Meta, Microsoft, X and Match Join Epic Games in Protesting Fees for Non-App Store Purchase Links

[dwaite]

The problem with this is that you're ignoring that Apple isn't currently getting a commission on sales to people who only use Netflix via an App from the App Store. Today, right now, Netflix has an App on the App Store for which they pay nothing to Apple. If Apple was entitled to a commission based on the revenue earned by Netflix thanks to having this App they should be collecting it from Netflix's website. They aren't, which significantly undermines their argument that they should gain a commission from this link.

I'm not sure how much emotional weight the word "entitled" is bearing here. Nobody has an inherent right for their business to be profitable.

Apple has structured their agreements so they get a commission for sales through the platform, and they have put restrictions on app behavior to limit apps from instead trying to take sales outside the platform.

The reason _usually_ to try in-app to direct people outside the platform for purchase/subscriptions is to avoid the commissions that the company has contractually agreed to pay to Apple. This isn't always the case (sometimes, you want a more direct customer relationship. Sometimes, you want to make it really hard for people to cancel your service. Sometimes, you want to do predatory or discriminatory pricing.)

Some want to believe Apple just runs an obnoxiously expensive payment service, but no - they use in-app payment support to efficiently collect their commission at the scape of the number of app developers and end-users the platform has.

The fact that these rules aren't going to make any money for Apple or change the fact that Netflix and Spotify won't have any way to sign up for them in the app via a link is why Apple's so called compliance is meaningless.

Splitting payments out doesn't change the fundamental equation at all - Apple charges a commission for the value they think apps create in bringing in new revenue for other companies, large companies totally agree in the value but don't think they should have to pay Apple. Instead, it mucks up the separation these companies have been relying on to avoid the high commission, because now web payments _sometimes_ will result in a contractual obligation to pay a commission to Apple.

The whole commission setup is pretty broken imho. The goal was to share in developer success, but avoiding the commission arguably has led to both a decline in app pricing/quality and a surge in free advertising-funded services/games. It will be interesting to see if the opt-in core technology fee affects this in a positive way - hard to do advertising-driven freemium when new users are costing you real money.

 

[dwaite]

On the other hand I think that so long as Apple competes with apps on its platform (Music vs Spotify, iCloud vs Dropbox, Apple TV+ vs Netflix, Arcade vs XBox Pass, etc…) they should not be allowed to charge developers for SDK access on a per user or per download basis as it gives them a large competitive advantage.

Depends. One could say that mandating these competitors get access to the platform without funding its ongoing development in any way is putting Apple at a disadvantage. Apple has to develop the SDKs for Apple TV+ out of pocket, as well as the SDKs necessary for Netflix.

If Apple say launched certain new video playback systems (say new HDR or high frame rate or audio modes) so that _only_ Apple TV+ and Apple Music could use them, without going the extra mile to make these publicly usable and documented SDKs for the like of Netflix and Spotify, there'd be talks of anticompetitiveness there too. This has happened - see all the work to support alternative music app support on Homepod that Apple did against Spotify's complaints, which Spotify has then never used.

If they want to charge for SDK access they should be a neutral platform and get out of the music, game streaming, storage, and television business. They are leveraging their dominant position in the OS and App space into these other categories and I think that is likely going to get them into trouble.

That would certainly make it easier, but it isn't a business reality as services are a growth business for Apple.

They'd be more likely to spin out the App Store if forced to eject a part of their business. My hypothesis is that the core technology fee (paid to Apple, not to the App Store) is structured as part of them setting up for this possibility - that the App Store would be positive revenue on its own if it subsidized the CTF for free apps via the commissions on up-front and in-app purchases.

Apple has been in music, games, movies and television since before the iPhone launched. This isn't a new pivot for them, and not them 'leveraging' the success of the iPhone for anything - it was there at the start. It is also why they have had 'reader' exemptions for certain classes of apps since the App Store launched. That is why Netflix and Spotify can get away with taking money solely out of app today, vs being required to offer in-app purchasing as one of the options like most other app categories.

 

[svish]

So many legal issues. Waiting to see what happens in the end.

 

[bollman]

No… And I wasn’t implying that with my analogy. I was talking about in app purchases only. In fact, maybe you missed my post 6 minutes before that one and it’s okay if you did, but I even sided with the developers when it comes to app steering-

I did, sorry about that!

 

[neilpmas]

I think we can all agree that Apple is entitled to some compensation for developing the platform, SDK, and tools (e.g., Xcode). After all, Epic takes 12% commission from apps distributed through its store, which is more generous than Apple and Google, but it is certainly not free.

So the real question is, what is fair? €0.50/year beyond 1 million install is certainly prohibitive for free and freemium apps generating very little recurring revenue from each user.

Apple's take should be capped to more reasonable amount, such as €0.50/year for active users that generate a minimum revenue of €2.00/year or €1,000/year per developer, whichever is higher.

It’s called the price of the phone.

 

[Zest28]

This point is primarily why I think this link charge is bogus, Apple just seems to be doing it out of spite.

Please, this is common industry practise. If you use someone their link to buy something, they get the sales commission.

 

[AppliedMicro]

Well, Microsoft charges 30%

Wrong.
Microsoft charge 0% to 12%/15% on the Microsoft Store.

And Epic charges 5% just to license Unreal, then 12% for hosting

Wrong.

«For games built on Unreal Engine, engine royalty fees are waived for in-store purchases using Epic's payment processor»

https://store.epicgames.com/en-US/n...hing-tools-for-game-developers-and-publishers

offers zero foreign exchange services

«Epic's payment service supports 100+ payment methods with 43 regional currencies and more on the way.»

https://store.epicgames.com/en-US/distribution

doesn’t cover local payment processing upcharges and you walk away with less money.

Cheap in the EU.

 

[hans1972]

So if I go to Netflix’s website via Safari and sign up for a subscription Apple gets nothing but if I click a link in the app that takes me to their subscription page Apple gets 27%? Why?

No, Apple doesn't get anything from Netflix.

In general, Apple would get 15% from such a service.

 

[hans1972]

Making the tools does not entitle you to bully developers. Especially when competition for the development tools is not allowed, which is why this whole discussion came from in the first place.

What if the developers go for subscription pricing? Are Apple entitled to do som bullying then?

 

[Mrkevinfinnerty]

I don't know why more companies wouldn't join up to fight the anti competitive behavior.

Only the big ones are willing to put themselves in opposition to Apple. A lot of smaller devs fear the backlash.

 

[hans1972]

That technically isn't true, she allowed that Apple could collect payment for its IP but declined to comment on the specific amount of the commission. It also isn't clear that her comments that payment for IP being allowed is something Apple can collect via commission on payments processed via an external website.

"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."

As you say, it establishes the right for Apple to collect commission.

"Indeed, while the Court finds no basis for the specific rate chosen by Apple (i.e., the 30% rate) based on the record, the Court still concludes that Apple is entitled to some compensation for use of its intellectual property. "

The court didn't use this opportunity to say 30% was illegal and thus it is legal until another ruling. The court also didn't order Apple to stop charging 30%.

"Creating a seamless system to manage all its e-commerce was not an insignificant feat. Further, expanding it to address the scale of the growth required a substantial investment, not to mention the constant upgrading of the cellphones to allow for more sophisticated apps. Under current e-commerce models, even plaintiff’s expert conceded that similar functionalities for other digital companies were not separate products. Under all models, Apple would be entitled to a commission or licensing fee, even if IAP was optional. Payment processors have the ability to provide only one piece of the functionality."

The IAP is just one way Apple is collecting a commission. The court states that other models would also be legal.

 

[hans1972]

You apparently don't realize how circular your logic is.

1. Apple forces devs to distribute iOS apps through the App Store
2. Dev adds link to their app leading to their website for customers to subscribe
3. Apple takes cut from transaction because (return to point 1)

1. Apple offers devs to voluntarily distribute iOS apps to iOS customers
2. Dev adds link to their app leading to their website for customers to subscribe
3. Apple takes cut from transaction because (return to point 1)

Why do developers to this? Because they want access to customers. That's what valuable for them.

 

[hans1972]

It absolutely 100 percent is NOT a private company. I'm not sure what made you think this 🙄

In this context it means a privately owned company, not owned by the government.

 

[hans1972]

Edit: Given the justifications the Judge gave for Apple's right to charge the commission it would imply that Apple should be charging all monetized apps a commission - I don't think carve outs fit into that logic. It is a "may charge a commission" of course, so it is optional for Apple to charge, however the logic of her refutation of Epics claims seems to strongly imply that Apple shouldn't be singling out digital purchases made within apps.

There is a part of the judgement where she discusses this. She notes that the commission collected by Apple is paid disproportionately by gaming apps through in-app purchase. It's clear she doesn't like it.

Again, as with the 30% cut, she doesn't forbid or say outright it's illegal.

Thus it's legal.

 

[hans1972]

And we'll see what the outcome is here when the court responds to this brief.

Epic lost on all accounts except the anti-steering provisions. The case was settled when the Supreme Court refused to hear appeals.

The question is only about if Apple violated the court order about anti-steering provisions.

It doesn't change the right Apple has to collect a commission, that's already decided. Even if the payment happens outside the App Store, Apple has the right to collect a commission.

 

[hans1972]

who decides what's reasonable? the developers? Apple? the government?

In the end, it's Congress (+state legislatures) and the courts in the US.

 

[hans1972]

Apple wants a license fee for its IP then they have to actually break that out and apply it uniformly and fairly - that is not what they are doing here.

Legally, licensing IP doesn't have to be reasonable, fair and uniform, unless talking about FRAND patents.
Apple can discriminate pretty widely and they do.

 

[hans1972]

And if Apple really hates developers, they can write all their own damn apps and charge an entry fee just to LOOK in the App Store!

They probably could.

Think of Apple as a pimp and developers has prostitutes.

They go where their customers are and where there is money to be made, even though they hate their pimp.

 

[hans1972]

Apple’s stance is now if you link out from an app, they’ll take a cut.

It's a stance found legal by the very court and judge where Epic has filed this complaint. Apple is entitled to a commission completely independent of where and how the payment is done.

 

[sleepybear723]

I don't know why more companies wouldn't join up to fight the anti competitive behavior.

Why be competitive when the government can kill the competition for you?

 

[sleepybear723]

I think we can all agree that Apple is entitled to some compensation for developing the platform, SDK, and tools (e.g., Xcode). After all, Epic takes 12% commission from apps distributed through its store, which is more generous than Apple and Google, but it is certainly not free.

So the real question is, what is fair? €0.50/year beyond 1 million install is certainly prohibitive for free and freemium apps generating very little recurring revenue from each user.

Apple's take should be capped to more reasonable amount, such as €0.50/year for active users that generate a minimum revenue of €2.00/year or €1,000/year per developer, whichever is higher.

Sounds like a good way to weed out the trash Freemium apps.

 

[N47H]

I agree with this. Think about a retail store like Target. If Target platforms Apple's products and they sell a pair of AirPods, would it be fair for them not to get a cut of that sale?

So you clearly don’t understand the retail model because that is not remotely how it works. If I got into a store and pay for a product, the store has purchased that stock from the manufacturer, they then mark up said product to include a margin that covers their costs and gives them some profit. Apple aren’t paying devs to have their apps on the App Store and then marking them up to make that money back and then some, they are getting that product for free and then taking a cut of the sale. Those two worlds are miles apart.

Apple taking a cut of in app purchases should completely depend on what that purchase is, but taking cuts of online sales? Absolutely not, that is ridiculous, if you go to Amazon via Safari do Apple take a cut of your purchase?

 

[vipergts2207]

But the developer would never even have an option sell (or in many case ever exist) to users if iPhone wasn’t developed by Apple. It is a symbiotic relationship. Apple was the reason for thousands of developers existing. Uber, TikTok, instagram, snapchat, WhatsApp and many many more would have never existed. They seem to forget that. Android wouldn’t even exist if not for iPhone. Android was like Blackberry until Google CEO was on Apple Board of directors and stole the idea.

Apple creating the platform doesn’t magically exempt them from anti-trust laws.

 

[vipergts2207]

1. Apple offers devs to voluntarily distribute iOS apps to iOS customers
2. Dev adds link to their app leading to their website for customers to subscribe
3. Apple takes cut from transaction because (return to point 1)

Why do developers to this? Because they want access to customers. That's what valuable for them.

Thank you for pointing out one reason they’re under scrutiny everywhere. Because Apple thinks they’re allowed to control access to wide swaths of consumers. I am not owned by Apple for them to control access to.

 

[vipergts2207]

Epic lost on all accounts except the anti-steering provisions. The case was settled when the Supreme Court refused to hear appeals.

The question is only about if Apple violated the court order about anti-steering provisions.

It doesn't change the right Apple has to collect a commission, that's already decided. Even if the payment happens outside the App Store, Apple has the right to collect a commission.

Like I said, we’ll see what happens when the court responds to this brief.