On September 10, Epic against Apple delivered a final verdict that has put the App Store in a precarious position. Epic wanted to abolish the system completely, breaking Apple’s control over iOS software distribution — but the ruling did not allow that. Instead, we received an injunction with ambiguous words that appears to allow developers to bypass Apple’s commission system or make it easier to use other payment methods than Apple outside of their apps.
Apple tried to make the ruling a victory in the immediate aftermath, but Epic appeared certain it was losing. It is understandable. Until we see Apple’s reaction and how Epic appeals to the court, it will be difficult to determine what the injunction actually means. This ruling could open up a major hole in Apple’s tightly controlled ecosystem. Epic and its allies need to win the case in Epic’s favor both inside and outside of courtroom. There are many places Apple can fight and plenty of ways developers can win.
These are the most important questions that emerged from those fights. We’ll be paying close attention in the months ahead.
What freedom does this ruling give developers?
Despite the complexity of the case, it is actually quite simple to issue the court’s order. It focuses on one sentence from Apple’s App store guidelines. Apple has been forbidden from enforcing it.
Apps may not contain buttons, external links or any other calls to actions that direct customers to other purchasing channels.
One thing is certain: developers must be allowed to send users to other payment systems. My boss Nilay pointed out that the “buttons” clause could allow developers to make these systems look very much like Apple’s official option. Even if they use Safari or another app to actually pay the money.
It will require a lot more legal work on the part of developers, and many developer-friendly court rulings. Apple will have many opportunities to challenge the injunction’s validity from the other side. It is difficult to predict how interested the courts will be in defending it. However, even if they don’t, developers who use alternative payment methods could find the App Store to be very risky.
There is a real risk that Apple could still impose the so-called Apple Tax on any new payment system. The commissions paid by the App Store are intended to support the store’s entire operation. In her ruling, the judge examines the possibility of Apple allowing alternative payment methods, but still requiring the same 30% cut through audits or other systems. My colleague Adi discusses this in the seventh section. She writes that Apple could charge an “Apple Tax” even without charging in-app payments. If that is true, alternative payment methods would be available very quickly.
What will Apple do to change its App Store rules as a result of this ruling?
Apple is the other half of this equation. If the order is upheld, Apple will almost certainly change its App Store rules, even if it is to modify the anti-steering clause. Apple has broad legal authority and can still create its own rules for the App Shop, despite not being able to reference outside payment systems. What new rule will Apple create to replace the existing one?
The Apple has many ways to discourage outside payments, but not ban them completely. Apple could place restrictions on the way outside payments links are presented, as well as the commission rate that we have already discussed. Apple could place restrictions on the price differentials between its IAP system and other competitors. It could also require that the systems be presented side-by — whatever company believes will work with the court to keep developers using the Apple system.
How will external payments look on the App Store?
Developers will have options for Apple’s built in payment system once the dust settles on those two questions. It could be as simple as a button, or as complex as a web of forms and links. A lot will depend on where external payments fall on this spectrum.
These numbers are crucial as developers will need to balance the costs of friction with the extra revenue they receive from Apple. A Fortnite-styled app will receive an additional 30 cents for each dollar of in-app purchase that doesn’t go through Apple’s system, less any fees associated with providing the alternative service. It is possible that Apple’s walls will cause friction, which will result in fewer dollars being spent on the alternative path.
How many customers can you lose if there are fewer? You can lose four customers out of ten by switching to an external payment system. But if you only lose two customers, it won’t hurt to put it in. It’s the details of your UX that will determine how high your attrition rate. How many taps are there? Is Safari requiring you to enter your credit card number every time you make a purchase? Developers will be pushed back to IAP and Apple’s App Store profits will be safer with each additional step.
How much will the App Store be able to accept external payments?
Tim Sweeney had a dream when he launched this lawsuit: to end Apple’s control of iOS software. This didn’t happen and, as long as the appeals ruling is upheld, Apple’s control of iOS seems more solid than ever. Sweeney cannot harm Apple if developers vote with the feet and leave taking their commissions.
Epic and other big developers are particularly important to Apple. They have sufficient profits to pay 30% commission rates and generate most of the App Store’s revenues. Importantly, the injunction doesn’t limit the court to in-app payments or games. It’s not clear how many developers will be leaving Apple’s payment system. Apple may be forced to change to the new commission system if that happens.
It doesn’t seem like this is happening so far. Most developers have not responded to the request and many seem to believe that it will be difficult for them to make payments outside of Apple’s system. Developers should wait to see if the new system is worth the effort, as the changes are still months away and under appeal. It’s hard to believe that none of these people will be interested in exploring the options available after Friday’s open house.