What can $83 million in legal defense fees buy? In Apple’s case, billions of dollars in annual App Store revenue that had been under threat until this week.
While the iPhone maker’s costly legal battle started by developer Epic Games technically isn’t quite over, Apple looks mighty victorious after the US Supreme Court on Tuesday refused to hear Epic’s appeal of its losses. That means up to 30 percent of app developers’ sales will continue to flow into Apple’s pockets—just as they did before Epic picked a fight in 2020.
That outcome adds to a glum picture for developers like Fortnite maker Epic, consumers, and governments from around the world that have been trying for years to loosen the restrictions Apple and Google maintain over downloading, paying for, and using apps on mobile devices. A handful of small victories in the US, Netherlands, and elsewhere have forced policy changes at Apple and Google and cost the companies some revenue. But overall Apple’s App Store and Google’s Play Store function much as they always have and retain their hold over businesses that want to reach customers on mobile devices.
The few tweaks Apple and Google have made to their app stores in response to legal and regulatory pressure have not been overwhelmingly enticing to users or developers. Anyone who wants to download or offer a mobile app is essentially stuck with the two giants’ stores—and must comply with their rules. A jury last month found Google’s mobile store to be unlawfully monopolistic but the company will likely make appeals and is operating it essentially unchanged. After this week’s Supreme Court rejection, Apple put into effect a concession to comply with Epic’s lone victory in its legal fight, but added a new fee that developers say largely wipes out the potential benefits. Apple did not respond to a request for comment.
Apple’s tweak allows developers selling apps in the US to link from their apps to purchase pages on their own websites. This practice was previously banned, locking developers into using Apple’s payments system and paying up to 30 percent of revenue to Apple. But to link out to alternative purchase options on their websites, developers must apply for permission and also offer in-app purchases through Apple’s billing system. And they have to certify that they have processes for handling billing complaints and that their payment processors meet what Apple calls “certain industry standards.” Apple then has to approve the wording used to link the alternative purchase options. Finally, when users click those links, they will encounter a full-screen warning that they are taking a risk by going into a world where Apple’s protections don’t apply.
For any consumers brave enough to keep going and make a purchase, Apple will collect up to 27 percent of the revenue, via a newly created fee that extends the much-loathed levy that previously had been placed only on in-app purchases. Developers will have to provide “periodic accounting of qualifying out-of-app purchases” and allow Apple to audit their records, though it acknowledges that “as a practical matter … collection and enforcement will be exceedingly difficult and, in many cases, impossible.”
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