Developers, regulators say Apple's App Store changes don't do enough

Apple has announced a series of slight changes in settlement of a class action by developers, but they don't seem to go far enough.

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Developers are debating Apple’s statement of clarification around the App Store in resolution of a class action suit brought against it by developers in 2019. Some say the announcements don’t go far enough, but others welcome its slightly more open approach to payments outside the store.

10 years on, you can now email customers

Since it introduced the App Store more than a decade ago, Apple has always insisted that payments be  primarily made within its ecosystem.

Developers have always been able to offer sign-up accounts outside the App Store, of course. But they have not been permitted to email iOS app users to let them know other payment methods exist. This might include an email sent to a customer at the end of a trial period that invites them to sign-up to a service, which they can now do.

This presumably means developers can request a person’s email and ask them for permission to receive offers. If they get the go-ahead, they can email offers — but still cannot do so from within their app.

Even with these changes, Apple continues to forbid developers from mentioning the existence of alternative payment options on their app description pages. As the legal agreement states: “By informing customers of alternative payment options, developers can avoid paying Apple’s commissions and, moreover, exert competitive pressure on Apple to discipline its pricing.”

Apple has also expanded the number of price points it supports in-store.

This may help some developers build more resilient businesses, but will also mean consumers must look twice at the prices before buying. There will be over 500 price points.

US developers will get $250-$30,000

Apple announced a $100 million fund to “assist qualifying US developers." That means the smallest developers offering apps for sale or subscription will be able to claim $250, scaling up to $30,000 for those making more than $1 million each year.

The legal settlement reveals that 85% of Apple’s US developers make $5,000 or less per year via the store. It also reveals that the lawyers will be paid fees of up to $30 million from this fund.

Small business program

The settlement document confirms that Apple announced its small business program as a direct response to the class action. Under this scheme, businesses earning less than $1 million a year pay a 15% commission on sales, subsidized by larger developers who pay the 30% rate.

Apple says it will maintain this program for at least another three years. That’s alarming some developers, who also note that the scheme could still be improved and are concerned it may become finite.

Given that 85% of Apple’s US developers make less than $5,000/year, it is perhaps unsurprising that in its current incarnation Apple’s Small Business Program only dents App Store receipts to the tune of $59 million each year.

That means most of the billions the enterprise generates each year come from larger developers.

Follow the... search trail

Another interesting section in the deal sees Apple agree that search results will continue to be based on tangible data, such as star ratings or relevance for at least the next three years. That hints that Apple may extend its ad business more deeply into App Store search, which itself implies the company may have a wider plan around search. (Recent news that Google may pay as much as $15 billion to remain the default search engine on iOS means any such plan may impact Apple’s services income.)

(Some) more transparency

One final thing that may prove to be of interest in this affair is Apple’s commitment to publication of an annual transparency report in which it will provide the number of apps it has rejected, customer and developer accounts terminated for sketchy or fraudulent behavior, and information about search queries and results. It will also disclose the number of apps removed from the store each year.

We already have a rough idea how this report will work following the company’s publication of similar data in 2021.

Among other data points, that report claimed 95,000 apps were removed and 244 million customer accounts deactivated for fraud.

Critical voices remain strong

Announcing the news, Apple Fellow Phil Schiller said: “We would like to thank the developers who worked with us to reach these agreements in support of the goals of the App Store and to the benefit of all of our users.”

Epic’s Tim Sweeney seems unimpressed. Vowing to continue his company’s fight to force alternative payment methods into the App Store, he tweeted:

“Total coincidence that Apple abandoned its customer privacy commitments the same month they’re asking the US government to formally endorse and adopt Apple’s app store and payments monopoly in foreign trade negotiations?”

He was referring of course to Apple’s truly disturbing CSAM plans.

Analyst Benedict Evans notes that Apple’s App Store commission, combined with the estimated money it gets from Google for iOS searc,h adds up to more than the entire revenue of Netflix. It’s also more than that of Adobe – and McDonalds.

Evans seems to think it is inevitable regulators will eventually make decisions around all of this. I tend to agree.

Sen. Amy Klobuchar (D-Minn.), chair of the Senate Judiciary antitrust subcommittee, was supportive of the Apple move, but wants more: “This new action by Apple is a good first step towards addressing some of these competition concerns, but more must be done to ensure an open, competitive mobile app marketplace, including common sense legislation to set rules of the road for dominant app stores.”

It is important to note the settlement has not yet been approved by Judge Yvonne Gonzalez Rogers, who is overseeing both this and Epic’s outstanding case. (You can read the legal briefing here.)

Regulators are currently investigating Apple’s App Store business model in multiple countries.

The reaction to Apple’s move tells me the company hasn’t yet gone far enough to silence critics. That’s why I believe the end result will see regulators set a series of limitations around this part of the company’s business — but doing so will take many years yet.

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Copyright © 2021 IDG Communications, Inc.

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