Google Play Will Let Developers Use Alternative Billing Systems in South Korea, While Apple Has Yet to Make Changes

[Michael Scrip]

I don't know what to do about, say, Apple Music vs. Spotify. Perhaps the answer would be to spin Apple Music out as a "separate-ish" entity that has to pay the same fees as everybody else, in order to level the playing field. I'm not sure that would fix the situation.

Luckily Spotify already figured out a solution a while ago.

They started telling their customers to stop using Apple's IAP roughly six years ago and instead pay through the Spotify website. And eventually Spotify removed in-app payments completely.

Everyone today must sign up directly through Spotify... and thus Spotify gets every dime and doesn't have to give any money to Apple, Google, or anyone else. #winning

And yes... Spotify is not allowed to tell new customers what to do... per Apple's rules. People must find their way to the Spotify website on their own.

But despite that inconvenience... Spotify became, and is still, the largest music streaming service in the world. By a lot.

 

[Michael Scrip]

Is only a matter of time, if the feds in South Korea can force Google to comply, Apple will have no choice.

I'm just ready for this to be over. I'm sick of a new article every week about some country or some government suing Apple.

30% was bad... 15% was bad... now it's 11% plus 3% for a 3rd-party payment processor.

Whatever... just do it.

 

[meson]

In my opinion, this all should be pretty straightforward.

On the initial sale of a paid application with a one-time fee, Apple/Google should be able to collect a typical retail markup, 30% is reasonably in line based on my experience. In this case, Apple/Google are replacing the brick and mortar retailer.

For a subscription-based application with recurring fees, there should be a commission-based fee applied. Since this app will be supported by the subscription instead of the one-time fee, the commission should be in the neighborhood of 30% for the first year, to subsidize the 'sale' of the app. Beyond that the vendor should be supported with a modest percentage of the subscription value (likely less than 10%, but more than a typical 3% payment processing fee).

For an in-app purchase for a digital good or service that is not associated with upgrading to a new version of the application and is not a recurring fee, the vendor should only be a able to asses a pass through payment fee of whichever is greater, a few percent of the purchase or a minimum dollar amount. Apps with in-app purchases should also be required to either have a one-time fee or a subscription. Apple/Google have absolutely nothing to do with these purchases other than processing the transaction.

That would then leave the door open for free apps to exist in the app stores as well. These are useful utilities similar to free Mac Apps that the developer produces and supports for fun and are typically downloaded outside of the App Store. If Apple wants to keep the garden walled, then useful free apps should be able to exist within the walls as well. This would go a long way toward alleviating the desire to side load applications, but not eliminate it entirely. As a proponent of side loading, it would be awesome to have an iPad version of Mathematica that could parameterize any scribble you make, make use of their input palettes through the touch interface etc., and actually have the computing power to perform legitimate analyses on a 'slab of glass.'

These issues have arisen from the fact that early cell phone apps had very limited functionality and were rarely worth the $1-$10 that they cost to download and install. Within a very short time, the smartphone industry started delivering a computing platform that rivals and/or exceeds that of budget laptops and PCs in terms of computing power. At this point, developers stuck to the 'cheap phone app' pricing scheme and failed to charge a fair amount for the level of complexity and feature sets of their apps. In-App purchases and subscription-based apps started to take hold, so developers could earn enough to eat from their apps.

Once it got to the point that subscription-based apps and in app purchases seemed to be the best way forward, we have fallen pretty far down a slippery slope. Apple/Google have gotten used to their cash cows and will not give them up easily. However, the original pricing model developed in the iOS and Play stores was based on the brick and mortar retail model. The stores quickly evolved, and we are now at a point where the iOS and Android platforms are so ubiquitous that something needs to change. It would make far more sense for these companies to adapt and change to the times than have that change forced upon them by legislative bodies. The cost of realignment and the inertia of regulations will be far more costly in the long run.

 

[CarlJ]

For an in-app purchase for a digital good or service that is not associated with upgrading to a new version of the application and is not a recurring fee, the vendor should only be a able to asses a pass through payment fee of whichever is greater, a few percent of the purchase or a minimum dollar amount. Apps with in-app purchases should also be required to either have a one-time fee or a subscription. Apple/Google have absolutely nothing to do with these purchases other than processing the transaction.

Your proposal mostly holds together. This bit seems problematic, though. How do you handle the case of, say, a game that, if it were sold for a one-time up front price, given the development time and effort, might have sold for $50 (some mobile games are approaching the complexity of console games, many of which are getting into the $80-90 range now), but the developer decides instead to go "free to play", and gives the game away, but loads it with microtransactions that are either necessary or highly desirable to progress in the game (but they're decidedly not version upgrades or recurring fees). It looks like you'd pass those through for basically the credit card processing fee. So, instead of getting 30% of $50, Apple/Google gets basically nothing.

You list "required to have a one-time fee or a subscription", so the developer makes the one-time fee $1, and now Apple/Google get 30% of $1... instead of 30% of $50 (or 30% of thousands of dollars some whales drop on the game and 30% of the $5-10 that most everyone else spends).

I think a large part of the reason for the original "30%, no exceptions" design of the App Store was the legitimate concern that if they allowed any "weak spot in the armor", every app developer would change their pricing structure to take advantage of that, leaving the App Store with no funding.

 

[Rafagon]

The South Koreans should be happy they have the freedom to use iPhones and should happily pay Apple their due fee.

Their North Korean friends can't even have internet connections on their cell phones.

 

[Sophisticatednut]

Do you think the 15-30% is only a "payment processing fee"? That seems an overly simplistic view. Apple is not asserting that it costs them 30% to run the transaction through a payment processor.

They're effectively charging for the entirety of the App Store and the development and maintenance of iOS and all the APIs that make it possible for developers to write apps in the first place. They built an ecosystem, and it costs money to develop and maintain, plus they're entitled to some profit. They could, instead, say, charge every develop $1 million a year, up front, to use the libraries, APIs and ecosystem, but that would be so burdensome to small developers as to chase most of them out, while it might not be enough for a few really large developers. Better to find some way to charge for everything Apple is offering/providing to developers in some more equitable manner. So, first pass, "develop your apps and put them in the store at whatever price you want and we'll take a 30% cut". This, frankly, roughly matches what a whole lot of other businesses do. And apps that sell a lot, pay more, and apps that don't sell much (or are "sold" for free) pay very little or even nothing. This seems pretty fair. Then... then developers and users wanted IAPs. And some started charging less for the initial download, making it up on the IAPs (and "free to play" games were born, sigh). Now, if Apple didn't charge for IAPs equally with initial purchases, then developers would have made pretty much every single app in the store "free to 'purchase' with IAPs to unlock", and Apple's funding model for all of this would have collapsed. So, everything gets charged the same - initial purchases, IAPs, everything.

Now, people are saying, "hey, wait, I can get a credit card transaction processed for way less than 30%, so let me do it myself (and then don't charge me anything, right?)". Except they're making that mistake of thinking the 30% is a credit card transaction fee. It's not. Take the banking fees (3-4% has been bandied about) out of the equation and you're still left with the rest.

I don't know what to do about, say, Apple Music vs. Spotify. Perhaps the answer would be to spin Apple Music out as a "separate-ish" entity that has to pay the same fees as everybody else, in order to level the playing field. I'm not sure that would fix the situation.

(Personally, I wish all-you-can-eat subscription music streaming had never become a thing - it pays vanishingly little to the artists. Or, if they were going to exist, they should be much more costly. As it is, the companies are essentially saying, "well, this person streamed these thousand songs this month, and they paid us $10, so after taking out our cut and the record label's cut, we'll give the artist half a cent for that song". Rather than a smaller number of people deciding to actually buy the song. It's not a good deal for most artists. Rather than starting from what would be reasonable to pay the artists and working out what to charge for the service, they started from what they wanted to charge for the service and worked backwards from that to figure out how much to pay the artists. From this article - a random Google hit, it looks like Apple Music pays about 0.78 of a cent per stream, while Spotify pays about 0.44 of a cent per stream - to be clear, the larger of those is about 3/4 of a penny.)

there is a very simple solution. Increase teh developer fee you pay every year from 99$ to 500$ or some other number that covers the cost plus profits. Or just increse iPhone costs, apple have show as willing to nickle and dime us anyway with "free" features

iPhone sales pays for ios development, iPhone sales pay fot the app store development....
and honestly it's one of the worst stores in the world. only acsessable on an iDevice. Itunes nolonger have it, extremly clunky web viewing that we are forced to use third party solutions....

i would like to have my money back as they quite literaly dont put it to good use

 

[Sophisticatednut]

I don't know what to do about, say, Apple Music vs. Spotify. Perhaps the answer would be to spin Apple Music out as a "separate-ish" entity that has to pay the same fees as everybody else, in order to level the playing field. I'm not sure that would fix the situation.

(Personally, I wish all-you-can-eat subscription music streaming had never become a thing - it pays vanishingly little to the artists. Or, if they were going to exist, they should be much more costly. As it is, the companies are essentially saying, "well, this person streamed these thousand songs this month, and they paid us $10, so after taking out our cut and the record label's cut, we'll give the artist half a cent for that song". Rather than a smaller number of people deciding to actually buy the song. It's not a good deal for most artists. Rather than starting from what would be reasonable to pay the artists and working out what to charge for the service, they started from what they wanted to charge for the service and worked backwards from that to figure out how much to pay the artists. From this article - a random Google hit, it looks like Apple Music pays about 0.78 of a cent per stream, while Spotify pays about 0.44 of a cent per stream - to be clear, the larger of those is about 3/4 of a penny.)

Now imagen all other things apple have.
iMessage is free,
iCloud+ have
50GB: $0.99
200GB: $2.99
2TB: $9.99

How do we do with Dropbox? google drive? they all pay 30%fee and could never compete fairly with apple who dont need to pay 30% of the price to another entity but the real costs of teh transaction.

AppleTV

$4.99/mo.​

with the ability subscribe in the app and keeping 100% of the profits

What will Netflix, Disney Play, amazon prime, HBO etc do? they cant link in their apps ot their websites. if the allow subscruptions they need to pay apples fee and alwasy have a price 30% higer than apple to "earn" the same with an disatvantage of being forced to have a higer price etc.

i think the most faire solution is to only take a procecing fee equal to what apples pays for their own apps, and provide revenue from developer accounts and the privelige to use xcode. nothign hsould be provided for "free".
xcode must competer with other developer tools for all our sakes .

 

[Sophisticatednut]

The South Koreans should be happy they have the freedom to use iPhones and should happily pay Apple their due fee.

Their North Korean friends can't even have internet connections on their cell phones.

nah, i think they should just kick apple out and Levy a 100% profit fee. if apple wants to make money in Korea they need to follow the Terms of service of doing business in Korea, that they AGREED and SIGNED when openign up there. Teams and conditions can be changed at anytime without notice, and if they dont agree they must exit the market.

if apple think they can claim anythign they want as "mu private company" then nations can do so aswell. national laws trumps random american company

 

[Altivec88]

By the same token what you seem to have overlooked is that;
These are market places that belong to other countries, they have the right to impose what laws and regulations they see fit.
Google and Apple should stay out of law making?

You are implying that Apple and Google broke the law before implementing their devices and stores in these countries. That is not the case. They followed the rules. These Countries are now moving the goal posts and want to change the rules in an unfair manner. Do all stores in South Korea need to have multiple payment methods or just Apple and Google. Its clear that the government is the one trying to mess around with the free market and not the other way around.

 

[I7guy]

That's why the "we follow local laws" excuse is terrible. Yes, when it comes to remove dissident apps or the Quran, not when it affects profits

What excuse. Apple may believe it is in compliance?

 

[I7guy]

nah, i think they should just kick apple out and Levy a 100% profit fee. if apple wants to make money in Korea they need to follow the Terms of service of doing business in Korea, that they AGREED and SIGNED when openign up there. Teams and conditions can be changed at anytime without notice, and if they dont agree they must exit the market.

if apple think they can claim anythign they want as "mu private company" then nations can do so aswell. national laws trumps random american company

Agree, apple should just exit the market.

 

[Sophisticatednut]

You are implying that Apple and Google broke the law before implementing their devices and stores in these countries. That is not the case. They followed the rules. These Countries are now moving the goal posts and want to change the rules in an unfair manner. Do all stores in South Korea need to have multiple payment methods or just Apple and Google. Its clear that the government is the one trying to mess around with the free market and not the other way around.

Grabed this from Apples TOS

how is governments changing the goal post? Apple have the exact same policy of moving the goal post whenever they wish.

The free market is not a thing. i dont know if you realise this but 99% of developed nations heavely regulate what a buisness can and cant do against customers. Companies being free to do whatever they want is exclusively an American sickness. Companies aren't people and don't have the freedoms granted to citizens.

 

[Abazigal]

If Google charges a fee of their choosing, I don't see how this accomplishes anything. Apple should do the same thing but charge the same 15% they always do. Technically, they will have multiple payment systems that follows the law. The only difference is that you pay more to use something else. lol. I think these laws are nonsense. These are Googles and Apples store and OS, they have the right to charge what they want and people have the right to buy their devices or not. Governments should stay out of the market place.

With Google' solution, their 11% plus the other payment provider mark up will generally be the same cost as just using Google's payment method. Anyone that would take the risk of using the other payment methods without saving any money is crazy.

This is what happens when lawmakers (and regulators) rush to enact new laws without thinking of unintended consequences.

It is very difficult to argue that Google and Apple shouldn’t be compensated in some way for building a platform, developer tools, and a digital store. Even if developers find themselves paying other payment providers to use the Apple and Google ecosystems, Apple and Google should still be entitled to some form of compensation. We can debate what that compensation should be (10%, 15%, 30%), but that just ends up missing the big picture.

Which is what I have been trying to say all along. In this context, it’s meaningless to compare the rate that Stripe or PayPal charges against the 15% or 30% charged by Apple. Payment processing companies can charge less because they are also providing less (ie: they are not saddled with the costs of running and maintaining an App Store).

Going forward, I expect Apple for Apple to focus its energies on preventing sideloading and alternative app stores while allowing more flexibility in terms of anti-steering and alternative in-app payment solutions.

 

[Sophisticatednut]

Agree, apple should just exit the market.

Absolutely exit the market or follow the law.
beliving you follow the law is not an excuse considering they knowingly break the new Korean law

 

[Sophisticatednut]

This is what happens when lawmakers (and regulators) rush to enact new laws without thinking of unintended consequences.

It is very difficult to argue that Google and Apple shouldn’t be compensated in some way for building a platform, developer tools, and a digital store. Even if developers find themselves paying other payment providers to use the Apple and Google ecosystems, Apple and Google should still be entitled to some form of compensation. We can debate what that compensation should be (10%, 15%, 30%), but that just ends up missing the big picture.

Which is what I have been trying to say all along. In this context, it’s meaningless to compare the rate that Stripe or PayPal charges against the 15% or 30% charged by Apple. Payment processing companies can charge less because they are also providing less (ie: they are not saddled with the costs of running and maintaining an App Store).

Going forward, I expect Apple for Apple to focus its energies on preventing sideloading and alternative app stores while allowing more flexibility in terms of anti-steering and alternative in-app payment solutions.

Not at all. what unintended consequences? Apple doesn't have the right and ownership of our devises.
Apple and Google are compensated for building their platform. Both from customers buying their devices and developer fees.

• Apple developer account costs 99$/ year.
• Google developer account needs a one-time fee of 25$.

And they both take 15-30% of purchases made on the store. Just as any brick and mortar store does.
Now, this should end the second the app leaves the store and ends up on our phones.

it's not our fault or governments fautls apple/google allow developers to sell goods for free. Why doesn't anyone sell goods at Amazon or Walmart for 0$?

Edit: apple can have a 99% fee and it would be completely okay. as long as when the app is purchased it's no longer bound by apples arcaic store(it sucks balls by the way) and be detached and allowed to have in app purchasing with

1. Apples iAP system and their fee of choise.
2. Developers own solution with 0% fees and no connection at all to apple

 

[Havoc035]

Anyone really surprised at this outcome is a little naive. Of course Apple and Google will still collect their fees this bill doesn’t prohibit that at all.

 

[hans1972]

there is a very simple solution. Increase teh developer fee you pay every year from 99$ to 500$ or some other number that covers the cost plus profits. Or just increse iPhone costs, apple have show as willing to nickle and dime us anyway with "free" features

iPhone sales pays for ios development, iPhone sales pay fot the app store development....
and honestly it's one of the worst stores in the world. only acsessable on an iDevice. Itunes nolonger have it, extremly clunky web viewing that we are forced to use third party solutions....

i would like to have my money back as they quite literaly dont put it to good use

Developer fee = Apple's App Store revenue / # of developers = $80 billions / 1 million developers = $80 000 per developer.

Increased iPhone cost = Apple's App Store revenue / # of iPhones sold = $80 billions / 228 millions iPhones = $227

It's not really feasible to pay in such a way.

It's Apple who decides their pricing structure and how they want to make money like almost any business.

The cost of an iPhone just pays for getting the iPhone, the software installed on the device and some of the services. You are not paying for the App Store itself or all the development tools and API. And even if you were, Apple should be allowed to charge twice for the same thing from different parties or even the same party.

 

[meson]

You list "required to have a one-time fee or a subscription", so the developer makes the one-time fee $1, and now Apple/Google get 30% of $1... instead of 30% of $50 (or 30% of thousands of dollars some whales drop on the game and 30% of the $5-10 that most everyone else spends).

I think a large part of the reason for the original "30%, no exceptions" design of the App Store was the legitimate concern that if they allowed any "weak spot in the armor", every app developer would change their pricing structure to take advantage of that, leaving the App Store with no funding.

The micro transactions in games are another thing that needs to go away, and should be banned as well. I suspect that this one will require legislative intervention to make happen.

Apple and Google have the power to make a policy to remove such consumer abuses from their stores, but this is what is driving their cash cows.

Developers have taken advantage in the weak spot of the consumer's armor with the $1-$3 micro transaction. I fully suspect that the initial intent of the 30% blanket was to prevent the corporation from being abused, but they are now fully happy to reap the benefits of seeds they have sewn, even as they talk out the other side of their mouth about need to stop mindless scrolling (so the user can get back to microtransactions).

 

[Abazigal]

Not at all. what unintended consequences?

Legislation wants Apple to allow the use of third party payments, which is precisely what they will allow. They just won’t make it any cheaper for developers to do so.

That’s the Pyrrhic victory I am talking about here. You get what was agreed on paper, without any of benefits. As it stands, developers may well still end up paying the same amount to Apple, which means app pricing stays the same, which means the consumer remains indifferent between using iTunes and another payment option, and will likely stick with iTunes for the convenience and security.

I am surprised lawmakers didn’t see this coming.

 

[hans1972]

The free market is not a thing. i dont know if you realise this but 99% of developed nations heavely regulate what a buisness can and cant do against customers. Companies being free to do whatever they want is exclusively an American sickness. Companies aren't people and don't have the freedoms granted to citizens.

Most countries protects consumers and not customers unless the customer happens to be a consumer.

Developers are not consumers, but for-profit businesses and should have no more protection than Apple. Basically, between to commercial entities the main principle is : any thing goes.

 

[I7guy]

Absolutely exit the market or follow the law.
beliving you follow the law is not an excuse considering they knowingly break the new Korean law

That’s not your business or mine though. If they believe they are following the law, let it work itself out. You (or I) are not international gatekeepers.

 

[dwaite]

They don't allow any third party billing (for digital purchases), that is pretty clear. Many have tried (outside of Korea) and failed, they are explicitly banned

Apple recently changed their rules to allow for several avenues for out-of-app purchasing without having to pay a commission to Apple. Korea just said you can't force all payments through Apple/Google, not that they had to be in-app or that Apple/Google couldn't ask for a commission still.

 

[AndiG]

Another crack in the wall. We don't need no thought control.

 

[AndiG]

Apple recently changed their rules to allow for several avenues for out-of-app purchasing without having to pay a commission to Apple. Korea just said you can't force all payments through Apple/Google, not that they had to be in-app or that Apple/Google couldn't ask for a commission still.

But how could Apple charge a commission, when Apple doesn‘t know that a payment event happened? This is exactly why Apple wants all developers to use only Apples InApp payment. No control - no money. Simple as that.

 

[Ebarella]

Apple recently changed their rules to allow for several avenues for out-of-app purchasing without having to pay a commission to Apple. Korea just said you can't force all payments through Apple/Google, not that they had to be in-app or that Apple/Google couldn't ask for a commission still.

No, Apple recently changed their rules to make it clear communication with users was OK. Something that they could never actually control, they just made it tactilely acceptable. They've also never prohibited third party processing outside of the store because that would be weird.

You still can't even mention third party processing in the app, which seems to be the intention of this law