App Store External Purchase Fee: 27%
Apple (Hacker News):
A recent order from the Netherlands Authority for Consumers and Markets (ACM) will allow developers of dating apps on the Netherlands App Store to use alternate payment processing options. These changes will compromise the user experience, and create new threats to user privacy and data security. We have appealed the ACM’s decision. In the meantime, we are required to make the mandated changes and are providing further details today which satisfy our legal obligations in the Netherlands while helping to protect users from these increased risks.
Benjamin Mayo (also: MacRumors):
Apple typically charges 30% commission on purchases made using its In-App Purchase system. The commission levied on alternative payment systems has been set at … 27%, net of tax.
Netherlands dating apps can choose to offer alternative payment systems by linking out to a website, or using a native in-app flow.
[…]
Each month, developers will have to send a report to Apple that lists their sales. Apple will then send out invoices for its commission, that must be paid within 45 days.
Check out the text the company is going to require developers to show on a modal sheet prior to allowing users to go outside the App Store to make a payment:
Title: This app does not support the App Store’s private and secure payment system
Body: All purchases in the
App Nameapp will be managed by the developer “Developer Name.” Your stored App Store payment method and related features, such as subscription management and refund requests, will not be available. Only purchases through the App Store are secured by Apple.
This is perfect* – it’s implying-without-technically-saying-it that other payment services aren’t “private and secure”.
Apple mastering the art of legalese is where we’re at in 2022. Proper regulation can’t come soon enough.
*ridiculous and downright user-hostile
Just look at the striking twist in language here. The title and final sentence the body text literally say that the app’s payment mechanism is different from Apple’s, and that Apple’s is “private and secure”. But it implies the payment standard used by the developer is less private and has inferior security to Apple’s own — even though Apple requires all developers to use a private and secure payment processor. Apple is selling asbestos-free cereal, while requiring all other cereals to be asbestos-free but not allowing them to label themselves as such.
- Separate app, only available in Netherlands
- Cannot also support IAP
- Must display scary sheets before payment
- Website links are all to a single URL specified in Info.plist with no parameters
- Must submit monthly report to Apple listing EVERY external transaction
Apple is afraid to compete fairly against other payment methods because they know the current IAP system wouldn’t win a fair fight.
See also:
- Damien Petrilli
- Steve Troughton-Smith
- Saagar Jha
- Matt Birchler
- Russell Ivanovic
- Marco Arment
- Jeff Johnson
- Tim Schmitz
- Joe Cieplinski
- Dimitri Bouniol
- David Heinemeier Hansson
- Rene Ritchie
- Kyle Howells
- Paul Haddad
- Tim Sweeney
- Ben Lovejoy
Previously:
- Apple’s Q1 2022 Results
- Netherlands Rejects StoreKit External Purchase Entitlement Plan
- StoreKit External Purchase Entitlement for Netherlands
- Apple Wants Fee for Alternate Billing Systems
- Google Wants Fee for Alternate Billing Systems
- Why Apple Should Compromise With Antitrust Regulators
Update (2022-02-08): Dave Verwer:
I know some of you will see this as unnecessarily kind to Apple, and I’ll make sure not to read this week’s unsubscribe reasons 😰 but I really don’t think anyone benefits. Apple certainly doesn’t look good. I was quite shocked at the arrogant tone of yesterday’s announcement. However, they are behaving in a predictable way for a company being told what to do by courts.
I’ve said this before too, but I would support a bigger rethink of how the App Store works. A shake-up that focuses on downloads and usage more than taking a percentage cut of financial transactions. One that makes sure that the largest companies in the world, who get massive value from the platform, pay something instead of nothing. I don’t know what that model looks like, but I can only really see changes of that magnitude putting an end to this current situation.
Steve Jobs on the greed and outlandish profits that ruined Apple[…]
Apple notes that it “has audit rights pursuant to the entitlement’s terms and conditions,” which “will allow Apple to review the accuracy of a developer’s record of digital transactions as a result of the entitlement, ensuring the appropriate commission has been paid to Apple.”
I’m not sure you could find a webpage more emblematic of the idiom of following the letter of the law, rather than the spirit of the law. They are also simultaneously appealing the decision and that tone comes across in the text too, as if each sentence is dripping with resentment.
[…]
This court ruling is on enabling competition for in-app payment systems, rather than the general monopoly of mobile app stores. However, the two are obviously inextricably linked. No one is going to use a third-party payment system when the saving compared to Apple’s built-in offering is a measly 3%. These current terms will not incite competition in payment systems as no developer will ever implement one.
[…]
Apple’s stated policy is not long-term sustainable. I don’t know whether it will be changed as a result of these proceedings, or a different lawsuit down the road. It will change.
They try to get away by finding the limit where they respect the ruling, while still ensuring it’s so complicated and painful that no developer chooses to use out-of-store payments.
The 30% cut is not the only problem, and not even the most important one.
The Netherlands’ Authority for Consumers and Markets (ACM) has fined Apple five million euros for a third consecutive week for allegedly failing to satisfy the requirements it set regarding alternative payment systems for dating apps, according to Reuters.
The ACM today said it has still not received enough information from Apple to assess whether Apple has properly complied with the order, the report states. The competition regulator will continue to fine Apple five million euros per week, up to a maximum of 50 million euros, until it finds the company has come into compliance.
The strangest aspect of Apple’s new guidelines is that they’re intended specifically and solely to address the ACM requirements, and we already know they do not. […] Neither the ACM ruling nor Apple’s updated guidelines seem ambiguous here, but clearly Apple’s guidelines don’t comply with “Providers must be able to choose both options.”
[…]
Both Apple and Google obviously want purchases to be made using their built-in purchasing. Google’s thinking seems to be that if third-party payment options can only be offered alongside their built-in Play Store processing, most users will just use the Play Store option. Apple’s thinking seems to be to make offering third-party payment processing so unappealing to developers (including the requirement that they use an entirely different SKU just for the Netherlands version of their app) that they won’t even bother.
[…]
The reduced commission rate of 27% isn’t completely arbitrary — clearly it’s based on a rough estimate of 3% for payment processing fees. But 3% isn’t enough to cover most developers’ actual payment processing. […] Consider Stripe, which is incredibly popular (and deservedly so). Stripe charges 2.9% plus $0.30 per transaction.
[…]
That’s the warning sheet for apps providing their own in-app payment processing; there’s a similar required warning sheet for apps that link users to the web to make payments. The language here is clearly slanted — perhaps laughably so.
[…]
It strikes me as inherently problematic for Apple to demand anything from transactions that take place outside the app.
[…]
Another restriction on web-based payments: an app can only have one URL that users are sent to, and that URL cannot contain any parameters[…]
Shout out to John for mentioning the flat fee also usually associated with payments, which will mean it’s not break-even for merchants, it’s a net negative in most cases. Literally no one else seems to be mentioning this, which is wild because it meaningfully changes the math.
[…]
I will never stop finding it funny that the argument is, “yes, the App Store fees are monstrously high compared to every single other way people sell apps today, but have you seen game consoles?”
I do wish more of the conversation (and the ACM’s ruling) was around the user vs. Apple. Another way to look at this is that Apple believes you should pay them a markup for using a dating app.
I’ve mentioned before that for small app shops, the 15-30% commission could be the difference between being able to afford hiring full time support or another developer. Those are new features, bug fixes, and support you’re missing out on in your favorite apps.
And just look at the purposefully miserable experience they’re designing for out-of-store purchases. Sure, the goal is for to not be used… but what if it is? Is this what Apple wants, a bad experience for users? That’s where we’ve finally gotten to now? Deliberately bad design?
Update (2022-02-11): Matt Birchler:
That’s a lot of manual work for both sides, and I don’t see how it could ever scale to more than a few of Apple’s smaller markets.
[…]
I would suggest that Apple should, and will, build third party payments into the in-app purchase system. After all, why not? If Apple is getting their 12/27% and is saving money on processing payments, then what difference does it make to them how hard they make it for merchants to use another payment provider?
[…]
Based on my replies every time I talk about Apple Pay, I know for a fact that many people think that Apple is processing this payment, but that could not be further from the truth, every Apple Pay transaction you’ve made outside of Apple.com is happening through a third party payment provider already and it’s not disclosed anywhere in the UI.
EU has lower credit card processing fees than the U.S. Stripe, for example, charges 1.4% plus €0.25 per transaction. That’s still about 4% for a €10 transaction, though.
For a company that says it is focused on delighting its customers, it has always chosen to maximize App Store revenue. Why else can you not buy Kindle books in the Kindle app, for example? Apple cares more about its cut and about pushing iPhone users to Apple Books than it does about the iPhone being the worst device on which to be a Kindle user.
If I sound despondent it’s because I am. Apple will fight tooth and nail to keep the money it feels it is owed. Yet third-party developers helped make the iPhone what it is, and Apple profits mightily off the iPhone. Regulators continue to test Apple, but the results will just add complexity without actually benefiting developers or consumers substantially.
Update (2022-02-16): David Heinemeier Hansson:
Every time Apple mobilizes its law machine to squash a developer in court, foil democratic accountability in the legislatures, or give regulators the middle finger, Apple wounds the relationship with developers. They can win every battle in court, lobby around every hearing in the house, and pay all the trifling regulatory fines, and still ultimately end up losing something far more long-term important than a monopoly tax rake.
[…]
Apple was in our corner. Apple was our escape. Oh how the world has turned. I guess you either die a hero (salute Commodore) or you live long enough to become the villain (hello Apple).
So here we are twenty years later. Apple has planted all the same seeds of discord with developers as Microsoft did in the 90s. But somehow even more ruthlessly and greedy than the boss that came before it. What a story arc.
See also: Accidental Tech Podcast, Upgrade.
11 Comments RSS · Twitter
Words I used to associate with Apple: innovative, style, quality
Words I currently associate with Apple: greed, petty
The level of dishonesty and unwillingness to play fair is repugnant. They probably don't realize it yet, but many now feel contempt for them. That is bad for their long term prospects. It's all very well to destroy your complement, but then you have no value either.
I’m nearly all in on Apple gear and stuff like this is making me regret spending the money on their gear. If I could figure out how to get my family and friends switched to something other than iMessage and FaceTime, I’d try switching tomorrow.
Would be interesting to see how Google would handle similar demands.
Or do they already accept third party payments from within apps? I don't have any app which requires payments.
@ Kristoffer: in South Korea, Google proposed reducing fees from 15% to 11%, so they pulled a somewhat similar move.
I'm really glad I'm not in the consumer software business!
Small wonder the new generation of developers turn to Blockchain projects.
There they get to be the ones doing the fleecing.
I’ve yet to see a convincing argument for why Apple is justified to charge any App Store fees beyond 10% for any app in any situation.
"Taxes are a COO's business model"
You must develop a new App to take "advantage" of the 27% rate.
A whole new app: "dating-app providers must develop a completely new app if they wish to use an alternative payment system" ... "App providers cannot adjust their existing apps".
Right...
In my opinion Apple will loose this fight in the end. But it's going to take years. The EU hopes that the Digital Markets Act will put some preassure on Apple and Google to lower commissions. But I don't see this happening in the short term. Android already has side-loading and alternative app stores. Yet they still successfully charge mostly the same rates.
That means many more years of dirty tactics and litigation, until the regulatory bodies come to the conclusion, that the market is not working. Then maybe, we will get hard caps on commissions for app stores.