Apple has agreed to let iPhone app developers email their users about cheaper ways to pay for digital subscriptions and media by circumventing the manufacturer’s billion-dollar-a-year commission system.
The grant announced Thursday night, which covers email notifications but does not allow in-app notifications, is part of a preliminary settlement of a nearly two-year court case filed on behalf of iPhone app developers in the United States. It also deals with a case raised by a federal court judge who is expected to rule soon in a separate case she brought Epic GamesPopular video game maker It is an electronic game.
Apple made the announcement in brief with reporters, insisting on anonymity to participating executives and not allowing any direct quotes.
Under Apple’s old rules, iPhone app makers were barred from emailing users with information on how to pay for services outside the app, which could exceed Apple’s 15% to 30% fee.
The franchise now opens a way for app developers to more aggressively encourage users to pay in other ways, as long as companies get consumer approval.
Apple will also create a $100 million fund to pay thousands of app developers covered in the lawsuit, amounts ranging from $250 to $30,000. Developers will gain more flexibility in setting different prices within their apps, expanding the options from around 100 to 500 options.
The compromise addresses concerns that US District Judge Yvonne Gonzalez Rogers has repeatedly raised while presiding over a high-profile Epic-Apple trial. Everyone has honestly wondered why Apple can’t let developers offer a variety of payment options within their apps, just as traditional retailers can offer a variety of different credit cards they accept in addition to cash.
Apple still doesn’t allow developers to use in-app notifications to encourage consumers to explore different payment options.
But just being able to email users to explain why they should pay out of the app is a huge leap for developers who have complained about Apple commissions as a form of price hike for years.
Richard Czeslavsky, one of the app developers who brought the lawsuit that Apple is resolving, hailed the freedom to send emails to users as a “game changer” in a statement field in an Oakland, California court. Czeslavsky, CEO of Pure Sweat Basketball, predicted that app developers “will take advantage of this change in customer communications as a way to further reduce the commissions paid to Apple.”
Apple is already overhauling its App Store fee system in response to legal pressure and increased scrutiny among lawmakers and regulators around the world, who are looking closely at whether or not the company’s tight grip on the Store is working, stifling competition and innovation.
Earlier this year, Apple slashed its in-app commissions from 30% to 15% for developers with less than $1 million in annual income, a move that covers most apps in its Store. As part of the deal announced Thursday, Apple is ensuring that low commission for small developers continues for at least another three years.
But the low commissions are not helping big app creators like Epic and Spotify, the leaders of an alliance trying to tear down Apple’s so-called walled garden that prevents outsiders from offering other options. Apple maintains that it prevents alternative stores from offering apps on its iPhone to protect the security and privacy of its customers, while its critics assert that the company is simply trying to protect the revenue stream that generates billions of dollars annually.
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