U.S. Developers Can Now Offer Non-App Store Purchasing Option, But Apple Will Still Collect Commissions

[Kastellen]

Not at all. The judge acknowledged that Apple was entitled to continue collecting a license fee in the decision.

"First, and most significant, as discussed in the findings of facts, IAP is the method by which Apple collects its licensing fee from developers for the use of Apple’s intellectual property. 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."

I think you are missing my point. Yes, the judge said Apple is entitled to a commission. But by changing the commission from 30% (which includes the 3% Apple has to pay for certain fees) to Apple paying the fees and changing the commission to 27% -- meaning Apple doesn't really lose a single dime -- they are demonstrating BEHAVIOR that could piss off the courts and/or invite legislators to intervene for Apple's petulance. It's like when your father tells you to stop poking your brother, and so you sit there with your finger 1/2" from him so he can't move without being poked. There is nothing legally wrong with Apple's change, and I don't have any problem with Apple charging for the intangible benefit of developers selling on the highest profile platform there is. But if Apple had dropped the commission to 20% or thereabouts there wouldn't be nearly as much outrage.

 

[BaldiMac]

I think you are missing my point. Yes, the judge said Apple is entitled to a commission. But by changing the commission from 30% (which includes the 3% Apple has to pay for certain fees) to Apple paying the fees and changing the commission to 27% -- meaning Apple doesn't really lose a single dime -- they are demonstrating BEHAVIOR that could piss off the courts and/or invite legislators to intervene for Apple's petulance. It's like when your father tells you to stop poking your brother, and so you sit there with your finger 1/2" from him so he can't move without being poked. There is nothing legally wrong with Apple's change, and I don't have any problem with Apple charging for the intangible benefit of developers selling on the highest profile platform there is.

No, they're not. They're doing exactly what the court expected in continuing to collect their licensing fee. The fact that you think their licensing fee should be less does not mean the court did.

Of course, legislators are a different matter, but I wasn't commenting on that.

But if Apple had dropped the commission to 20% or thereabouts there wouldn't be nearly as much outrage.

Great! They dropped it to 12% for the vast majority of developers who use this entitlement.

 

[Kastellen]

No, they're not. They're doing exactly what the court expected in continuing to collect their licensing fee. The fact that you think their licensing fee should be less does not mean the court did.


Great! They dropped it to 12% for the vast majority of developers who use this entitlement.

From 15%, and paying the 3% fees themselves. Meaning again, they aren't losing a dime.

Is there some place where the court said they "expect" Apple to continue collecting the exact same fee?

 

[BaldiMac]

From 15%, and paying the 3% fees themselves. Meaning again, they aren't losing a dime.

You're operating under the assumption that they were supposed to lose money on this ruling. They weren't. It was just about competition for alternative payment processors. Hence, they removed the cut that went to payment processing from their commission and allowed links to alternative payment processors.

Is there some place where the court said they "expect" Apple to continue collecting the exact same fee?

I quoted it already. It's their licensing fee that the judge said that they are entitled to continue to collect.

 

[mikeschr]

Agree. Within what the law allows (which seems pretty liberal in the U.S.).

I would not call that a licensing fee for the use of of Apple's IP though.
It's not really a use-based fee or commission.

It's just a rather arbitrary and, yes, discriminatory fee.
As you said earlier:

What Apple are really charging for, is (economic) access to customers that they're "gatekeeping".

(Which, to be clear, they so far seem to be entitled to in the U.S.)

It's incredible to me that so many people expect Apple to operate the App Store, app review, cloud servers and updates for the life of the app without charging anything - that the only thing they offer is "access to customers".
It's either a disingenuous argument or shows a total lack of understanding of how these transactions occur.

 

[AppliedMicro]

It's incredible to me that so many people expect Apple to operate the App Store, app review, cloud servers and updates for the life of the app without charging anything

You‘re misconstruing what I said.

I do not expect them to operate it for free.
And they are not operating it „without charging anything“:
They charge a lot for their hardware - and they charge a yearly developer fee too.

👉 Is there any relation between app size, download volume/traffic and the amount of Apple‘s charges? No!
👉 Is there any relation between the time and effort app reviews take for different apps or kind of apps?No!
👉 Is there any relation to payment processing or tax admin costs in different markets and Apple‘ fees? No!
👉 Is there a relation between how much a developers earns from end customers and Apple’s fees? Totally!

that the only thing they offer is "access to customers".

You apparently suffer from a lack of understanding what I said.

I didn’t say the only thing they offer is access to customers. Quite the contrary, they’re offering download facilities, commissionaire services and transaction processing. As you said. Even forcing them on unwilling customers that would rather do it themselves (Netflix, Spotify, Epic). At the same time, they’re offering these services to other customers for free (other than the yearly developer fee). Even when those customers earn billions in revenues each year (Uber), Apple aren’t charging them for hosting, updates etc., or IP.

They are in effect charging for economic access to customers for delivering digital content.
That is also why they prohibit(ed) them from even linking to outside purchasing options.

 

[Ethosik]

All this furor about a 30% cut when you use free tools and APIs supplied by Apple to make your product.

Why not move to Android and sells your apps there? Oh wait, they charge 30% too. And their customers only want free ‘stuff’ and ‘free’ phones.

Whiners.

You’re on a platform that has invested countless billions to merge hardware and software in a way that has attracted the wealthiest customers with the most disposable income.

Suck it up, stop complaining, and devote that energy to developing a world-class application that pays off because it sells well.

Heck if I want to use Unreal or Unity they take a cut as well with some tiers.

People complain that Apple doesn’t need to fork over 15% or 30% for their own stuff. Do you honestly think Epic forces themselves to pay when they use Unreal?

 

[Ethosik]

Who said anything about free?

So then what is the percentage that is acceptable? We already know 12% isn’t as Epic proved it. And their store infrastructure pales in comparison to the entirety of iOS API and offerings.

 

[arlomedia]

It's incredible to me that so many people expect Apple to operate the App Store, app review, cloud servers and updates for the life of the app without charging anything - that the only thing they offer is "access to customers".
It's either a disingenuous argument or shows a total lack of understanding of how these transactions occur.

Apple offers a lot of services that it doesn't charge directly for. Podcast hosting, the first 5 GB of iCloud storage and calendar syncing come to mind. I don't think app distribution needs to be in a special category. I doubt the cost to host my app executable exceeds that of a moderately popular podcast.

I don't see developers asking for all tools and services to be free, but clearly the current fees are arbitrary and not subject to most market pressures that would keep them in line. Remember that Apple prohibits developers from using alternatives to any of the services it provides. To me that strongly suggests their fees are not competitively priced. I already host the back end and all the app data myself and could easily host the app downloads as well, but am required to pay Apple whatever it wants for that service.

For those who are now thinking, "What, shouldn't Apple be allowed to make a profit?!" -- sure, offer a great app store that works better than the alternatives and see if people use it. It's the requirement to either use their store or abandon the platform completely that I have a problem with. I don't necessarily want to see multiple app stores on iOS, but I'm afraid that would be the only way to introduce free market factors. If Apple did a more honest assessment of the value it provides, with alternatives or opt-outs allowed for some components and fees lowered accordingly, I think this whole issue could go away.

In any case, I wouldn't include "app review" in a list of benefits to developers. That's so unpredictable and error-prone that it drove me to expand my products to include Android and Windows support. It's in Apple's best interest to keep apps iOS-only, but I found it too risky to rely solely on them.

One more thought before I let this dead horse alone. I've always used Apple hardware and I've never felt it was overpriced for the value it offers. But I think their developer fees are way out of line. I'm curious to see how long they can keep that up.

 

[1129846]

That seems a truly massive oversimplification of why Windows Phone failed. Microsoft were always about "developers, developers, developers" (just ask Steve) and it certainly seemed like there was a fair bit of support. The Windows CE to Metro to Windows Phone transition made it seem like they were sure pen would work and then scrambled to transition the interface to touch when iOS took off.

But (ironically, considering this thread) I'd say the real Windows Phone killer was the App Store that made it simple to find (but mainly, market) applications. Microsoft was even later to a store, and didn't do it nearly as well, likely because they didn't want to upset existing developers. Almost anyone who developed prior to the App Store will tell you it was a paradigm shift and changed independent development from something you did for customers in your city into something you could do internationally for almost no cost, just a 30% cut of any gross sales you could get. That was a truly amazing thing. Funny how it is the large developers now trying to change that process. I wonder why. I realize there are probably some small developers that now think getting 70% of the gross is a bad deal for them (though if they really are small, they are getting 85%), but that is because they probably don't recall the bad old days. Hopefully they won't have to return to them, but the way the world is going, we shall see.

I doubt they cared about ticking off existing developer but back then they were still under federal anti trust oversite and did not want to risk getting it extended or risk being told no. Miscrosoft did a lot of pretty bad things when they got the anti trust hammer brought down on them hard. Apple is doing a lot of the exact same things now if not worse.

People need to remember there is no hard and fast rule when a company crosses the line. One thing is it does require a company getting a certain level of control and it is a grey area. At some point it is clear a company is way over the line in their abuse of power. Remember of the big FAANG level companies Apple was the last to get the looked at for Anti trust. Microsoft oddly enough currently is the only one not currently under investigations or in the firing line. Apple it is pretty clearly is set up to be looked hard at and I believe it is long over due.

 

[AppliedMicro]

So then what is the percentage that is acceptable? We already know 12% isn’t as Epic proved it

How about… 15% or 12%, for everyone? We already know it’s acceptable, as Microsoft proves it. Developers can even use their own commerce platform (on non-gaming apps) and not pay anything to Microsoft.

Epic just spends a ton on marketing and exclusivity deals. They’re deliberately loss leading to gain customers and market share.

 

[poseidondev]

Is there some place where the court said they "expect" Apple to continue collecting the exact same fee?

Yes, there is. In fact, the courts actually expected Apple to keep collecting the full 30%.

The district court did hem and haw a bit about the commission rate in general (30%), but didn't do much more than that because it was ultimately not illegal nor is it for the court to question business decisions if they're not illegal.


District Court judgment can be found here.
9th Circuit judgment can be found here.

Relevant quote from 9th Circuit:

Because the court upheld the app-distribution restriction, Apple would still be entitled to its 30% commission on in-app purchases within apps downloaded from the App Store. On its own initiative, the district court floated the idea of Apple permitting multiple in-app payment processors while reserving a right to audit developers to ensure compliance with the 30% commission.

Some other quotes that convey the same:

In essence, Apple uses the DPLA to license its IP to developers in exchange for a $99 fee and an ongoing 30% commission on developers' iOS revenue.

As the district court noted, in a world where Apple maintains its distribution restriction but payment processing is opened up, Apple would still be contractually entitled to its 30% commission on in-app purchasers. Apart from any argument by Epic, the district court "presume[d]" that Apple could "utilize[e] a contractual right to audit developers... to ensure compliance with its commissions."

First, and most significant, as discussed in the findings of facts, IAP is the method by which Apple collects its licensing fee from developers for the use of Apple's intellectual property. 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.

Anyone reading these judgments will understand that this is not only something the courts have determined is legal, it's something they fully expected to happen.
I have a legal background, but it's all in very plain and clear language; no legal training is required.

But if you're not in the mood to read both (which is fair, especially since the district court's judgment is lengthy), then I'd suggest reading at least the appellate court's judgment. It's more brief, more concise and to the point and very straightforward when it comes to the topic at hand.

 

[bgillander]

How about… 15% or 12%, for everyone? We already know it’s acceptable, as Microsoft proves it. Developers can even use their own commerce platform (on non-gaming apps) and not pay anything to Microsoft.

Epic just spends a ton on marketing and exclusivity deals. They’re deliberately loss leading to gain customers and market share.

And there is my main problem with Epic and Spotify. Any large company complaining about others' monopoly behaviour while simultaneously signing exclusivity deals is plain and simply hypocritical.

 

[bgillander]

I doubt they cared about ticking off existing developer but back then they were still under federal anti trust oversite and did not want to risk getting it extended or risk being told no. Miscrosoft did a lot of pretty bad things when they got the anti trust hammer brought down on them hard. Apple is doing a lot of the exact same things now if not worse.

People need to remember there is no hard and fast rule when a company crosses the line. One thing is it does require a company getting a certain level of control and it is a grey area. At some point it is clear a company is way over the line in their abuse of power. Remember of the big FAANG level companies Apple was the last to get the looked at for Anti trust. Microsoft oddly enough currently is the only one not currently under investigations or in the firing line. Apple it is pretty clearly is set up to be looked hard at and I believe it is long over due.

Microsoft basically wiped out Paradox and DBase with an "intro price" on Access that was less than 25% of the current DB pricing, if I remember correctly. That is the kind of stuff I worry about. Apple having consistently slightly higher prices than I would prefer to pay, but which I pay anyway because I figure it is worth it, is not the kind of thing I worry about, because I don't have to buy Apple.

Apple charging me 15% of gross to sell in their store is simply a normal cost of doing business to me, and a bit of a bargain, honestly. I'm sure if I sold over a million and had to pay 30%, I'd probably grumble that I had to pay 15% more, but I can't say I feel bad for anyone making $700,000 per $1,000,000 sold, as that is far better than most business have for a profit margin. People here keep complaining about Apple's profit margins and it is nowhere near that. And, yes, there are other development costs, but the ability to have another company sell your software and still get 70% of the retail sell price would have been improbably sweet in the 1980s when I started out. Even now it is a good deal, considering the exposure provided.

Epic isn't fighting this for the consumer, they are fighting this because they want to be able to charge the programmer (and consumer) and want to be able to have exclusives so you have to go through their store. How is that better than Apple? I trust Apple far more than I trust Epic, just based on Epic's current behaviour, let alone if they got a chance to make everything they would like to into "an exclusive" for Epic.

 

[jjtrejo]

does google/android have to comply with this as well? because they do the same thing and have the same rules in place.

 

[Abazigal]

Remember when people were so convinced that this lawsuit would spell the end of Apple's walled garden, and were gloating over Apple being compelled to allow a single link to an external payment option, which as it turns out, Apple will get a cut out of ultimately?

 

[bcortens]

But the commission has nothing to do with payments. We've already determined that Apple's 30% fee is actually 3% for payment processing... and 27% for their commission.

The commission is a platform fee. Or an IP licensing fee. Or whatever you want to call it.

And that's what I was asking earlier... can a platform charge a platform fee?

Or... should a developer be allowed to build their business on a platform while the platform gets nothing? That doesn't seem right.

🤔

Then they have to charge uniformly.

The reader exception, the fact that ad based apps pay nothing, etc… there are countless examples of exceptions that prove this isn’t them charging a platform based commission… if they want to charge a platform based commission that’s fine, but they should be required to make it uniform and without exception.

 

[Joe The Dragon]

Then they have to charge uniformly.

The reader exception, the fact that ad based apps pay nothing, etc… there are countless examples of exceptions that prove this isn’t them charging a platform based commission… if they want to charge a platform based commission that’s fine, but they should be required to make it uniform and without exception.

and then all of sports betting / lotto apps / casino apps will need to be removed as there is NO way that the states that control them will allow apple to take an cut of 15%-30%. With lotto at most 8% and 1-2% Commission on Winning (there are caps on that as well)

 

[bcortens]

and then all of sports betting / lotto apps / casino apps will need to be removed as there is NO way that the states that control them will allow apple to take an cut of 15%-30%. With lotto at most 8% and 1-2% Commission on Winning (there are caps on that as well)

That’s the trade off Apple should have to make. If it’s a platform fee then it should apply equally to all. Otherwise it’s just Apple extracting money for developers who can’t afford a way to skirt around the rules.

 

[BaldiMac]

Then they have to charge uniformly.

The reader exception, the fact that ad based apps pay nothing, etc… there are countless examples of exceptions that prove this isn’t them charging a platform based commission… if they want to charge a platform based commission that’s fine, but they should be required to make it uniform and without exception.

Why? That's just a made up requirement that is repeated over and over. I can charge for ice cream and give away yogurt for free. There are a million examples of stores charging different amounts for different things.

Where do people get these ideas? It's like their only exposure to business is discussing the App Store in a forum.

 

[bcortens]

Why? That's just a made up requirement that is repeated over and over. I can charge for ice cream and give away yogurt for free. There are a million examples of stores charging different amounts for different things.

Where do people get these ideas? It's like their only exposure to business is discussing the App Store in a forum.

If Apple makes the legal argument in court that they charge fees to compensate for iOS dev costs then the inconsistencies in which devs are charged exposes them to possible charges of anticompetitive behaviour and behaviour that might violate other fair competition rules.

 

[BaldiMac]

If Apple makes the legal argument in court that they charge fees to compensate for iOS dev costs then the inconsistencies in which devs are charged exposes them to possible charges of anticompetitive behaviour and behaviour that might violate other fair competition rules.

No, it doesn't. Where do you get that idea? Again, it's a completely normal business practice to charge different prices for different things.

 

[poseidondev]

If Apple makes the legal argument in court that they charge fees to compensate for iOS dev costs then the inconsistencies in which devs are charged exposes them to possible charges of anticompetitive behaviour and behaviour that might violate other fair competition rules.

There truly seems to be a thorough misunderstanding of the current legal status quo.

Apple claimed that the commission is primarily a payment in exchange for using their IP. It is so structured in the developer agreement, and the district court accepted that reading and judged it to be legally sound; later, the 9th Circuit Court of Appeals affirmed the lower court's decision and reiterated that it was legally sound.

Both courts, while giving their blessing, were aptly aware of the differential pricing Apple employs. That is to say that Apple doesn't require everyone to pay this commission.
And while the district court did a bit of hemming and hawing on the exact rate and why some have to pay while others don't, ultimately, the district court conceded that nothing was illegal. Again, affirmed by the 9th Circuit.

So in light of all this, it is truly remarkable to me that people have such a hard time accepting these legal findings, findings that are currently the law of the land now that SCOTUS declined to hear the case and instead bent themselves in all kinds of pretzels with hypotheticals and "Ooh wait until your dad gets home"-type of hopeful wishes when the courts have already spent hundreds of pages covering all of that.

 

[bcortens]

There truly seems to be a thorough misunderstanding of the current legal status quo.

Apple claimed that the commission is primarily a payment in exchange for using their IP. It is so structured in the developer agreement, and the district court accepted that reading and judged it to be legally sound; later, the 9th Circuit Court of Appeals affirmed the lower court's decision and reiterated that it was legally sound.

Both courts, while giving their blessing, were aptly aware of the differential pricing Apple employs. That is to say that Apple doesn't require everyone to pay this commission.
And while the district court did a bit of hemming and hawing on the exact rate and why some have to pay while others don't, ultimately, the district court conceded that nothing was illegal. Again, affirmed by the 9th Circuit.

So in light of all this, it is truly remarkable to me that people have such a hard time accepting these legal findings, findings that are currently the law of the land now that SCOTUS declined to hear the case and instead bent themselves in all kinds of pretzels with hypotheticals and "Ooh wait until your dad gets home"-type of hopeful wishes when the courts have already spent hundreds of pages covering all of that.

They may be the law of the land in the US but that doesn’t mean Apples pricing and commission strategy fair or reasonable. The lack of fairness is likely going to hurt them in the long and lead to ongoing regulatory scrutiny, if not in the US, then in the EU, Japan, and South Korea.

 

[bcortens]

There truly seems to be a thorough misunderstanding of the current legal status quo.

Apple claimed that the commission is primarily a payment in exchange for using their IP. It is so structured in the developer agreement, and the district court accepted that reading and judged it to be legally sound; later, the 9th Circuit Court of Appeals affirmed the lower court's decision and reiterated that it was legally sound.

Both courts, while giving their blessing, were aptly aware of the differential pricing Apple employs. That is to say that Apple doesn't require everyone to pay this commission.
And while the district court did a bit of hemming and hawing on the exact rate and why some have to pay while others don't, ultimately, the district court conceded that nothing was illegal. Again, affirmed by the 9th Circuit.

So in light of all this, it is truly remarkable to me that people have such a hard time accepting these legal findings, findings that are currently the law of the land now that SCOTUS declined to hear the case and instead bent themselves in all kinds of pretzels with hypotheticals and "Ooh wait until your dad gets home"-type of hopeful wishes when the courts have already spent hundreds of pages covering all of that.

We’ve been over this in other threads, but my main point is that legal doesn’t equal fair. It is especially concerning as Apple are operating a semi-open platform, and doing so unfairly is going to continue to invite regulatory scrutiny.