The Problem With IAP Internal App Payments(Apple V Epic) — Google, Microsoft, etc — and Third-Party Developers — Epic, Spotify, etc.
Some Context:
Epic added their own payment alongside Apple Pay. Apple removed Fortnite from the App Store because it violated the App Store Terms of Service. Apple’s policy only allows Apple Pay as the payment provider for digital purchases. There are cases where Apple makes exceptions such as retail apps for physical goods.
Why Apple?
Because it’s easier to get peoples’ attention with Apple in the headline and this makes it harder for third-party developers to compete against the platform providers' services. This issue extends across all platforms(IOS, Android, Windows, macOS, App/Software Stores on Consoles, etc).
Sure In-App payments benefit consumers from numerous perspectives such as a centralized way to manage subscriptions, etc. However, this also prevents competition — Stripe, Square, Shopify Payments, etc — in payment providers on the IOS platform that are as secure, if not more secure than Apple pay. In addition results in an increase in subscriptions and apps because this is pretty much a tax — this issue is similar to Government taxes on businesses which always end up passed on to the consumers in the form of price hikes.
Is the issue related to app store maintenance cost?
Payments do not relate to Apple’s App Store infrastructure. Rather this is a problem with Apple not allowing the third-party payment systems to keep a chunk of the profit from a service industry in which around 2019 Tim Cook announced Apple is moving to the services industry. Rather than charging per subscription to maintain servers as some people would like to argue, Apple should charge a bandwidth fee per download. Similar to AWS(Amazon Web Services) or allow a Third-Party App store to be downloaded with app installation permissions.
It leaves the smallest developers powerless.
Because larger companies are more prominent, users would expect these services from platforms(IOS, Android, macOS, Windows, etc.) therefore they have more leverage in negotiation. For Example, Amazon was able to attain a 15% cut on fees which normally would be 30% for new apps on the platform. Meanwhile smaller developers are forced to comply with the rules or be taken off the platform. Smartphones without apps are useless and apps without a platform are practically dead. In other words, SmartPhone operating systems(IOS, Android, etc.) and Third Party(Fornite, Spotify, Netflix, etc.) apps have a symbiotic relationship. They can not exist without each other and depend on each other for survival.
This is an issue of Centralization vs Decentralization.
It’s similar in many ways to the current and past arguments about the best form of economic system: Communism v. Capitalism. This in itself is self-explanatory.
Unfair Competition Against Apple’s Services.
Apple offers a variety of services ranging from streaming music to movies. New developers have to pay a 30% cut to Apple vs Apple’s internal apps being funded by Apple themself.
How are companies like Spotify, Netlify, etc handling this unfair competitive advantage against Apple's services?
They completely disable IAP and require users to pay for the service upfront through the web resulting in a worse user experience and increased friction to convert leads/potential clients to customers.
This issue also prevents developers from integrating a variety of payment solutions enabling competitive pricing throughout the entire payment processor industry — Apple Pay, Stripe, Square, Shopify Payments, etc.
PS: If you are Spotify, Netlify, etc., and are interested in seeing an interactive website with visualizations developed for this article, hit me up: nzrbeats@gmail.com
