Apple to let video apps point users away from its payment system

Apple store
Under pressure, Apple liberalized one of the App Store’s oldest and strictest rules. (Getty Images)

Video services for iPhones and iPads won’t be stuck giving Apple a cut of every in-app purchase, rental or subscription starting early next year.

Apple revealed this sweeping liberalization of one of the App Store’s oldest and strictest rules in an announcement posted Wednesday night. The Cupertino, California, firm said that as part of a settlement of an investigation conducted by the Japan Fair Trade Commission, it would “allow developers of ‘reader’ apps to include an in-app link to their website for users to set up or manage an account.”

And while the commission’s investigation only covered Apple’s operations in Japan, Apple said it would apply this rule globally to “reader” apps, which it defines as those that “provide previously purchased content or content subscriptions for digital magazines, newspapers, books, audio, music, and video.”

Today, those apps must use Apple’s In-App Payment, with Apple keeping 30% for the first year of a subscription and then 15% afterwards. (A Small Business Program launched in January keeps that cut at 15% for developers who earn less than $1 million a year on the App Store.) Apple bans apps from linking to any other payment option on the web or even telling users that such options exist.

That restriction leads to weird in-app explanations like this phrasing the Netflix app displays above a sign-in button in case the user doesn’t already have an account: “You can’t sign up for Netflix in the app. We know it’s a hassle.”

Under the new policy, set to go into effect in “early 2022,” qualifying apps can “share a single link to their website to help users set up and manage their account,” according to Apple’s announcement. That posting does not say if apps will be allowed to display the prices available at their sites. It also does not say if Apple TV apps will be covered, and Apple PR did not answer a request for clarification sent mid-day Thursday.

The Japan Fair Trade Commission pronounced itself satisfied in a press release Thursday reporting the closing of its investigation. That announcement noted that Apple’s conduct thus far might violate the country’s Anti-monopoly Act, but that its announced remedy would eliminate those concerns.

The change really helps smaller video providers

For the very largest video services, which can tap into an Apple program for “premium subscription video entertainment providers” that last year allowed Amazon to ship Prime Video apps for iOS and Apple TV that use Amazon’s own payment system instead of Apple’s, this upcoming policy shift may not change things much.

But for smaller services, the ability to point viewers to their own site may offer a vast savings in cost. Third-party payment processors charge far less; Stripe, for instance, only charges 2.9% plus 30 cents for each credit-card transaction.

One developer advocate said Apple could have done much better.

“Developers still can't offer better alternatives to Apple's payment systems in their apps,” emailed Kostas Eleftheriou, an iOS and watchOS developer who became a public critic of Apple after seeing scam apps go unpoliced. “Apple is barely giving an inch, while their draconian anti-steering provisions remain in place - users can't even be told about Apple's 30% tax!”

Google, meanwhile, continues to enforce Apple-esque conditions on content apps, having announced last September that it would require them to use its in-app billing no later than Sept. 30—which, like Apple, keeps 30% of the first year of a subscription and then 15%. Google also now bans content apps from linking out to other payment options on the web.

An analyst noted that both Apple and Google have reasons besides income to want to keep apps locked to their payment systems.

“I think that Apple and Google will want to retain as much control over the payment process, and the resulting data, as possible,” wrote Brett Sappington, a vice president with Interpret. “The payments are important, but competition for exclusive access to data is fierce.”

But Apple’s concession to Japan is probably not the end of this story. Korea’s legislature passed a bill Tuesday banning app-store operators from requiring developers to use their own payment systems. And in Washington, Sens. Richard Blumenthal (D-CT), Marsha Blackburn (R-TN) and Amy Klobuchar (D-MN) introduced similar legislation Aug. 11.

Wrote Eleftheriou: “Thankfully, regulators, lawmakers, and the public are starting to see Apple's anti-competitive practices for what they are, and it won't be long before we see some real change.”