Unpacking Apple’s recent App Store policy changes

Apple’s policies related to in-app monetization — the 30% platform fee it applies to in-app purchases, the forced use of iTunes Connect as an in-app payments processor — have lived on borrowed time at least since Epic goaded Apple into removing Fortnite from the App Store last August. Epic sued Apple over that, and a judgment in that suit is forthcoming, but the treasure trove of emails and internal company memos that the suit made public presented Apple as so avaricious, so hostile to developers, and so intractable that the outcome of the lawsuit is mostly incidental. Apple will almost certainly have to give up exclusive control of App Store payments at some point in the mid-term future.

And over the past two weeks, three developments have transpired that move the App Store closer to that eventuality. In chronological order, those are:

Apple agrees to allow developers to send outside-of-app communications to users about alternative payment options

On August 26th, Apple announced that it had settled a class-action lawsuit brought against it by a group of developers that claimed that Apple maintains a monopoly on app distribution and monetization on iOS. As part of the settlement, which also includes a $100MM payout to affected parties, Apple agrees to allow developers to communicate with users — through outside-of-app channels — about the existence of alternative payment methods using contact details gleaned from usage of the app.

This was previously not possible, although many developers did it anyway. Now, through official App Store policy, a developer can collect contact information (eg. email address) from a user from within its app and then contact that user via those contact details to inform them of a payment option that exists outside of the App Store.

The magnitude of the impact of this change was disputed within the developer community after its announcement: this change in policy doesn’t allow for alternative payment methods within the app, and the communication with the user must likewise take place outside of the app. I believe that this was a meaningful change — despite the fact that many apps were already doing this in a breach of App Store guidelines — because it takes the practice out of the shadows and will ultimately entice games developers to try it.

South Korea’s National Assembly passes a bill requiring Google and Apple to allow alternative payments systems in their app stores

On August 31st, South Korea’s National Assembly passed a bill amending the country’s Telecommunications Business Act that forces large “app market operators” to allow for alternative payments systems to be used on their platforms for South Korean consumers. As Ben Thompson points out, this bill was aimed specifically at Google and its policies on Android (according to Thompson, the bill’s title translates to Google’s Abuse of Power Act), but nonetheless it impacts Apple and its policies governing the App Store.

South Korea is likely not a strategically critical market for Apple (it might be more meaningful to Google given that Samsung is headquartered in the country), and so from a commercial perspective this regulatory change will probably have little impact. But this requirement is symbolically important and surely portends similar nation-level changes to come.

Apple agrees to allow “Reader Apps” to link to external account maintenance interfaces, including payments

On September 1st, Apple announced that it has reached a settlement with Japan’s Fair Trade Commission — which had been investigating Apple under the auspices of the country’s “Antimonopoly Act” — which includes allowing “reader apps” to link to account management interfaces, including for making payment.

The “reader app rule” had previously (and infamously) allowed apps that provide access to previously-purchased content (eg. Netflix) to monetize outside of the App Store, but those apps were prohibited from linking to proprietary payments or account management interfaces from within the app. This change to App Store policy allows apps to do just that, and it applies globally and not exclusively to the Japanese market.

None of these cases or developments, in isolation, is Earth-shattering or transformative. But taken together, they point to a stacked batch of dominos that is in the midst of collapsing. A suit was brought against Apple to the Competition Commission of India recently that alleges that Apple’s App Store monetization policies are anti-competitive. And in late April, the European Commission issued anti-trust charges against Apple, finding that Apple’s App Store policies contravene EU competition law following a complaint by Spotify in 2019.

In aggregate, and especially given the speed with which they are taking place, these developments point to a period of deep platform reform that ends with alternative payment methods being universally permitted within the App Store — and possibly for the existence of alternative app stores. I’ve argued that this won’t materially change the competitive landscape on mobile, but it’s nonetheless important.