In a win for indie hackers and game makers, a federal court ruled that Apple can no longer prevent App Store developers from directing users to other payment systems, allowing them to circumvent Apple’s 30 percent cut.
The background: Fortnite creator Epic Games sued Apple in August of 2020, accusing the world's most valuable company of being a monopoly and for charging exorbitant fees on game makers via its App Store.
The situation: Apple charges Epic, and all other game developers, a 30 percent fee on all in-app payments. In tandem with filing its lawsuit, Epic taunted Apple by offering users the option to purchase virtual currency within the Fortnite app, which resulted in a ban from the App Store.
What’s happening: In Epic Games v. Apple, U.S. District Judge Yvonne Gonzalez Rogers ruled that Apple isn’t a monopoly. She did order, however, that Apple must allow App Store developers to provide users other payment systems. That enables game makers to bypass Apple’s 30 percent fee and to keep most, if not all, proceeds from their users’ in-app purchases. Starting on Dec. 9, Apple must allow apps to offer alternative payment options unless the ruling is halted by a higher court.
“[Apple is] permanently restrained and enjoined from prohibiting developers from including in their apps and their metadata buttons, external links, or other calls to action that direct customers to purchasing mechanisms, in addition to In-App Purchasing and communicating with customers through points of contact obtained voluntarily from customers through account registration within the app.” —The 185-page Epic v. Apple ruling
Taunt too far: Epic must pay back Apple the $3.5 million it collected from users’ in-app purchases when the video game and software developer offered its alternative payment system in 2020. It’s a tiny price to pay to win a larger battle — especially considering that Epic Games generated about $5.1 billion in 2020.
What it means for IHers: Indie game developers have a lot to smile about with this court ruling. While there’s no guarantee that gamers will opt for alternative purchasing methods, developers can provide all types of alternative payment options to users — such as Alipay, Klarna, or PaySafeCard — that eliminate Apple’s steep commission. Developers can create more attractive and accessible purchasing avenues, offering a better experience and likely more revenue.
A bite out of Apple: Gaming represents a large portion of Apple’s App Store revenue — 70 percent to be exact. Entertainment apps are a closet second, generating $3.9 billion in 2020. Apple raked in about $15 billion from its App Store in 2020, which was more than 20 percent of the company’s total profit for the year, per The Information.
Boon for crypto wallets? The ruling means that any iOS app can link to an external digital wallet. That could benefit crypto wallets like Exodus and Mycelium, or prompt other finance businesses to create in-game wallets, The Information reports.
What’s next: Epic Games is appealing the court’s ruling as the game maker still wants to prove the Apple is a monopoly. Apple is considering appealing the ruling as well — specifically the ruling allowing game makers to offer alternative payment options — but has yet to do so.
Apple's still Apple: Regardless, Apple has the broad legal authority to change its App Store rules, which means the suit may not be the complete victory some hope it to be. As The Verge points out, Apple has many options to discourage outside payments without restricting them outright. That could include "requiring specific price differentials between Apple’s IAP system and any competitors," per The Verge.
Anti-trust looms: Apple isn’t out of the monopolistic woods yet. Congress is eager to curb Apple, Facebook, Google and Amazon’s power via new antitrust regulations. In early 2021, U.S. Sen. Amy Klobuchar introduced the Competition and Antitrust Law Enforcement Reform Act, which would make it more difficult for big tech to complete mergers and acquisitions, as well as beef up antitrust enforcement.
What do you think about this court ruling? Are you an App Store developer that plans to offer alternative payment options? Share your experience below.