- The Epic Games trial versus Apple opened a door for developers to defray Apple’s App Store fees.
- Software makers that supply Apple app developers are building products to allow companies to handle their own customer relations and billing and avoid taking Apple’s 15% to 30%.
- But it’s still unclear what permissions Apple would need to allow under the ruling.
Developers are building new software for apps that lets companies bill customers without paying Apple, which takes up to 30% of app sales.
They are preparing for new changes Apple will have to implement after a federal judge’s ruling in September that Apple has to let app developers link to alternative payment systems. The decision came as a result of a legal battle between Fortnite maker Apple and Epic Games.
The new software, if widely adopted by developers and users, could threaten Apple’s profit engine. The App Store is part of the company’s services business, which reported $53.8 billion in sales during fiscal 2020 on a 66% gross margin, which is roughly 20% of Apple’s revenue.
Developers are working out several options because it’s unclear what they’ll need to do to comply with Apple’s new rules. Apple has not shared details of its plans to comply with the judge’s order, which takes effect on December 7.
Paddle CEO Christian Owens said the ruling provides an opportunity to expand his company’s Mac and Windows customer billing business to Apple’s iPhone App Store. Paddle made three different implementations of the iPhone payments product in the hope that one would follow the rules.
“We’d love to hear from Apple, and get a description on the record as to exactly what’s being allowed,” Owens said.
A version of Paddle’s Software Development Kit (SDK) lets app-makers offer monthly or yearly subscriptions with an “Upgrade Now” button. The button links to a paddle-hosted webpage in the Safari browser with multiple payment options, including Apple Pay and PayPal. Once the payment is processed it is returned back to the user in the app.
CEO Jacob Eating said RevenueCat, a company that makes tools for iOS developers to manage customer subscriptions, is also developing a browser-based payment system that developers can add to apps without building their own. Huh.
“The real magic is that developers will get a portable link that they can incorporate into external marketing, or now in the app, that will instantly unlock access using our SDK,” Eating said in an email.
“We are operating under the assumption that developers will still be required to use Apple’s IAPs inside their apps, but will now allow you to reference and link external paywalls,” Eating said.
The CEO of Paddle thinks the same.
Owens said, “I think it’s going to be a situation where, if you want to offer an off-platform, in-app purchase mechanism, you have to offer Apple an in-app purchase mechanism along with that.” Gotta do it.”
Apple hasn’t updated its App Store guidelines, the document that sets out what developers can and can’t do in iPhone apps, since last month’s decision. All iPhone apps and updates go through a process called app review, where Apple employees reject apps that don’t conform to Apple’s regulations.
The judge’s ruling said Apple should allow customers to leave its ecosystem to buy virtual goods on the Web. But that doesn’t stop Apple from making other policy changes to its stores, such as developing a new way to charge fees for iPhone app transactions that happen from the platform. It is likely that Apple CEO Tim Cook testified during the trial.
“if not for [in-app purchasing]”We have to come up with another system for invoicing developers, which I think would be a mess,” Cook said in May.
Apple declined to comment but argued during testing that the App Store ensures user privacy and security. Apple General Counsel Kate Adams said in September that the Epic Games decision was a “huge victory” and the company appreciated the court’s conclusion that Apple was not a monopoly.
Some Wall Street analysts believe the impact on Apple will be limited but real, potentially reducing Apple’s earnings by as much as 4%, with off-platform billing being used more frequently for expensive software subscriptions. .
Eating said Apple’s changes may not have a huge financial impact on developers. They argued that users would be less likely to complete a purchase if they had to visit an external webpage, even if apps could link to it. It can also annoy users who will have to manage subscriptions individually rather than in the iPhone’s settings.
“I think it’s cool to let the system compete, but I don’t believe it’s going to be an unexpected one for anyone,” Eating said.
Alternative payment systems charge developers less than Apple, providing features such as managing subscription cancellations and providing insight into sales trends.
Owens said Paddle will cut gross purchases by 5% to 10%, reducing Apple’s 15% to 30%, while still handling behind-the-scenes headaches like international taxes and customer support. That savings can be passed on to consumers.
Developers will feel an incentive to lower prices if Apple requires an app with a direct billing link, which also offers in-app purchases. For example, a music service may charge users $9.99 per month if they subscribe from within an app, as Apple deducts those purchases, but only $6.99 per month if they subscribe directly to the service’s website. Click on a link to subscribe.
“We are trying to create a competitive solution for in-app purchases, given the fact that even for small transactions, we can do this for 10% of the value of those transactions, and then reduce the price. From there,” Owens said.
Epic Games CEO Tim Sweeney, whose lawsuit led to these changes, congratulated Paddle made a tweet on Thursday.