"Apple to developers: Heads I win, tails you lose | Mobile Dev Memo by Eric Seufert"

`` Late last year, the Dutch competition regulator, the Authority for Consumers and Markets (ACM), ruled that Apple must allow dating apps to offer alternative, off-platform payment options to users in the Netherlands’ App Store. In response, in January, Apple published guidance to developers around how it planned to facilitate the integration of third-party payment processors on iOS. I covered Apple’s proposed policy changes in _Apple just clarified alternative payments on iOS. Spoiler: Apple still takes a commission_, but briefly:

• Apple has introduced two new alternative payments entitlement policies: one for alternative in-app payments, and one for out-of-app payments (eg. purchasing in-app goods from a website). Only one or the other can be used by an app;
• If a developer wishes to utilize either of the new entitlement policies and integrate alternative payments into their app, they must submit a standalone app bundle that is only accessible in the Netherlands’ App Store;
• Apple will still apply a commission to payments transacted through third-party platforms;
• This new policy only applies to dating apps in the Netherlands’ App Store. At the time I wrote the above article, Apple had not quantified the commission it would take on off-platform transactions. But last week, it did: 27%. If that number seems oddly specific, it’s probably because it is the equivalent of 30% less the processing fee that Stripe charges. In addition to the commission that Apple will charge on transactions that are facilitated off-platform, Apple is instituting further conditions for the use of non-iTunes payments processors:
• Developers must submit reporting to Apple each month detailing the transactions that have been fulfiflled off-platform (the report template can be found here);
• Each time either an off-app or alternative in-app purchase is linked, the app must effectively receive opt-in permission from the user to continue through a modal that includes unchangeable language, the body of which reads: “Your stored App Store payment method and related features, such as subscription management and refund requests, will not be available. Only purchases through the App Store are secured by Apple.” Note that the user must press a ‘Continue’ button on the modal in order to be forwarded to the off-platform payment option;
• Off-platform payment websites cannot be loaded inside of a WebView in the app but must rather be opened in the user’s default browser. It’s difficult to overstate just how cumbersome these restrictions are for app developers. If “non-editable and intimidating consent text as a means of engineering a desired outcome” sounds familiar as a strategy for platform control, it’s probably because Apple applied it expertly to produce very low opt-in rates for its App Tracking Transparency (ATT) privacy policy. Users won’t click through the above modal in high numbers: “Only purchases through the App Store are secured by Apple,” while tautological and true, is an ominous, trepidation-inspiring warning that will likely produce a low completion rate for off-platform purchases. But even if the loaded language of the modal doesn’t deter users, and if off-platform transactions are completed at the same rate as on-platform transactions, developers simply can’t gain anything by implementing off-platform transactions given the 27% commission that Apple demands. The premise of this policy is that developers must bear the burden of (1) maintaining a standalone app bundle for the Netherlands, (2) filing monthly reporting with Apple to account for all off-platform transactions facilitated, (3) building an off-platform purchase system, either on the web or in their app, (4) implementing the off-platform transaction modal, all for the prospect of paying Apple a 27% commission in addition to a credit card processing fee that could very well be 3% or more. Notably, Apple also does not indicate whether this new policy will accommodate a decrease in subscription price after one year, as happens with iTunes billing. Apple’s policy regarding off-platform, alternative payments is a classic “Heads I win, tails you lose” proposition. No sensible developer would undertake the effort of implementing off-platform payments given the total absence of an economic incentive. Apple’s policy towards off-platform payments is the purest example of status quo preservation through administrative obstruction. The ACM fined Apple €5MM for noncompliance with its initial ruling in late January on the basis that the company’s policy didn’t allow off-platform payments to be used for both out-of-app and in-app purchases, and that fine will be levied for each week that Apple fails to update its policy in accordance with the ruling (up to a maximum of €50MM). Note that this fine was issued before Apple revealed that it would take a 27% commission on off-platform transactions. While €50MM is a substantial amount of money, it must be put into perspective: Apple generated $34.6 billion in profit on $123.9 billion in revenue last quarter. And as I describe here, Apple is in no rush to make sweeping changes to its platform payments policy because the incremental, country-by-country nature of regulatory intervention actually works in its favor. Developers can’t afford to support multiple app bundles for different countries, nor can they justify the added, country-level reporting required by Apple for apps that offer off-platform payments. The cumbersome administrative overload involved in complying with these new policies would require a careful cost-benefit analysis even if Apple charged a 0% commission on off-platform transactions; when Apple’s 27% commission is considered, combined with credit card processing fees, the notion of offering off-platform payments becomes patently absurd. Apple likely sees its approach to off-platform payments in the Netherlands as a replicable template to be used elsewhere when it inevitably faces other country-regulatory intervention. If nothing else, countries across the EU will likely line up to collect non-compliance fines. It’s important to note here that Google has implemented a similar policy in South Korea, as I detail here: the South Korean government, in legislation that was nicknamed the Google power-abuse-prevention law, has ordered that Google must allow for off-platform payments in Google Play. The company responded by providing developers with the ability to offer multiple payment options, reducing its fee for off-platform payments by 4%, with Apple’s fee reduction being only symbolically lower. But Google hasn’t instituted the requirement for a country-specific app bundle, additional reporting, the either/or dichotomy between on-platform and off-platform payments, or the unmodifiable, threat-laden modal text. Nonetheless, both platforms have — understandably, from a commercial standpoint — obstinately dug in their heels on the topic of alternative payments. The best hope for off-platform payments on either iOS or Android may lie in legislation related to sideloading. The Open App Markets Act, which I unpack here, provides a glimmer of promise: the bill was passed by the Senate Judiciary Committee last Thursday and will move to the floor of the Senate for a vote. While the consumer appeal of default stores is irrefutable, sideloading would prevent platform operators from extracting a commission from off-platform sales because apps distributed that way would not be subjected to platform store policies. Whether this bill will ultimately be passed into law is anyone’s guess. While I believe the frictions and challenges inherent in distributing content on non-default app stores are substantial, as I articulate in Is app store regulation too little, too late?, alternative app stores are probably the only venue in which alternative payments methods are viable. Apple and Google have both presented their answers to regulatory prescriptions, and they provide no financial relief for developers. -"Apple to developers: Heads I win, tails you lose | Mobile Dev Memo by Eric Seufert"