Apple created the first app store in 2008, to coincide with the launch of the shiny new iPhone 3G. Even whilst the platform and the world around it has changed beyond recognition, its rules around payments have remained fundamentally the same.
It comes as a surprise to many – even when I discuss app creation with seasoned entrepreneurs – that Apple take 30% of all payments made through the App Store. If you rent a movie, unlock a level or subscribe to a newspaper, Apple takes their 30% cut. Contrast this with usual payment processing fees – around 2% – and it becomes clear why developers feel aggrieved.
Artificially raised prices for consumers
This results in consumers paying more. Outlets with thin profit margins like newspapers or streaming video services have no choice but to increase their price to cover Apple’s cost when bought through the App Store. As a consumer, a good trick is to subscribe using companies’ own websites rather than through the app: often it’ll be cheaper; or if not, the company will receive a much bigger slice of what you pay. Given our struggling written press, this is particularly important when subscribing to newspapers or magazines.
It’s a somewhat mean rule of Apple’s that publishers aren’t even allowed to mention that you can subscribe outside the app, even without a price comparison, so this trick remains unknown to many.
It’s about monopoly
The cut is undeniably enormous. But to resent Apple for it, misses the point in many ways. Apple will argue that their platform builds your audience for you. This is a reasonable point. They have a platform with over a billion users and can raise your profile from unknown to household name.
The more significant grievance is that Apple’s tactics are monopolistic. This claim has merit. You can’t distribute your app to any iPhone user without using the App Store – the iOS platform is locked down to prevent that. So regardless of the personal choices of the developer and the iPhone user, both are forced to adhere to Apple’s rules and their payment requirements. This is the greatest objection of consumers and publishers alike.
This is also why Google and Microsoft – who also have app stores for their platforms – aren’t party to anywhere near the same degree of outrage, even though they also take 30%. Publishers and consumers on those platforms can choose to source their apps from wherever they like.
How might this change?
Monopoly is at the centre of the recent high-profile case against Apple by Epic, the developer of the immensely successful Fortnite series of games. In a deliberate attempt at provocation, Fortnite attempted to offer a different payment in their app, outside of Apple’s control:
Much has been made of the fact that Epic clearly planned this, with a lawsuit and PR campaign prepared for the exact moment of rejection. But this characterisation misses the point. Epic may well be fighting for their own interest, but if they win, and Apple’s monopoly ends up being reduced even in small ways, then it’s a benefit to everyone.
Apple’s latest response deliberately misrepresents Epic’s fight as them seeking special treatment. This won’t sail for long, as Epic has been clear that the changes they seek apply to everyone, not just themselves.
It will be very interesting to see how Apple’s slick PR machine continues to handle this, especially as more companies and figureheads join the fight (not least Microsoft). And ultimately I await with interest the result of the upcoming legal fight.