For the past 9 or so years app developers have had a quasi-truce with Apple. So long as the developer didn’t sell anything inside the app (or even hint that something could be bought), the developers didn’t have to pay 30% of their sales as a vig to Apple.
That truce is about to end.
Wow. I'm literally stunned. Apple just doubled down on their rejection of HEY's ability to provide bug fixes and new features, unless we submit to their outrageous demand of 15-30% of our revenue. Even worse: We're told that unless we comply, they'll REMOVE THE APP.
— DHH (@dhh) June 16, 2020
If you click through to the tweet and scroll down, you will see a screenshot of the email that Apple sent. That email lays out the rules that the Hey app violated, and Apples claim that they are doing this for the benefit of consumers.
The thing about those rules is that many apps such as Spotify, Basecamp, and Kindle “break” the rules. They have been “breaking” the rules for years, and Apple accepted this.
This has in fact been the status quo since the spring of 2012, when Apple decided that all in-app transaction had to go through it. Most companies can’t afford to pay Apple the vig, so they removed any mention of sales, even going so far to delete the in-app help pages. Bol.com actually had to remove the DotCom from its name before Apple would accept its ebook app (I am not joking).
The thing about paying Apple 30% of an app’s revenue is that Apple is doing nothing more than payment processing, and is demanding over ten times what payment processors typically charge. For example, I pay Paypal 2.9% on each transaction. That is actually on the high end of what payment processors charge (most charge under 2%) and yet Apple wants 30%.
That is outrageous, and also arguably illegal.
The other problem with Apple demanding 30% is that in many cases they have a competing product (such as Apple Books). Apple is effectively forcing its competitors to raise their prices 43% in order to cover the cost of Apple’s vig or take a loss on every transaction (do the math, and you’ll see I am right).
This is a prima facie violation of antitrust law. That’s why Spotify filed an antitrust complaint in the EU last spring, and why Rakuten filed a similar complaint back in March. Or so I have gleaned from the Financial Times story published today (I don’t think they got the story right).
From the FT:
Rakuten’s ereader subsidiary Kobo claimed it was anti-competitive for Apple to charge it a 30 per cent commission for e-books sold through the App Store while promoting its own product, Apple Books.
Kobo said it loses out on business by forcing customers to go to its website to buy e-books, as it seeks to avoid the Apple commission, according to several people familiar with the complaint.
The case is a mirror of a March 2019 complaint from Spotify, which said Apple’s App Store charges allegedly tilt the playing field to disadvantage rivals and favour its own music service. The European commission has yet to rule on Spotify’s complaint.
Apple has defended the commission it charges some apps in the past by saying that it gives businesses the option to either sell their services through the App Store or not and that it provides the service to distribute apps for free.
I am pretty sure that Apple is making the same demand of Kobo that they made to Hansson, and that the FT got the story wrong. (If nothing else my interpretation makes more sense than what the FT published.) This would mean that Apple has expanded from targeting small developers, and is now going after $12 billion a year corporations.
I have queried Kobo for more info, and I will amend this post with their response.
Apple’s greed knows no bounds, and it’s going to hurt consumers in the long run. When Apple first demanded the vig in early 2012, they killed a bunch of smaller ebook app developers who simply could not afford to pay 30%, and we’re going to see another round of dead apps as Apple sends out more demand letters.
In the long run Apple is probably going to be fined for its antitrust violations, but that is little solace for the developers and consumers it has harmed.