Apple to let media apps avoid 30% fee from next year after global scrutiny

Companies like Netflix and Spotify Technology have long complained that Apple doesn't allow them to link to their web portals for users to sign up for their services

Apple Inc. will allow developers of some apps to link from their software to external websites for payments by users, addressing a longstanding App Store complaint and settling an investigation by Japan’s Fair Trade Commission.
 

The Cupertino, California-based technology giant said the change will go into effect globally early next year for so-called reader apps spanning 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 per cent commission on downloads and in-app subscriptions. By pointing users to the web to sign up, creators of those apps can sidestep that fee.

The announcement comes as part of a settlement with Japan’s regulator, which is now closing its investigation into the App Store. “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.

Games, which are the most lucrative class of mobile apps, are not affected by this change and Apple’s decision won’t resolve its legal dispute with Epic Games Inc. over in-app purchases in global hit Fortnite. The judge overseeing the trial between Apple and Epic has suggested that Apple make a change similar to this one.

What Bloomberg Intelligence Says
 

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 per centf of App Store spending.

-- Matthew Kanterman, analyst

Lawmakers and regulators worldwide have been increasingly critical of the market dominance of Apple and Alphabet Inc.’s Google on mobile platforms. South Korea’s National Assembly passed a bill Tuesday, the first of its kind, that would mandate that app store operators allow users a choice of online payment methods. The bill will become law as soon as it’s signed by President Moon Jae-in, possibly as early as this month.

“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 the 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.”

Last month, as part of a preliminary settlement of a class-action lawsuit with US App Store developers, Apple agreed to pay out $100 million and loosened its rules to let software makers advertise outside payment methods to consumers via email. Many developers have been asking for these changes for years and regulators beyond Japan and South Korea are looking to step up enforcement as well.