At a very high level, Apple wants to be the sole payment processor within its App Store for two reasons — trust and revenue. The company wants its customers to feel confident buying and subscribing to digital goods while getting a piece of the revenue for bringing those customers to the makers of those goods. Allowing third party payment processors in the App Store undermines both. Apple obviously wouldn’t get a share of the revenue, but it also wouldn’t be able to prevent abusive practices with those payment processors. For example, cancelling a New York Times subscription purchased through Apple merely involves clicking a button, but doing so with subscription purchased from the Times directly requires chatting with a customer care advocate1. Given the shenanigans so-called reputable companies pull with both subscription pricing and retention, it’s not hard to imagine the levels of abuse some no-name developer could do with a few free-to-play games.
The problem is maintaining that high level of trust is becoming increasingly untenable while Apple inarguably profits by being the sole payment processor for every transaction on its store. Even if they manage to prevail in the civil courts, there is no argument that will convince the court of public opinion (let alone regulators) that Apple isn’t abusing it’s position. Apple has to change, but how?
As a customer, I want it both ways. I want developers to have more choices when it comes to getting paid and I want the power to seamlessly stop paying that developer at any point. I want the New York Times to be able to directly sell me a year long subscription for a dollar, but I also want to cancel that subscription without any hassle when that promotional price ends.
Gruber suggested on The Talk Show that Apple should offer every app developer what he accurately calls the “Netflix rule” wherein some media apps like Netflix, Amazon, and Spotify are allowed to sell subscriptions outside the App Store.
Just give everybody the Netflix option, and make a very clear distinction that if you do commerce for digital content, and you do it in the app then you have to pay Apple their cut… if you don’t want to use [Apple’s in-app purchasing], you have to it outside the app and so no web view in the app, you have to go to website and do it there…
I absolutely agree that any developer who only needs the App Store for vetting and distribution should be able to bring their own customers and while I love the simplicity of that paradigm, I am not convinced that should be the only solution. Sending users to effectively go it alone on some web page whenever its maker wants to avoid paying Apple feels un-Apple-like. It obviously doesn’t help Apple revenue-wise, but it also doesn’t help customers trust the App Store. I think Apple can do better.
Idea 1: Payment Processor Entitlements and APIs
Let developers use different payment processors, but with the caveat that they have to use and get approval for Apple’s first party APIs to do so. Forcing transactions through an API would let Apple and its users decide which apps have permission to use non-Apple payment processors and perhaps more importantly, control over subscriptions. This would not only be for giants like Amazon, Netflix, and Epic, but could also work with independent payment processors like Stripe who would in turn be available to smaller developers. Furthermore, I think it’s possible to write clear guidelines around the use of payment processors (unlike, say, not using notifications for ads.)
The way I am thinking about it, using a non-Apple payment processor would involve two entitlements2. One to be a payment processor and another to use it. Two entitlements would allow Apple to stop 3rd Party payments from a single abusive app or from any app using an a abusive payment processor. Furthermore, revoking this entitlement wouldn’t mean having to remove an offending app from customers phones. People would still get to play their games and keep their in-app purchases already made through the third party, but new purchases would either be impossible or go through Apple until the entitlement was reinstated. I also think it will be much easier for Apple to win the court of public opinion if/when an app or payment processor demands more control over billing.
Idea 2: Apple Pay
The one downside for Apple with the above is that allowing other payment processors in the App Store has no services revenue. Right now, Apple gets transaction-based revenue through one of two ways: Their digital stores and Apple Pay. Subscriptions are currently managed through those stores, but what if they could also be managed via Apple Pay? Apple’s story could be as simple as “this is the level of service and respect you will get whenever you use Apple”. This idea is a bit more nebulous, and I think trickier. For example, how could Apple unilaterally cancel subscription at the behest of a customer without a seller crying foul? That said, I can’t help but feel that’s a solvable problem for a 2 trillion dollar company. And while the percentage Apple would get from credit card transaction would be much less than 30%, it is a percentage they could get from all purchases made, not just digital ones.
Apple obviously wants the App Store to remain both a brand that customers trust while being a source of revenue, but it may soon have to choose with those two priorities increasingly coming to head. These ideas are about giving up on revenue to double down on trust. Giving up revenue may seem silly, but I would argue it’s less risky. Losing revenue is unlikely to also lose trust. Apple is already losing trust by doggedly pursuing revenue, and if things keep going the way they’re going, they might lose the revenue too.