Epic Games vs. Apple Judgment Allows App Store Developers to Link to Alternative Payment Methods

[Velli]

This is what App store revenues look like for the last few years. Apple's cut of 15-30% of in-app purchases will be diminished. This adds up to tens of billions of dollars over the foreseeable future.

https://www.statista.com/statistics/296226/annual-apple-app-store-revenue/

It's not the lazy users that drive change, but the sea of developers that will fight for every penny of their hard earned money.

Is it clear in the ruling whether developers can use secondary payment as the ONLY payment method? Or will they have to still provide payment via Apple as an option?

I feel enough users would prefer Apple payment due to convenience, that most would need to provide both, which in turn lessens the incentive to have the secondary in the first place… I see a catch 22 for the developers there. If both options are available, noone will pick the alternative method unless it costs less. If it costs less, the developer earns the same, AND now has the cost of the secondary payment method. So in practice, not much difference. This goes for micro transactions, perscriptions will benefit more.

 

[KENPHOTO]

Thanks for reading and reporting on it. At a high level, it seemed to be a win for Apple, without knowing the details. From what you’re saying, it seems like an even bigger win in terms of a basis for future cases.

I didn’t think a court would stipulate a certain commission, and providing a link doesn’t necessarily mean a user would prefer this outside the App Store (I certainly wouldn’t).

The bigger piece that Epic wanted seems to be allowing third party stores for buying apps. The judgement seems to have shut down this possibility — do you concur?

Yes, Apple has not been forced to let third party app stores in either in this case, or even with the new South Korea law. No government or judge would be able to force apple to do that, as that is one of the main features that makes iOS unique compared to android.

 

[theotherphil]

Is it clear in the ruling whether developers can use secondary payment as the ONLY payment method? Or will they have to still provide payment via Apple as an option?

I feel enough users would prefer Apple payment due to convenience, that most would need to provide both, which in turn lessens the incentive to have the secondary in the first place… I see a catch 22 for the developers there. If both options are available, noone will pick the alternative method unless it costs less. If it costs less, the developer earns the same, AND now has the cost of the secondary payment method. So in practice, not much difference. This goes for micro transactions, perscriptions will benefit more.

"The Court also notes that in the but-for world where developers could use an alternative processor, Apple would still be contractually entitled to its commission on any purchase made within apps distributed on the App Store. Thus, so long as the alternative processor charged a non-zero commission or fee for its services, no economically rational developer would choose to use the alternative processor, because on each transaction, they would still have to pay Apple its commission, and they would have to pay the alternative processor a commission for its services."

 

[Velli]

"The Court also notes that in the but-for world where developers could use an alternative processor, Apple would still be contractually entitled to its commission on any purchase made within apps distributed on the App Store. Thus, so long as the alternative processor charged a non-zero commission or fee for its services, no economically rational developer would choose to use the alternative processor, because on each transaction, they would still have to pay Apple its commission, and they would have to pay the alternative processor a commission for its services."

What? Where was that quote taken from?

Edit: Is it part of the ruling, or part of the complaint?

 

[SpringKid]

What? Where was that quote taken from?

Edit: Is it part of the ruling, or part of the complaint?

https://regmedia.co.uk/2021/09/10/epic-v-apple.pdf

 

[Velli]

https://regmedia.co.uk/2021/09/10/epic-v-apple.pdf

Thanks. I’m not sure I understand what this means in the context of the ruling… can someone translate?

 

[SpringKid]

Thanks. I’m not sure I understand what this means in the context of the ruling… can someone translate?

It's part of Epics claims:

Epic Games asserts three claims against Apple under the Cartwright Act: (i) Count 7 for unreasonable restraint of trade in the iOS app distribution market; (ii) Count 8 for unreasonable restraint of trade in the iOS in-app payment solutions market; and (iii) Count 9 for tying of app distribution and payment processing. Epic Games argues that its Cartwright Act claims are based on the same conduct as the analogous Sherman Act claims. Specifically, Count 7 is based on the same conduct as Count 3; Count 8 is based on the same conduct as Count 5; and Count 9

 

[Michael Scrip]

Here's a law firm Youtube video explaining the Epic v Apple case bit by bit... if you've got 2.5 hours to spare...

 

[Velli]

It's part of Epics claims:

Epic Games asserts three claims against Apple under the Cartwright Act: (i) Count 7 for unreasonable restraint of trade in the iOS app distribution market; (ii) Count 8 for unreasonable restraint of trade in the iOS in-app payment solutions market; and (iii) Count 9 for tying of app distribution and payment processing. Epic Games argues that its Cartwright Act claims are based on the same conduct as the analogous Sherman Act claims. Specifically, Count 7 is based on the same conduct as Count 3; Count 8 is based on the same conduct as Count 5; and Count 9

Ok. Then it doesn’t really answer my question. A: Will developers still have to support app store as well, when they link outside? Follow up, when reading this, it seems even if they link out, they still have to pay Apple 30%? Does this stand, even after the ruling? Or am I just reading it wrong? (I woukd think so…)

Sorry if I’m being thick.

 

[Natrium]

No it doesn’t. The court’s ruling says that Apple is entitled to a commission for every purchase, even for purchases made outside the App Store.

No, it doesn’t.

Apple is forced to allow developers to link to payment mechanisms in addition to Apple’s In-App Purchasing system. This means consumers can purchase items outside Apple’s In-App Purchasing system. This blows away the very foundation of Apple’s App Store business model, which is based on charging a commission for purchases made using Apple’s In-App Purchasing system. Very bad for Apple.

 

[Sophisticatednut]

That wouldn’t be worth Apple’s time and effort. Why would they bother with operating a platform at a loss? Even $399 for every app wouldn’t be enough to cover operating expenses.

My company pays FAR more than that per month for hosting on AWS.

Why? Because without it nobody would buy an iOS device as they failed like windows phones. And we don’t know the operational expenses, but we know the cost per app is insignificant as they operate with 400%+ margins

 

[bluecoast]

Ok. Then it doesn’t really answer my question. A: Will developers still have to support app store as well, when they link outside? Follow up, when reading this, it seems even if they link out, they still have to pay Apple 30%? Does this stand, even after the ruling? Or am I just reading it wrong? (I woukd think so…)

Sorry if I’m being thick.

I think they do still have to support Apple’s IAP method.

It’ll be interesting how this is presented in the app ie will it be:

‘Get 100 jewels for $4.99 via the App Store or get 109 jewels for $3.99 directly from us’?

And no, if a developer uses their own IAP system they don’t have to pay Apple anything.

This is dispite all of the bluster from Apple, that they’ve won, ultimately they’ve lost.

The big gaming companies are obviously making the vast majority of money for Apple & they have the resources to set up their own payment systems.

if this ruling stands, by (calendar) Q2 2022, the App Store’s revenue will likely have plummeted.

I can’t see how that’s a win for Apple.

 

[Abazigal]

I think they do still have to support Apple’s IAP method.

It’ll be interesting how this is presented in the app ie will it be:

‘Get 100 jewels for $4.99 via the App Store or get 109 jewels for $3.99 directly from us’?

And no, if a developer uses their own IAP system they don’t have to pay Apple anything.

This is dispite all of the bluster from Apple, that they’ve won, ultimately they’ve lost.

The big gaming companies are obviously making the vast majority of money for Apple & they have the resources to set up their own payment systems.

if this ruling stands, by (calendar) Q2 2022, the App Store’s revenue will likely have plummeted.

I can’t see how that’s a win for Apple.

Actually, the ruling doesn't stop Apple from charging developers 30% even if they use their own payment system, or a third party one like Stripe or PayPal.

This would explain why Epic still has to pay Apple 30% of the revenue they collected from the sale of v-bucks using their own payment system.

Whether Apple actually will, or how they would go about such an endeavour, is still unclear but in the very least, what's clear is that Apple can still charge developers a commission. It would simply be more difficult for Apple to determine and collect that commission, but not impossible, not least because Apple still wields absolute authority over the App Store (no third party App Store that developers can flee to).

No wonder Epic is appealing. It's a pyrrhic victory, especially when iTunes will remain the most convenient means of payment, and developers actually end up paying more were they to use third party alternatives.

 

[SurferPup]

I think private enterprise owners become sick of bending over for Governments' demands like iiNet's former CEO so they cease the anti meta data monitoring court cases, sell and retire. Other companies roll over, little is exposed in the media, the consumers pay more for some Government invention that they never wanted and most of the population is oblivious to the consequences. I am grateful for Apple and VPN providers that go to great extents to protect my rights to have privacy. I have had enough monitoring for all security services and criminal justice authorities to know that I pose no threat to anyone so no one has a right to follow my digital profile!

 

[Velli]

Actually, the ruling doesn't stop Apple from charging developers 30% even if they use their own payment system, or a third party one like Stripe or PayPal.

This would explain why Epic still has to pay Apple 30% of the revenue they collected from the sale of v-bucks using their own payment system.

Whether Apple actually will, or how they would go about such an endeavour, is still unclear but in the very least, what's clear is that Apple can still charge developers a commission. It would simply be more difficult for Apple to determine and collect that commission, but not impossible, not least because Apple still wields absolute authority over the App Store (no third party App Store that developers can flee to).

No wonder Epic is appealing. It's a pyrrhic victory, especially when iTunes will remain the most convenient means of payment, and developers actually end up paying more were they to use third party alternatives.

That’s how I read it as well, which makes it a much bigger win for Apple than what it is presented as by the press (which is why I’m wondering whether I’m wrong)

 

[Abazigal]

That’s how I read it as well, which makes it a much bigger win for Apple than what it is presented as by the press (which is why I’m wondering whether I’m wrong)

It also makes me wonder if DHH may have rejoiced a tad too soon.

https://twitter.com/x/status/1436356844570689546

Unless his email app is somehow designated a reader app and exempted from the 30% cut, I expect another meltdown if and when Apple starts sending bills his way...

 

[Velli]

I think they do still have to support Apple’s IAP method.

It’ll be interesting how this is presented in the app ie will it be:

‘Get 100 jewels for $4.99 via the App Store or get 109 jewels for $3.99 directly from us’?

And no, if a developer uses their own IAP system they don’t have to pay Apple anything.

This is dispite all of the bluster from Apple, that they’ve won, ultimately they’ve lost.

The big gaming companies are obviously making the vast majority of money for Apple & they have the resources to set up their own payment systems.

if this ruling stands, by (calendar) Q2 2022, the App Store’s revenue will likely have plummeted.

I can’t see how that’s a win for Apple.

But realistically that’s not how it would pan out. What is the developer’s incentive to price it like that? If they pass the saving on to the consumer, how does the developer win? I guess by assuming the consumer will buy more, but again, then how will the consumer win? What would happen in your scenario is not the price without Apple tax going down, it will be the price with Apple tax going up. Game developers have a lot of experience in exactly how much money people are willing to spend on micro transactions. They will extract exactly the same amount, but keep more of it to themselves. There will be examples of all scenarios, but on a whole, I don’t think it will change much. What is the inherent value of those 100 jewels anyway? It’s all just funny money.

 

[UBS28]

……

 

[Michael Scrip]

Unless his email app is somehow designated a reader app and exempted from the 30% cut, I expect another meltdown if and when Apple starts sending bills his way...

So wait... it's only "reader apps" that are allowed to have linking to alternative payment methods?

After 22 pages in this thread... this is the first I'm hearing that.

This case is so complicated... I feel like I need a "Dummies Guide" to this lawsuit...

 

[leman]

Are you kidding? No developer has to "set up a payment system", they just have to plug in a 3rd party payment system, which is trivial to do, it's all plug'n'play, of which there are many to choose from, and they all take a cut of around 2-3%. Thus highlighting why Apple's 15/30% cut is so utterly ridiculous and greedy. Thus why Apple is in courts all over the world, as devs are sick of having to give up so much of their hard earned, to the richest and greediest company in the world.

Stripe for examples takes 2.9% + 30c on each successful credit card charge. If you are selling a $2.99 subscription or digital item, that's 12% per charge. If you want to sell a $0.99 item, that's over 30%. And of course, it's something you lose if you have to issue a refund. And you have to do your own accounting. And so on.

Of course, Apple's "cut" is not just about payment processing. It's also hosting, distribution, listing, API use, support access and so on. Would be funny if Apple started changing thee things extra, no? What do you think will happen to $0.99 subscription prices if you had to pay 35% to the payment processor plus 10c for every installed app plus a small sum for every push notification?

Not at all, some stores has a higher price, some have a lower price, but they are all free to put whatever price they want.
I already gave apple a cut when I payed my hosting fees. If Netflix doesn’t need to pay then I don’t need to pay. Apple don’t take any profit from my ad revenue.
I think apple should only be allowed to take a literal processing fee and perhaps a fixed fee like a development fee for every year. Small developer= 99$. Medium= 199$ and large=399$ a year etc

Yeah, that's something I see as well. As I wrote earlier, they could offer multiple models.

Are you under the impression that the market knew the outcome of the case before today? Apple won 9 of 10 rulings, but still ended down over 3%. If this ruling was good for Apple they would at least be inline with the rest of the tech sector, but they're not. Out of all the big tech names, they're down the most.

Market is known to react in a knee-jerk matter. I wouldn't worry too much about it. We still closed above what AAPL was trading for last couple of months. There will be readjustments as the verdict is better understood and analyzed. Still, I couldn't have timed a purchase of call options any worse

 

[AppliedMicro]

"The Court also notes that in the but-for world where developers could use an alternative processor, Apple would still be contractually entitled to its commission on any purchase made within apps distributed on the App Store. Thus, so long as the alternative processor charged a non-zero commission or fee for its services, no economically rational developer would choose to use the alternative processor, because on each transaction, they would still have to pay Apple its commission, and they would have to pay the alternative processor a commission for its services."

I'll say it again: This is a footnote of reasoning on one very specific question (illegally tying app store distribution and in-app purchases) that has been grossly taken out of context.

 

[Abazigal]

So wait... it's only "reader apps" that are allowed to have linking to alternative payment sources?

After 22 pages here... this is the first I'm hearing that.

All apps are allowed to link, but then Apple is well within their rights to still charge them 30% or 15% or whatever number suits their fancy.

Netflix retaliated by doing away with the ability to sign up within the app, instead expecting users to create an account from their website. I believe Apple then created the reader app category to deal with this inconsistency and just so they didn’t have to deal with companies like Netflix who were technically flouting App Store rules.

I suspect Apple will continue to carve out this exception for them. Otherwise, this ruling is literally one step forward, two steps back for them.

DHH’s email app, hey, is technically doing the same thing, and got in trouble with Apple for precisely this. He seems to believe that he will now be able to let users pay via stripe from within the app and not have to pay Apple a single cent. But from what I am reading here, he may well have to.

So for now, I am a little confused as to just who is right - him or Apple?

 

[Velli]

I'll say it again: This is a footnote to a very specific question (illegally tying app store distribution and in-app purchases) that has been grossly taken out of context.

Thanks!

 

[Natrium]

Actually, the ruling doesn't stop Apple from charging developers 30% even if they use their own payment system, or a third party one like Stripe or PayPal.

This would explain why Epic still has to pay Apple 30% of the revenue they collected from the sale of v-bucks using their own payment system.

Whether Apple actually will, or how they would go about such an endeavour, is still unclear but in the very least, what's clear is that Apple can still charge developers a commission. It would simply be more difficult for Apple to determine and collect that commission, but not impossible, not least because Apple still wields absolute authority over the App Store (no third party App Store that developers can flee to).

No wonder Epic is appealing. It's a pyrrhic victory, especially when iTunes will remain the most convenient means of payment, and developers actually end up paying more were they to use third party alternatives.

Wrong. Apple is forced to allow developers to link to payment mechanisms in addition to Apple’s In-App Purchasing system. This means consumers can purchase items outside Apple’s In-App Purchasing system. This blows away the very foundation of Apple’s App Store business model, which is based on charging a commission for purchases made using Apple’s In-App Purchasing system. Very bad for Apple.

Epic needs to pay Apple damages for breach of contract based on two factors, broadly speaking, according to the ruling. First, the anti steering provision in the contract (prohibited to provide a link to alternative payment mechanisms in addition to Apple’s In-App Purchasing system) is not the only provision Epic breached. Second, Epic did not have to breach the contract to bring a claim to court about Apple’s anti competitive conduct.

 

[5232152]

You seem to imply that just because an app uses an alternate payment option they will be free to skirt Apple’s cut. Thats not the case developers are still in the hook for Apple’s fee and you can even see it in this ruling.

Calm down - It's a joke. Most find it funny.