Four big questions raised by the Epic vs. Apple decision
The verdict finally came on 10th September. epic vs apple, and that has left the App Store model in a precarious position. Epic wanted to do away with the system altogether, breaking off Apple’s control over software distribution on iOS — but the ruling stopped little. Instead, we’ve got a vaguely worded injunction that opens the door for developers to opt out of Apple’s commission system — or at least make it easier to use non-Apple payment methods outside of their apps.
In the immediate aftermath of the ruling, Apple pushed to cast it as a victory — and Epic was sure it had lost. It’s understandable: Until we see how Apple reacts and how the court looks at Epic’s recent appeal, it’s hard to know for sure what the injunction will actually mean. The ruling could be a significant leak in Apple’s carefully controlled ecosystem. But for that to happen, Epic and its allies will need a lot of break in their favor, both inside and outside the courtroom. There’s still plenty of places for Apple to fight, and plenty of ways for developers to bring back the little semblance of victory.
Here are four of the most important questions from those feuds, questions we’ll be looking at especially closely in the coming months.
How much freedom does this decision really give to developers?
For all the complexities of the case, the actual order issued by the court is simple. It zeroes in on a sentence in Apple’s App Store guidelines, which Apple is now forbidden from enforcing:
Apps and their metadata may not include buttons, external links or other calls-to-actions that direct customers to purchasing mechanisms other than in-app purchases.
One thing that is clear is that developers should be given some kind of permission to forward users to external payment systems. But as my boss Nilay points out here, the “button” clause is vague and could let developers make those systems look like an official alternative to Apple, even if they open Safari or another app for the actual payment.
It would take a lot of legal work from developers and a lot of developer-friendly decisions in court to implement that interpretation. On the other hand, there will be plenty of opportunities for Apple to overcome the force of the injunction. It’s hard to say how interested the courts are in defending it. But even if they aren’t, the App Store can still be a very risky place for developers using alternative payment systems.
In particular, there is a real danger that Apple will still be able to impose the so-called Apple tax on whatever new payment system is allowed. In theory, App Store commissions are levied to support the entire store, not just the payment system, and in its ruling, the judge upholds Apple’s consideration of allowing alternative payment methods, but through audits or other systems. The same 30 percent deduction is required. (My colleague Adi explored this in the seventh section of her deep dive on the ruling, under the heading “Apple may collect ‘Apple tax’ even without in-app payment fees.”) If it arose in actual legal order. What has happened, the door on alternative payment systems will close very quickly.
How will Apple change its App Store rules in response to this decision?
The other half of the equation is Apple itself, which is almost certainly going to change its App Store rules if the order stands, if only to change the anti-steering clause. The specific rule about referencing external payment systems has expired, but Apple still has broad legal authority to write its own rules for the App Store. So what new rule will the company write to replace the old one?
In particular, there are a number of ways Apple can discourage outside payments without restricting them altogether. There is the consideration of the commission rate that we have already discussed, but Apple may also place restrictions on how external payment links are presented. The company may require a specific price difference between Apple’s IAP system and any competitor’s, and it may require the system to be offered side-by-side — whatever the company thinks will pass with the court and developers. using the Apple system.
What will external payments look like on the App Store?
When both of those questions have settled the dust, developers will be left with a few options for Apple’s built-in payment system. It could be a simple button or a maze of links and forms – and a lot will ride on where external payments fall on that spectrum.
The specific numbers on this are important, as developers will balance the cost of friction against the extra money they get from bypassing Apple. On the face of it, a fortnite-style apps will get an additional 30 cents for every dollar of in-app purchases that don’t go through Apple’s system (which eats up the cost of providing the optional service). But there’s also the possibility that abandoning Apple’s walled garden will increase friction in the process, meaning fewer total dollars are being spent via an alternative path.
But how much less? If you lose four out of every ten customers by entering an external payment system, it doesn’t make sense to enforce it – but even if it’s only two, you’ll still come through. Specific UX details will make a huge difference in determining that crash rate: How big is the button? How many extra taps? Can Safari force you to enter your credit card number every time you make a new purchase? Each additional step will move developers back toward IAP, and make Apple’s App Store profits more secure.
How much of the App Store will go to external payments?
Tim Sweeney’s vision in starting this lawsuit was to break Apple’s control over the software on iOS. That didn’t happen, and while the ruling remains on appeal, Apple’s control over iOS looks more solid than ever. Under injunction rules, the only way Sweeney can hurt Apple is if the developers vote with their feet and take their commission with them.
Apple is particularly reliant on large developers like Epic, which have enough leverage to pay 30 percent commission rates and generate the bulk of the App Store’s revenue. Importantly, the court’s injunction isn’t limited to games or in-app payments, so it didn’t specify how much of the developer base would leave Apple’s payment system. If that happens, Apple may be forced to switch to abandoning the commission system for good.
That doesn’t seem to be happening yet. The response from most developers has been non-committal, and some already feel it won’t make sense for them to pay outside the Apple system. But with real changes still months away (and already under appeal), it makes sense for developers to wait and see if the new system is worth pursuing. But with so many possibilities open on Friday, it’s hard to believe that none of them would be interested in exploring their options.