Apple’s App Store policies are getting weirdly aggressive, but publishers should be okay

I’ve written several times over the years about Epic Games’ legal challenge to Apple’s App Store policies.

(A dime-store summary: Apple keeps ultratight control over its App Store. It has to approve every app and every update. And if you want to sell users any sort of digital good inside an app, you have to use Apple’s in-app purchasing system, which takes a hefty cut — usually 30% — of the payment. Using an outside payment system — like letting users punch in a credit card number — is verboten. Epic Games, which makes the uber-popular Fortnite, sued Apple, arguing this monopolistic control over app distribution and monetization violates antitrust law. Apple in turn argued that it isn’t a monopoly — Android devices far outnumber iOS ones globally — and that this tight control was necessary to protect users’ privacy and digital security, among other things.)

Epic Games is not, obviously, a news publisher, but its arguments reflected more than a decade of complaints from publishers about, primarily, that 30% cut. (Their other main complaint is that using Apple’s in-app purchasing system meant the user’s financial relationship was with Apple, not The Hometown Gazette, limiting how much a publisher could know about its customers.)

It’s now more than three years after Epic’s lawsuit, and the case has now fully wriggled its way up the American judicial branch. Lower courts had ruled (mostly) in Apple’s favor, and on Tuesday, the U.S. Supreme Court — presumably too busy tearing down the modern administrative state — decided not to hear either of the appeals filed by Apple and Epic, letting the lower court rulings stand.

Epic did score one victory, though: Apple would no longer be able to prevent developers from linking to their websites from their apps — allowing users to transact their business there, outside Apple’s ecosystem. Here’s Epic CEO Tim Sweeney Tuesday morning, celebrating this small victory within their larger loss.

As of today, developers can begin exercising their court-established right to tell US customers about better prices on the web. These awful Apple-mandated confusion screens are over and done forever. pic.twitter.com/YnFWt85MRF

— Tim Sweeney (@TimSweeneyEpic) January 16, 2024

But within a few hours, that win went sour when Apple announced the details of how, exactly, it would allow this new freedom. Yes, you could put a link to your website inside your app — but now you’d have to give Apple a healthy cut of the revenue you made there. A cut of 27% — the standard 30% minus the roughly 3% that you’d pay a credit card company for running the transaction yourself.

A quick summary of glaring problems we've found so far:

1) Apple has introduced an anticompetitive new 27% tax on web purchases. Apple has never done this before, and it kills price competition. Developers can't offer digital items more cheaply on the web after paying a… pic.twitter.com/YkHuapG7xa

— Tim Sweeney (@TimSweeneyEpic) January 16, 2024

Apple’s new policy, frankly, sounds crazy to me. Declaring it deserves 27% of your revenue because there was a link in your app is a hell of a finder’s fee. (Actually, Apple says it deserves 27% of all revenue generated over the following seven days by anyone who taps that link — plus a chunk of their every subscription renewal forever. You have to send that money to Apple monthly and it reserves the right to audit your books if it thinks you’re not paying as much as Apple thinks you should.)

Think of what the rough equivalent to this sort of system would be in other media:

• Did you put a classified ad in the newspaper, trying to sell your 1978 Plymouth Gran Fury? Please hand over 27% of the eventual sales price to The Hometown Gazette.1
• Did someone find your local business by searching “dry cleaner topeka” on Google? Not only did you have to pay for that keyword-dense ad atop the search results — now you also owe Google a quarter of what you get from their every blouse and blazer.
• Did you click a link on Facebook that led you to an interesting news story? Sorry, publisher, you’ve now got to cut a check to Mark Zuckerberg for 27% of your ad revenue from that pageview. Oh, and did you find that link while visiting facebook.com in Google Chrome? Throw another 27% to the browser maker, too.

Apple doesn’t really even try to say it’s earned this 27% share — only that this is how it has chosen to monetize its IP:

But in the short term, the question of concern to news publishers is: What about us? After all, things seemed to be getting better, not worse, for publishers vis-à-vis Apple’s cut. In 2022, Apple create a carveout for what it called “reader apps,” those that are primarily an interface for consuming content already purchased elsewhere, a group that includes newspapers, magazines, and their ilk. Reader apps could apply for a weirdly totalitarian-sounding “External Link Account Entitlement” which would let them link users to the publisher’s website, where they can transact their business.

Does this new 27% policy — which hinges on the similar-sounding “External Purchase Link Entitlement” — affect the pretty-good deal publishers were able to get before? When I went looking through the docs, the reader-apps policy never explicitly says Apple won’t take a cut — and the 27% policy never explicitly says reader apps are an exception to the rule.

Apple declined to discuss this on the record, but I can confirm that the reader-apps policy that existed before last week still exists and is available to publishers. (Aside from the 27%, there are other key differences between the programs. The new “External Purchase Link Entitlement” requires that apps also offer Apple’s standard in-app purchasing system. The reader-app “External Link Account Entitlement” requires that apps not offer in-app purchasing.)

So at least for now, publishers’ iOS apps should not be affected. (Let’s be honest: If Apple somehow seized the total available app-to-web revenue available from publishers, it would not move the company’s bottom line one iota. After all, Apple has something like $162 billion in cash sitting around.)

That said, the larger idea here — a tech giant deciding that its effective tax on apps should extend its tendrils to the web — is profoundly dangerous to the larger digital news ecosystem, which still lives overwhelmingly in browser windows. In recent years, the antitrust push against Apple has benefited publishers, as the company has made low-cost improvements to what it offers its publisher developers while battling the bigger-dollar apps in court. But recent years have also shown the immense power platforms retain over news companies, and you never known when even the ones viewed as relatively benign will decide to flex its muscles.

1. Obviously this example takes place in the distant past.