The Cupertino, California-based technology giant said the
change, settling an investigation by Japan’s Fair Trade Commission, will go
into effect globally early next year for so-called reader apps spanning content
like magazines, newspapers, books, audio, music and video.
To date, Apple has forced such applications to use its
in-app purchase system, which gives Apple up to a 30% commission on downloads
and in-app subscriptions. That rule will still apply to games, the most
lucrative class of mobile apps, as well as in-app purchases.
“When it comes to in-game content purchases, which make the
bulk of revenues for the App Store, they have kept their walled garden locked
to outsiders,” said Amir Anvarzadeh, senior strategist at Asymmetric Advisors.
“Nevertheless, Apple is clearly under the spotlight” and “lower royalty fees or
handling fees in the case of in-game content purchases are inevitable”.
The announcement comes at a time of rising regulatory scrutiny
and criticism of the market dominance of Apple and Alphabet Inc’s Google on
mobile platforms. On Tuesday, a new bill passed in South Korea that’s set to
force the two leading app store operators to allow users a choice of online
payment methods. The first legislation of its kind, the bill will become law
when signed by President Moon Jae-in and similar measures are under
consideration by US lawmakers.
Apple’s historic resoluteness about maintaining its 30% cut
was relaxed in November when the company announced it would reduce its fee to
15% for app makers earning up to US$1mil a year. The latest news helps the
company achieve a settlement with Japan’s regulator, which is now closing its
investigation into the App Store. Apple has committed to improving the
transparency of its app reviews and give annual reports to the country’s FTC
for the next three years as part of the settlement.
“We have great respect for the Japan Fair Trade Commission
and appreciate the work we’ve done together, which will help developers of
reader apps make it easier for users to set up and manage their apps and
services,” Phil Schiller, who oversees Apple’s App Store, said in a statement.
Companies like Netflix Inc and Spotify Technology SA have
long complained that Apple doesn’t allow them to link to their web portals for
users to sign up for their services. Apple has previously rejected or removed
third-party applications that attempted to steer users to web-based alternative
payment methods and Netflix has simply declined to offer an in-app sign-up
option as a result.
Last month, as part of a preliminary settlement of a
class-action lawsuit with App Store developers, Apple agreed to pay out
US$100mil and to let US-based software makers advertise outside payment methods
to consumers via email. Today’s decision appears similarly incremental.
In-game spending accounts for more than half of App Store
sales – US$26bil of US$41.5bil of consumer spending in the first half of this
year, according to Sensor Tower – but is not affected by this new policy
change. Subscription apps, which are most likely to benefit from Apple’s relaxing
of rules for reader apps, accounted for less than 13% of user spending over
that period across the iOS App Store and Android Play Store.
Apple’s change won’t resolve its legal dispute with Epic
Games Inc over in-app purchases in global hit Fortnite, which alone generated
more than US$1bil (RM4.16bil) of sales through Apple’s platform in its 30
months on the App Store. Epic wants to be able to handle in-app purchases
directly, and the judge overseeing the trial between the two companies has
suggested that Apple compromise by making a change similar to the one announced
for readers apps today.
“The App Store monopoly is slowly being broken down to
enable greater competition and consumer choice and the move to enable
developers to link to external sites for user sign-ups for subscription
offerings is just another step in that process. Still, this won’t impact mobile
games, which are solely based on microtransactions within the app, and account
for about 70% of App Store spending,” said Bloomberg Intelligence analyst
Matthew Kanterman.
A spokesman for Japan’s FTC said Apple’s voluntary
improvement measures were sufficient to close its investigation. In Japan and
South Korea, where companies like Naver Corp operate large businesses around
web comics apps and payment services, the particular allowance from Apple may
prove more impactful than in other global markets.
“Because developers of reader apps do not offer in-app
digital goods and services for purchase, Apple agreed with the JFTC to let
developers of these apps share a single link to their website to help users set
up and manage their account,” Apple said in its statement. Apple is not
allowing alternative payment systems within apps themselves, saying it will
“help developers of reader apps protect users when they link them to an
external website to make purchases”. – Bloomberg
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