Apple is Turning the Screws on App Developers, Including Your Favorite eBook Apps

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.

Earlier today Basecamp cofunder David Hansson tweeted that Apple wasn’t going to let Hansson update the Hey email app unless it started selling its email services inside the app:

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.

image by Andrew Gustar via Flickr

Nate Hoffelder

View posts by Nate Hoffelder
Nate Hoffelder is the founder and editor of The Digital Reader. He has been blogging about indie authors since 2010 while learning new tech skills weekly. He fixes author sites, and shares what he learns on The Digital Reader's blog. In his spare time, he fosters dogs for A Forever Home, a local rescue group.

9 Comments

  1. Ed Bear16 June, 2020

    For those of us who use our phones as readers, this is going to hurt Apple. The apps I use are 10 times better than anything I’ve seen on Android phones, apps on iPhone perform better and have a heckuva lot better text presentation. Since 100% of my book reading is on my iPhone, killing those apps effectively kills the phone for me.

    Reply
  2. Paul16 June, 2020

    One minor thing, Hey is selling a subscription, and yes it’s 30% in the first year, but it’s 15% in the second. I’m sure Apple also argues about the discoverability part of its app store too as a reason to pay the higher price (that and it’s more common among store fronts and magazine/newspaper subscription services). How much does Grubhub charge for example to a restaurant? Quite a bit.

    Note I’m not disagreeing that they are steep and I bet we’ll see them approve the Hey app in the next couple of days because there are too many other examples of them approving similar apps. If there’s a change at all (which will involve regulators), it would be because of Amazon Prime Video, which is paying less than everyone else. That shows a distortion in the app marketplace.

    Reply
    1. Paul16 June, 2020

      I should add I raised the discoverability part as we’ve reached way more into China and India thanks to the app store, than we ever did selling subscriptions on our web site.

      Reply
  3. Disgusting Dude17 June, 2020

    Try this:

    https://www.apple.com/newsroom/2020/06/apples-app-store-ecosystem-facilitated-over-half-a-trillion-dollars-in-commerce-in-2019/

    Sounds like they feel that they’re entitled to a share of everybody’s online income and $5B a year isn’t their “fair” share. They feel they’re only getting 1%.

    Reply
  4. Disgusting Dude17 June, 2020

    I believe Netflix used to pay on subscriptions started on Apple but stopped.
    So they may be next.
    And there is spillage: HBOMAX isn’t on Roku or Fire because they can’t agree on…something…
    …or maybe Apple demanded a window of “streamer exclusivity”?
    If every platform holder demands a vig for transactions flowing through their systems consumers are going to end up paying.

    It is long past time Apple got called on the carpet.

    Reply
  5. Xavier Basora17 June, 2020

    Nate

    Quite frankly the developers need to bitchslap Apple via an antrust lawsuit as well as citing the terms as adhesionary contract. That might get more traction.

    Reply
  6. Chris Meadows17 June, 2020

    The Verge’s coverage of the story states, “While Apple told The Verge that apps must offer an in-app subscription option, the company does make exceptions for a variety of apps. Those exceptions include music, video, and magazine apps, among a few others, but email apps are not one of the approved exceptions.” I would imagine ebook apps would probably be among those exceptions, too.

    If that’s the case, this might not actually have any implications for Kindle and such yet, unless they should decide to revise that list of categories.

    https://www.theverge.com/2020/6/16/21293419/hey-apple-rejection-ios-app-store-dhh-gangsters-antitrust

    Reply
    1. Disgusting Dude17 June, 2020

      Kobo begs to differ.
      Remember, they can’t even mention tbeir website.
      And yes, Rakuten has complained to the EU and DOD.
      So did Spotify: they used to charge iOS users $13 a month instead of $10 so they could pay tbe VIG.
      Then Apple Music came in at $10 so Spotify took out the app subscription option and dropped tbe price.
      Netflix used to pay the vig but when Apple got into video they dropped the feature and stopped paying.

      They are still vulnerable on antitrust because all they do is host the files (and actively prevent app sideloading) and process payments which everybody else does for low single digits,not 30%.

      And, above all, they are discriminatory in applying tbe rules. Companies that find a profitable segment soon find an Apple app competing with them and suddenly the rules tbat weren’t applied are.

      The official rules are written to apply to everybody except when Apple chooses not to.

      And now they’re claiming they “enable” $500B in sales, including physical stuff. Buy a Samsung TV from BestBuy online and according to them, Apple facilitated the sale. So, are they going to start demanding money from BestBuy?

      In case you haven’t noticed, app carriage is becoming an issue at Roku and Fire. Apparently they figure if Apple can do it, so can everybody else.

      (And don’t forget that during the Agency trial it came out that Apple blocked Random House from the app store until they adopted Agency. And documented it.)

      It is past time they were forced to divest the store or allow app sideloading.

      Reply
    2. Nate Hoffelder17 June, 2020

      Then why did Kobo file a complaint?

      Reply

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