BY GRAHAM SPENCER
Apple’s Current IAP Policy
As the rules currently stand (and they have changed significantly from their original format), Apple takes a 30% cut of all IAPs, just as they do for regular apps.1 Apps cannot link directly to an outside store in a way that would encourage customers to circumvent paying via IAPs.2 Nor is it permitted to use a system other than IAPs to allow users to purchase content inside an app.3 But it is permitted to allow customers who have purchased content from outside of the App Store to redeem the content inside the app.4 There is no rule that prohibits IAPs for content/services from being charged at a higher price than what the content/services cost when bought from a website.
To illustrate why this current policy results in unsatisfactory outcomes, let me highlight the biggest problems I perceive, with reference to current examples that exist.
Problem 1: iOS users could be paying more than they need to, and they aren’t informed of this.
One of the ways companies are getting around Apple’s IAP rules is by selling their content or subscriptions at a higher price for IAPs, covering the 30% cut that Apple takes. This is the case for Rdio, which charges users slightly more if they purchase a subscription from inside the app via IAP.5 But many users are no doubt unaware that not only can a subscription be purchased directly from Rdio’s website, but it can be done at a discount. This issue is made worse because of the rule that prohibits apps linking to outside purchase portals, so users are kept uninformed unless they do research or stumble upon the cheaper online price.
Problem 2: To avoid Apple’s 30% cut, many content stores and subscription services don’t offer IAPs and require users to purchase directly from their website.
Because Apple’s rules allow users to redeem outside purchases inside an app, developers have often used this as a way around the 30% cut for Apple. But another rule prohibits using any other purchase system or direct linking to web stores within the app. As a result, many content stores and subscription services have “dumb” apps that can’t do anything until you’ve made a purchase outside the app.
For example, Netflix’s iOS app simply displays a login panel, and until you login to your paid account with a subscription you can’t do anything - and there isn’t a “Buy a month’s subscription” button anywhere. Why? Because they don’t want to (or can’t afford to) let Apple take a 30% cut of their revenues and because Apple says they can’t link to non-IAP purchase mechanisms. Likewise, Amazon’s Kindle app and their new ComiXology apps no longer have a ‘Store’ section: the apps are only viewers for content you have already purchased outside of the App.
Problem 3: It is very hard for a smaller company to avoid IAPs
I think this is the hardest problem to demonstrate but, long term, perhaps the most serious and damning consequence of Apple’s current rules: it stunts the development of innovative new apps and services.
Let’s just discuss for a moment a theoretical new company that delivers a subscription service with some innovative twist at razor thin margins (just like Netflix, Spotify, etc). Consequently, it is simply untenable for them to absorb Apple’s 30% cut. They could go Rdio’s route and charge extra for the convenience of purchasing through IAPs, but that could mean their new, unknown service is now perhaps priced beyond what most people would pay. Or they could go the Netflix route and only allow people to purchase subscriptions outside of the app. But the problem with this approach is that it might work for the behemoths like Netflix and Amazon, but would a small company be able to get away with it? As Beats Music found out recently, it is “very hard” to get people to sign up for a service outside of Apple’s ecosystem.