandwidth cost money, but there is no "direct cost" per-user.

Hardware-wise, in the past month, we've had $2388 which I'd classify as shrink at retail price, $912 at cost price. That includes:

- 1 unit damaged in warehouse
- 3 units lost by couriers shipping to customer
- 4 "change of mind" hardware returns that couldn't be re-sold
- 1 unit that was bought via PayPal with a stolen credit card (we had to swallow the cost)
- 3 units that were returned as being faulty, which we determined was fraudulent - 1 had a smashed screen which couldn't have happened during qa/shipping (impact mark), one which was obviously dropped and cracked but otherwise seemed to work fine, and 1 which was returned because apparently only the accessories were in the box, not the unit itself (even though we could see the unit was online, and connected to our service - not for long though!)

At cost price, for us that was around 0.9% shrink vs revenue, and around 1.4% vs per-item profit margins (not taking into account operating costs here). That's something we have to budget for - we *know* it's going to happen, and we take that into account. 100% of our shrink costs come from hardware, not software. Out of that, only a third of shrink was down to "fraud".

Saying shrink can't happen with a digital product is silly. Of course it's going to happen. If you're dealing with people, at some point you're going to deal with fraud. Fact of life. The only difference is the physical cost behind it doesn't scale the same way as with physical products.

Here's two examples:

1. Company A sells a video streaming service for $10/month. Someone purchases a subscription uses a stolen credit card, and watches 50 films. The credit card company (rightfully) does a chargeback 14 days later, and the company cancels the service. A movie averages at 1.5GB, using 75GB bandwidth. They pay AWS $0.06/GB for bandwidth, which equates to $4.50. They also have to pay the rights holders $0.10 per viewing as part of their agreement. That's $5, meaning that the total cost of the fraud is $9.50 - that's $9.50 worth of shrink.

2. Company B offers a mobile video game for free on the App Store, and sells packs of "100 gold coins" for $5. When a user buys coins, they can use them to buy items in the store - the transaction is purely in the game, and the only result of buying the coins is a database entry to tell the game "hey, user X bought 100 coins". Somebody buys 100 packs of coins for $500, buying all sorts of virtual items for their character, again, all database entries. The user claims their child accidentally bought the coins, and Apple refunds the $500. Company B hasn't lost money, other than perhaps a couple of cent in bandwidth costs. Shrink is effectively 0.

That's why I don't understand them chasing so much - unless there is a physical per-unit cost behind it, it's really not worth it. So what if someone buys a game or coins and returns them, they've lost a sale, sure, but they haven't lost money.

Holy crap that's a word salad. You conveniently ignore the fact that employees have to be paid, lights have to be kept on, and company wants to actually make a profit, grow, and continue to support and develop games. Not to mention, it's essentially theft.

 

[Kaibelf]

Apple seem to be interested in protecting criminal fraudsters and penalizing legitimate businesses

Oh good grief. Yeah yeah, Apple is actively supporting the criminals of the world, and they are also sponsoring terrorism because they won't weaken everyone's encryption, and they hate small businesses. Any other nonsense? Maybe a line about how they want to put family farms out of business and operating fast-kill animal shelters?

 

[MichaelDT]

So... Commenters, we don't need to be specifying "Korean developers" or calling them out by their nationality. This is a problem to *ALL* nationality of developers, it just happens that this article was in a Korean newspaper, so the developers they interviewed are Korean. Saying things like "These Korean developers whining about..." or "I wish these Korean companies would..." is unnecessarily adding nationality (and by proxy race) in to a complaint. Would you have made the same comment if the developers had been from California? Or Texas? Would you have specified "These Californian developers..." or "I wish these Texan companies..."?

If not, then leave "Korean" off the description you post. Their "Koreanness" has nothing to do with the issue.

Nationality isn't race, it's not racist to point out I'm American and do American things. Korean companies have a certain reputation for the way business is conducted in that nation, as do American companies, German companies etc. I assume when you travel you're aghast when they ask to see you passport? Since that would imply they acknowledge you're a different nationality, truly racism at its worst.

 

[Mcmeowmers]

So by your view, I could download movies and music illegally because it's just a few bytes? The content creator is completely taken out of the transaction because they don't pay for the bandwidth. They don't even have to maintain any database so it's even less time consuming. Heck I wouldn't watch the movie or listen to the song if I didn't get it for free so I'm doing THEM a favor.

But muh personal priv-acy may or may not be violated be these here South Koreans app developers?

 

[Michaelgtrusa]

How are they able to track them down?

 

[Brian Y]

Wow, I forgot how "Apple is evil" MacRumors has become.

Holy crap that's a word salad. You conveniently ignore the fact that employees have to be paid, lights have to be kept on, and company wants to actually make a profit, grow, and continue to support and develop games. Not to mention, it's essentially theft.

I didn't ignore the fact that employees have to be paid.

First off, it's not theft. From the OED: Theft - "The action or crime of stealing", Stealing - "Take (another person's property) without permission or legal right and without intending to return it". Ergo it's not theft, but that argument has been done to death.

Second - yes, of course the company wants to make money. And they do make money. What I'm saying is that there is no real loss from what these people are doing. Wrong? of course. But why should Apple hand over the personal details of customers who have had refunds? Go after the people doing it as a business, sure - but why should someone be victimised by a company because they bought a game and it was crap/didn't work and you got a refund.

So by your view, I could download movies and music illegally because it's just a few bytes? The content creator is completely taken out of the transaction because they don't pay for the bandwidth. They don't even have to maintain any database so it's even less time consuming. Heck I wouldn't watch the movie or listen to the song if I didn't get it for free so I'm doing THEM a favor.

Again (I feel like a broken record here), it's not that you should be able to download them illegally, it's that there is no physical loss if you do. Piracy is wrong, and shouldn't occur, but you can't say that the movie studios lost $20 because someone didn't buy a $20 dvd.

This is akin to someone releasing a movie - without you being able to view trailers, and saying "people need to pay to see it, and we don't want to give refunds, even though it could be crap". Even in theatres, if a movie is bad, you can walk out and get a refund. If a game (physical) turns out to be crap (like Driveclub was), you can get a refund. Why should that be any different just because it's an online game?

 

[zorinlynx]

Absolutely no sympathy here. These "pay to win" games are a scourge and I don't mind seeing the developers "ripped off" at all.

It used to be you could buy an iOS game for a few bucks and have at least a few hours of guaranteed entertainment. Now you have to be buying jewels are coins or gems or whatever to keep playing, or wait long periods of time for "repairs" unless you pay, etc. etc.

 

[macTW]

Seeing as this is the first time I've seen this come up in the news... it's probably the first time Apple has come across this complaint and they'll likely change their policies soon.

 

[Alexsi13th]

So... Commenters, we don't need to be specifying "Korean developers" or calling them out by their nationality. This is a problem to *ALL* nationality of developers, it just happens that this article was in a Korean newspaper, so the developers they interviewed are Korean. Saying things like "These Korean developers whining about..." or "I wish these Korean companies would..." is unnecessarily adding nationality (and by proxy race) in to a complaint. Would you have made the same comment if the developers had been from California? Or Texas? Would you have specified "These Californian developers..." or "I wish these Texan companies..."?

If not, then leave "Korean" off the description you post. Their "Koreanness" has nothing to do with the issue.

I think Korea makes it more of an issue simply because Korean Players are notorious for abusing refund policies. Speaking from personal experience.