Apple recently agreed to settle a 2019 class-action lawsuit. The company will pay $100 million to affected developers, and will allow developers to communicate with users via emails for out-of-app purchases. Apple also loosened up a few other App Store restrictions. However, none of these address the real concerns of the broader Apple developer community.
A class-action lawsuitOpens a new window against tech behemoth Apple has yielded $100 million in payouts and some tweaks in the company’s App Store policy and practices, all as part of the settlement. Apple announcedOpens a new window the changes last week for what is one of the most contentious issues for iOS app developers with the Cupertino, CA-based company: the inability of developers to charge for purchases outside the app.
That’s not the case anymore. Developers will now be able to communicate with users outside the mobile app regarding purchasing methods other than Apple’s in-app purchase system. The settlement is for the Cameron et al v. Apple Inc.Opens a new window class-action lawsuit filed in June 2019 over Apple’s monopoly and control on iOS apps distribution and sales.
The lawsuit was filed originally by Donald Cameron of a basketball training app Pure Sweat Basketball and a baby naming app. In the lawsuit, the plaintiffs accused AppleOpens a new window of harming competition, developers, and consumers, stifling innovation, and being “a monopolist in the U.S. market,†for:
- iOS app and in-app product distribution services
- iOS app and in-app-product distribution services
- iOS apps and related digital products
Since it is a class-action lawsuit, anyone who has developed and contributed to the App Store revenue is eligible for the payout. The new policy updates are naturally valid for everyone.
Apple is currently also dealing with the lawsuit by Epic Games, the developer of the smash hit game Fortnite over antitrust practices. Apple, which built its empire to become the first trillion dollar company also faces antitrust investigations in both the United States, and Europe for App Store practicesOpens a new window , mobile paymentsOpens a new window , music streaming services, etc.
Apple’s Settlement
Apple’s settlement with the iOS app developers encompasses the following:
Out-of-app communications
Developers could already use channels like email to apprise users of the possibility of payment methods outside the iOS app. This is important because Apple has a steep commission on in-app purchases: 30% for all apps with revenue over $1 million, 15% for others which are infamously dubbed Apple Tax.
Out-app purchases, which are purchases made outside of any app or the App Store, do not entail any commission. The company in June 2021 clarifiedOpens a new window that developers could reach out to users for out-of-app purchases but not on the email addresses users provided on iOS apps or the App Store.
The current update allows developers to communicate on email with anyone, even on emails fetched from the App Store. Communication with users is allowed as long as they consent and opt-in to being communicated on the email address they provided in the app. Users can opt out any time.
See Also: Patent Litigations: Apple Fined $300m in Optis Retrial, Google Infringes on Smart Speakers Patents
$100 Million Small Developer Assistance Fund
Apple also made a financial settlement but the company calls it the ‘Small Developer Assistance Fund.’ Small developers are those who made $1 million or less through app and in-app digital product sales in the United States in a calendar year between June 4, 2015, and April 26, 2021.
These developers are eligible to claim and receive anywhere between $250 to $30,000 depending on the revenue their apps generated. It is difficult to say if this settlement amount covers what app developers lost out over the years, even after the company slashed the 30% commission to 15%Opens a new window for small developers in November 2020.
Nevertheless, this seems like a small step in the right direction. At the same time, it also looks like Apple is looking for short-term appeasement in lieu of a broader approach to address the developer concerns.
Developers can submit their claims on https://www.smallappdeveloperassistance.com/Opens a new window at a later date.
Introduction of new price points
Considering the App Store is one of the only two mobile app stores with a global reach.Â
All developers must choose from a broad selection of App Store pricing tiers that determine in-app purchase costs. The App Store was a half trillion USDOpens a new window ecosystem in 2019, over $64 billionOpens a new window of which went to Apple.
And despite a lower user count, iOS apps continue to outperform Android’s Play Store in terms of revenue generation. 65% of the total $111 billionOpens a new window mobile app revenue generated in 2020 went to Apple through the App Store.
Yet, Apple until now provided somewhat rigid pricing tiers. Price points shape subscriptions, in-app purchase and direct purchase costs. Price points are basically fixed transaction values. Refer to the table below.
|
Price Point |
USD ($) | CAD | EUR (€) |
| Tier 1 | 0.99 | 1.2474 |
0.8415 |
|
Tier 2 |
1.99 | 2.5074 | 1.6915 |
| Tier 3 | 2.99 | 3.7674 |
3.7674 |
|
Tier 4 |
3.99 | 5.0274 | 3.3915 |
| Tier 5 | 4.99 | 6.2874 |
4.2415 |
|
Tier 6 |
5.99 | 7.5474 | 5.0915 |
| Tier 7 | 6.99 | 8.8074 |
5.9415 |
|
Tier 8 |
7.99 | 10.0674 | 6.7915 |
| Tier 9 | 8.99 | 11.3274 |
7.6415 |
|
Tier 10 |
9.99 | 12.5874 |
8.4915 |
Apple said it is now making available 500 price points to developers, up from the previous 94. Thus, developers, who will continue to set their own prices, will now have a wider pool of pricing options at their disposal. So, let’s say an app costs $12.49, developers will be able to charge as close as possible to the said amount instead of having to charge $12.99.
Other updates
Apple also addressed developer apprehensions with respect to the enforcement of these changes.
- The company said small developers from the Small Business Program will continue to avail the 15% commission rate for at least three years. Developers will be charged 30% only if the revenue exceeds $1 million.
- Apple will keep on using the same standards for app discoverability. Search results on the App Store will continue to be based on objective parameters such as downloads, star ratings, text relevance, and user behavior signals. Again, this will be valid for at least three years.
- The market is rife with allegations of unfair treatment or decisions inconsistent with developer concerns. As such, Apple is releasing new content to better explain the App Review processOpens a new window . According to recent reportsOpens a new window , 1% of app rejections are appealed.
- To assuage rejection concerns, Apple will release a transparency reportOpens a new window for the app review process. The company will explain how many apps were rejected, why they were rejected, why developer accounts were deactivated, how many apps were removed, search query data, etc. The transparency report will be annual.
Please note that Apple’s settlement for the class-action lawsuit is currently a proposal. It still needs to be approved by Judge Yvonne Gonzalez RogersOpens a new window of the U.S. District Court for the Northern District of California.
See Also: What’s Going Wrong at Apple These Days?
Industry Reactions
According to an update from Hagens Berman, the law firm representing the plaintiffs, Cameron and Pure Sweat Basketball are happy with the settlement. “First, we have guaranteed three more years of the 50% commission drop for developers like PSB. We feel great about the fact that our lawsuit helped bring about such a large price cut,†Richard CzeslawskiOpens a new window , president of Pure Sweat Basketball saidOpens a new window .
“Second, we’ve gained the ability to use contact information obtained from signups in our app to communicate with our users outside the app about purchasing alternatives to IAP. That’s a big deal.â€
“And third, we appreciate all the new pricing tiers that are on the way, which will give us greater flexibility in how we market and sell our workout subscriptions,†he added. “We truly are proud that a case brought by two developers, standing in the shoes of tens of thousands of U.S. iOS developers, could help to bring about so much important change.â€
Others aren’t as happy as Czeslawski. For instance, David Heinemeier HanssonOpens a new window , the creator of Ruby on Rails, co-founder of Basecamp, and privacy-focused email service HEY tweeted the following:
“This new Apple settlement with a group of class-action legal vultures follow the arc of that iconic scene in Fight Club. In which both parties have assumed their ceremonial positions in a pointless settlement that reaffirm existing provisions.”
— DHH (@dhh) August 27, 2021Opens a new window
Heinemeier Hansson’s HEY also faced similar challenges when it launched on the Apple App Store.
Spotify, which is embroiled in an antitrust probe against Apple, echoed Heinemeier Hansson’s opinion. Horacio Gutierrez, chief legal officer at Spotify saidOpens a new window , “Apple’s proposed concessions fail to address the most basic aspects of their anticompetitive and unfair App Store practices. They are attempting to distract policymakers and regulators and slow down the momentum that’s building around the world to address their behavior.â€
Closing Thoughts
If you think about it, Gutierrez’s statement makes some sense. Apple’s concessions are the bare minimum they could do. It’s not like Apple has started accepting in-app payments through a mechanism other than its own. They still need to accept in-app payments through Apple-prescribed payment methods while alternates are disallowed.
Users cannot navigate from the app to the web for browsers for payments. Developers cannot even make the possibility of out-of-app purchases known within the iOS app. Apple on the other hand has phrased its press release so as to convey some sort of a huge win for developers.
South Korea on August 31 proposed an amendment to the country’s Telecommunications Business Act, The Wall Street Journal reportedOpens a new window . The amendment would require both Apple and Google to relinquish their control on in-app payments services. This means alternative forms of payment systems could come to App and Play Stores, the two most dominant mobile application platforms. At least in South Korea.
Apple also doesn’t allow sideloading or third-party apps citing security reasons.
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