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

[I7guy]

I think having the additional option of linking to an external page for profile/membership management will be a much bigger deal in the near future than it appears right now, more options can only be a good thing in this case; couple that with 15% for smaller developers and things are shaping up better than they were.

It seems plausible Apple could still structure it's fees such that revenue doesn't drop or even increases.

 

[leman]

I don't understand people that stick up for huge faceless mega corporations and not the low level consumer. Us. I support any measure that saves the consumer money and gives us more choice.

Some of you on here comment like you're sitting on the board. LOL.

That’s a false dichotomy. I don’t think you will find anyone here that has anti-consumer views. It’s just that it is far from obvious that consumers will benefit from third-party payment options.

 

[MowgliWolf]

Which part?

The part where there's no guarantee that prices will drop for the consumer? Instead developers will pocket any savings themselves?

Or the part where you'll now have type your credit card number into various websites for certain subscriptions?

One day later and 23 pages in this thread... but there's not much talk about all this being good for the consumer.

All snark aside... I am glad there are changes coming to the App Store. I just hope it doesn't radically affect the way some of us choose to use it.

Many of use here like Apple handling the payment... keeping our subscriptions in one place... offering easy cancellation... etc.

That link option may well work out well for the consumer to manage memberships and purchases outside of the App Store I don't expect any prices to fall, margin is margin after all.

For my part I use PayPal for most if not all of these things so I won't comment on credit and debit cards. Don't get me wrong, I much prefer dealing with apps through the App Store proper where possible. It seems to be a small change but an important one as it adds options for the consumer and will have to be made attractive in order to be of any use so lets see how it plays out

 

[MowgliWolf]

It seems plausible Apple could still structure it's fees such that revenue doesn't drop or even increases.

Thats the hope! btw, really appreciate your signature

 

[JeMeCasse]

That’s a false dichotomy. I don’t think you will find anyone here that has anti-consumer views. It’s just that it is far from obvious that consumers will benefit from third-party payment options.

Well now we can find out. Choice makes that possible.

 

[leman]

Well now we can find out. Choice makes that possible.

Very true. I just hope that there won’t be any long-term negative consequences for the customer or the small time developer.

 

[Mojohanna32]

You have a valid point, I agree that consumers prefer to make payments through Apple, there is no doubt about that. It's seamless, secure, convenient to cancel, etc. But the reason why this infrastructure exists is because Apple mandated it. If Apple is ordered to lift the mandate on in-app purchases going exclusively through Apple, developers will push their users to other payment methods. There's too much at stake when 15-30% of your company's revenue automatically goes to Apple just for payment processing. For many companies, the extra 10-25% in revenue from in-app purchases could mean operating at a loss vs profitability.

But 15-30% is not just for payment processing. Apple is maintaining servers, providing marketing support, providing security for the entire store, among other things. If these companies had to invest in a digital store on their own with the robust security Apple has, credit card payment systems (that scale) they probably would be paying just as much, possibly more, than the 30% Apple takes. We are focused so much on Apple's cut, but forget that the developers are still making 70% gross margin on their sales. Granted, operating expenses etc., will reduce that, but if a developer has 60%+ operating expenses, maybe they should consider that they aren't making $$ due to out of control spending and not Apple's 30% cut.

 

[theluggage]

That’s a false dichotomy. I don’t think you will find anyone here that has anti-consumer views. It’s just that it is far from obvious that consumers will benefit from third-party payment options.

But wait! The companies bringing these actions are all about their heartwarming concern for consumer rights and once they set up their third-party payment services, they'll pass that 30% "Apple Tax" saving straight on to the customers! Then we'll all get a free pet unicorn that eats waste plastic and excretes calorie-free chocolate!!!

The most obvious danger is that - once developers have to pay 30% on the app purchase price but can dodge that on IAPs - the App Store could fill up with even more "freemium" software that requires a third-party payment or subscription to be of any use. While there's nothing superficially wrong with that (for the consumer) - and it is even sensible for things like Netflix that are useless without a subscription or in-app purchases, I think its a negative influence on things like games which end up being designed specifically to maximise their dependence on IAP - at the expense of gameplay.

Other problem is that, while the 30% may chafe large businesses with the resources to run their own payment system, it is an absolute. freaking. bargain. for small fry who don't have their own distribution network, credit card facilities, business banking etc. (even if they don't all appreciate the cost of advertising, distribution and payment processing). We'll see whether that changes without the large players, effectively, subsidising the system (and remember the point above - this could hit revenue from initial App sales, not just IAPs).

 

[Velli]

I think having the additional option of linking to an external page for profile/membership management will be a much bigger deal in the near future than it appears right now, more options can only be a good thing in this case; couple that with 15% for smaller developers and things are shaping up better than they were.

I disagree (with the first part, agree with your last comment). I don’t think it will actually be a big deal to consumers. We don’t actually know how much money a developer makes (and shouldn’t). The value of an app is not defined by margin. Our impression of price points is very arbitrary. What makes an app worth 5 but not 7 or 10 dollars per month? Basically it is based on what it used to cost, or what alternatives there are. Over time, consumers won’t actually experience whether the price dropped or not. They just recalibrate their expectations. And as mentioned, I don’t think the result will actually be lower prices. So the end result will just be an annoying purchase experience, and not much benefit (for the consumer).

That said, it is great news for developers, they are the real winners here, much more so than consumers.

 

[Natrium]

Well how about you watch the video linked above, by a contract lawyer, that breaks down the entire document over a not inconsiderable 2.5hrs. I’ve watched it all and I’ll save you the trouble…

1) Apple doesn’t have to allow Epic back on the Apple store and can in fact ban all subsidiaries and affiliates.
2) Apple only has to provide a link to an alternate payment processor. They do not have to allow external “in-app processing” to developers. They will likely do so however to make calculation of commissions easier.
3) Even if a developer chooses to use an alternate payment method, Apple is still entitled to collect it‘s commissions.

It’s all in the judgement and video. Read/ watch them both….I have.

I'm sorry but you and the lawyer you're referring to are simply wrong about §2 and §3. I'm also a legal professional. This major part of this ruling isn't about contract law but anti trust and competition law. It is very important to analyse these separately, and even more importantly to pay close attention to the wording used in the ruling and what exactly the words refer to.


RE §2

Incorrect. Apple does not have to provide a link to an alternate payment processor.

According to the ruling, Apple must no longer prohibit developers from including links, etc., to purchasing mechanisms in addition to Apple's In-App Purchasing systems (ruling, p. 168):

Accordingly, a nationwide injunction shall issue enjoining Apple from prohibiting developers to include in their:
Apps and their metadata buttons, external links, or other calls to action that direct customers to purchasing mechanisms, in addition to IAP.

In other words, developers are allowed to direct customers to purchasing mechanisms for purchases made outside apps, that is purchases that are not in-app purchases.

RE §3

Incorrect. Apple is not entitled to a commission for purchases made outside apps, that is purchases that are not in-app purchases.

The quote from the ruling that has been posted here may suggest otherwise because it has been grossly taken out of context. This is the quote (ruling, p. 150):

Even in the absence of IAP, Apple could still charge a commission on developers. It would simply be more difficult for Apple to collect that commission.617

This quote is part of the ruling's section about Epic's claim §5, which is about In-App Payment Solutions, in other words in-app purchases. Epic essentially alleges that Apple requiring developers to use Apple's In-App Purchase systems for in-app purchases violates the law (ruling, p. 149):

that Apple has unreasonably restrained trade in the “iOS In-App Payment Processing Market” by requiring developers to “use Apple’s In-App Purchase for in-app purchases of in-app content to the exclusion of any alternative solution or third-party payment processor.”615

The court rules that Epic has not identified a suitable alternative to Apple's In-App Purchasing systems for in-app purchases (ruling, p. 150):

At step three, Epic Games has identified no suitable less restrictive alternative for Apple’s use of IAP based on the current record. The only alternative that Epic Games proposes is that Apple be barred from restricting or deterring in any way “the use of in-app payment processors other than IAP.”616 This proposed alternative is deficient for several reasons.

One of the reasons is stated in the quote you referred to, namely that Apple would still be entitled to charge a commission on developers for in-app purchases.

The court then concludes, regarding Epic's claim §5, that Apple requiring developers to use Apple's In-App Purchase systems for in-app purchases does not violate one of the federal anti trust laws (ruling, p. 150):

Thus, the Court concludes that Apple’s restrictions as to its IAP and separate payment processors do not violate Section 1 of the Sherman Act.

Thus, the quote does not refer to purchases made outside apps, but only to in-app purchases, and as such it can not be concluded that Apple is entitled to charge a commission for purchases made outside apps.

 

[I7guy]

Yes. The judge was clear in that Apple cannot control how lawfully devs communicate with their customers within their app neither act punitively if they provide alternate payment methods. Don’t think Apple can force developers to declare their in app revenue either to then bill them. How would that work, would the valued declared be exact? Also that would miss the point of the ruling. This is not merely a technical ruling.

Out payment processes could wind up being more expensive for devs as Apple is still entitled to 30%. The technical consideration of how that might be implemented is another thing. But it's not inconceivable that by using an outside payment processor a dev could pay Apple more than 30% (or more than 15% if on the small business tier)

 

[Natrium]

Out payment processes could wind up being more expensive for devs as Apple is still entitled to 30%. The technical consideration of how that might be implemented is another thing. But it's not inconceivable that by using an outside payment processor a dev could pay Apple more than 30% (or more than 15% if on the small business tier)

No, please read my post above, in which I analyse the quote that may suggest this.

 

[I7guy]

[...]

Thus, the quote does not refer to purchases made outside apps, but only to in-app purchases, and as such it can not be concluded that Apple is entitled to charge a commission for purchases made outside apps.

What a rare occurence...legal professionals disagreeing on a ruling. I guess this remains to be seen on whether apple is entitled to commissions on app store based purchases.

 

[Velli]

But wait! The companies bringing these actions are all about their heartwarming concern for consumer rights and once they set up their third-party payment services, they'll pass that 30% "Apple Tax" saving straight on to the customers! Then we'll all get a free pet unicorn that eats waste plastic and excretes calorie-free chocolate!!!

The most obvious danger is that - once developers have to pay 30% on the app purchase price but can dodge that on IAPs - the App Store could fill up with even more "freemium" software that requires a third-party payment or subscription to be of any use. While there's nothing superficially wrong with that (for the consumer) - and it is even sensible for things like Netflix that are useless without a subscription or in-app purchases, I think its a negative influence on things like games which end up being designed specifically to maximise their dependence on IAP - at the expense of gameplay.

Other problem is that, while the 30% may chafe large businesses with the resources to run their own payment system, it is an absolute. freaking. bargain. for small fry who don't have their own distribution network, credit card facilities, business banking etc. (even if they don't all appreciate the cost of advertising, distribution and payment processing). We'll see whether that changes without the large players, effectively, subsidising the system (and remember the point above - this could hit revenue from initial App sales, not just IAPs).

You are right on the money here. I think the end game of all this will be Apple going to 15% for IAP. They are already there on subscriptions post 12 months, and app purchases for small developers. They are just dragging out the inevitable, because that maximizes their revenue. Once that’s settled, things will pretty much go back to normal, and it will be a good enough deal that most won’t bother with other options. Apple will lose a few billions, Epic will lose out on getting their game store, developers at large will make more money, and Joe Consumer won’t ever know all this happened…

 

[Nuno Lopes]

Out payment processes could wind up being more expensive for devs as Apple is still entitled to 30%.

True. And another law suit.

 

[Natrium]

What a rare occurence...legal professionals disagreeing on a ruling. I guess this remains to be seen on whether apple is entitled to commissions on app store based purchases.

One doesn't have to be a legal professional to conclude that my interpretation is correct.

If Apple were really entitled to a commission for every purchase made outside the app, what would be the use of the court forcing Apple to allow developers to link to alternate purchasing mechanisms for making purchases outside the app?

Anyway, it seems to be futile to try to explain legal matters to people who only parrot each other and only want to see what they want to see, even when provided with the facts on a silver platter.

 

[Maximara]

1. Open app
2. Redirect user outside app for payment
3. Provide Apple Pay at much lower fee than app store
4. ??
5. Redirect user back to app

6. Find out outside site is run by monkeys and got hacked
7. Spend time (and money) fixing the mess this cause.

 

[Sophisticatednut]

Which part?

The part where there's no guarantee that prices will drop for the consumer? Instead developers will pocket any savings themselves?

It’s better developers pockets the difference than apple doing it. Or they can chose to lower the price.
currently developers are forced to have the same price in the app and their website, forcing them to increase the prices 30% when they don’t want to, or remove iAP

Or the part where you'll now have type your credit card number into various websites for certain subscriptions?

Nowhere does it say you will do that. Developers will just need at ad an Apple Pay or PayPal button next to the normal iAP price button.

All snark aside... I am glad there are changes coming to the App Store. I just hope it doesn't radically affect the way some of us choose to use it.

Many of us here like Apple handling the payment... keeping our subscriptions in one place... offering easy cancellation... etc.

Nothing will change as you can continue to only use the iAP option and ignore the rest.

 

[paulmeyers42]

Thus, the quote does not refer to purchases made outside apps, but only to in-app purchases, and as such it can not be concluded that Apple is entitled to charge a commission for purchases made outside apps.

I’m not a professional lawyer but I did read the ruling and have some understanding of business law.

What in the ruling or injunction stops Apple from collecting commissions outside the existing IAP mechanism? The injunction only stops Apple prohibiting outside links.

Requiring 30% commission is already in the Apple Developer agreement; I don’t see anything in the ruling that stops Apple from collecting this even for transactions outside the in-app purchase mechanism.

 

[Sophisticatednut]

6. Find out outside site is run by monkeys and got hacked
7. Spend time (and money) fixing the mess this cause.

And? Sounds like a developer problem and not an apple problem. If it’s an apple problem they should incentivize them to use their way.

 

[I7guy]

One doesn't have to be a legal professional to conclude that my interpretation is correct.

If Apple were really entitled to a commission for every purchase made outside the app, what would be the use of the court forcing Apple to allow developers to link to alternate purchasing mechanisms for making purchases outside the app?

Anyway, it seems to be futile to try to explain legal matters to people who only parrot each other and only want to see what they want to see, even when provided with the facts on a silver platter.

Anyway minutes 27 to 28 Hoeg Law virtual legality on YouTube. One can make their own conclusions or see what happens in the future.

 

[I7guy]

True. And another law suit.

As we just saw, lawsuits don't always end the way MR posters think they will end.

 

[leman]

That said, it is great news for developers, they are the real winners here, much more so than consumers.

I am not even sure this is true. Sure, rich developers benefit from the ruling. Most of the small-time dev's probably won't bother with third-party payment processors (they are by far not as cheap as some posters here claim). But most importantly, what will this mean for the App Store economy? The (IMO) brilliant part of the model is it offers equal opportunity access to everyone. You don't pay to try, you pay only on success. Now, if the successful devs push their users to use third-party payment, it means they will not contribute to the cost of running the App Store. Which might move Apple to change how they charge for these costs. Which in turn might be bad news for small time devs that are just starting out.

At the same time, Apple is very much aware of these issues and they definitely would not want to set up entry barriers for devs. I think what will happen that Apple will either eat up the slight loss of revenue (the only losers here would be the shareholders — if at all), or they will introduce a more involved tiered payment model for developers to compensate for the revenue loss, which would not punish the small developer.

Requiring 30% commission is already in the Apple Developer agreement; I don’t see anything in the ruling that stops Apple from collecting this even for transactions outside the in-app purchase mechanism.

How do you imagine they would enforce this? They already have a contract with the devs. The judge verdicts changes some details of this contract. The contract does not give Apple any rights to demand insight into the developer's financial documents or ask for compensation outside of the usual commission. They would need to renegotiate/renew the contracts with all the devs — and not to the dev's advantage. I doubt this would be an easy thing to do.

 

[Abazigal]

One doesn't have to be a legal professional to conclude that my interpretation is correct.

If Apple were really entitled to a commission for every purchase made outside the app, what would be the use of the court forcing Apple to allow developers to link to alternate purchasing mechanisms for making purchases outside the app?

Anyway, it seems to be futile to try to explain legal matters to people who only parrot each other and only want to see what they want to see, even when provided with the facts on a silver platter.

It would give users what they want - choice, while addressing the issue of developers potentially being able to get out of paying Apple's 30% or 15% cut via the use of third party payments and not contributing their share to upkeeping the app store.

 

[Nuno Lopes]

As we just saw, lawsuits don't always end the way MR posters think they will end.

This is exactly the out come I was expecting as well as most people considering the subject matter.

Even posted about this possible solution in our conversations … considering the best outcome for Apple at the moment. It gives Apple plenty of leeway to address the actual issue. I think Apple will at least in the context of multi channel / platform digital services.

But if Apple proceeds chasing the control of Internet driven digital businesses using iOS users as leverage to markup the price higher as you think they should worst will come.

This was fundamentally a slap on the wrist from the Judge. Who ever thinks that it can be ignored and simply work around it procedurally is deluded.

As I’ve mentioned above, this is not merely a technical/procedural ruling as you seam to interpret MR poster.