Arizona wants to get rid of Apple’s control over in-app payments in the App Store, but that won’t solve its problem with developers

Tim Cook

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On Wednesday, lawmakers in Arizona’s House of Representatives passed a bill that would prohibit platforms like iOS and Android from requiring developers within the state to use the platforms’ in-app payment (IAP) systems. Currently, iPhone apps are required to use Apple’s system for all purchases, which allows it to capture a commission of up to 30%.

The move comes after lawmakers in North Dakota rejected a similar bill. Both laws were backed by a group of developers known as the Coalition for App Fairness, which includes Epic Games and Spotify, among others. 

Then, on Thursday, the United Kingdom said it was opening an antitrust investigation into Apple’s control over the iOS App Store. That follows a year of discontent between Apple and the developers who make apps for its platform.

There are plenty of things that Apple could do to make the iOS App Store better, but none of these laws or investigations are going to fix the problem.

The App Store offers quite a few benefits to users and developers. 

The fact that developers have to submit their apps to the iOS App Store and follow its guidelines means you aren’t going to accidentally download something that will suddenly make your iPhone inoperable. You also don’t have to worry about downloading an app that will steal your credit card information. 

The App Store also has very real benefits for developers, most important of which is that Apple created an entire ecosystem that didn’t exist before. Sure, there were software developers before the iPhone, but what Apple did was make it easy for anyone with a good idea who was willing to learn how to code to build something and distribute it to anyone with an iPhone. And there are a lot of people with iPhones — according to the company, the number hovers around 1 billion

The developers who don’t benefit from the App Store often create poor user experiences. 

There are those companies that already had an idea or a service that they wanted to make available on the iPhone but Apple didn’t support their business model — for example, Netflix. 

People were streaming video on Netflix for years before they could do it on the go. For that matter, Netflix didn’t even have an iPhone app until 2010, despite the fact that it’d been streaming video since 2007 and Apple opened up the App Store to third-party developers in 2008. 

If you download Netflix from the App Store and you aren’t already a member, you can’t sign up for an account in the app. Instead, you’re directed to create one on a computer first before being able to log in and use the app.

netflix app store

That’s a pretty terrible experience from a user perspective. If I’m not a member, but I just went through the process of searching for an app in the App Store and downloading it to my device, there’s a pretty good chance I’d like to become a member. The fact that I can’t is because Netflix isn’t interested in giving Apple a cut of the $14 or whatever for a monthly subscription. 

Also, the fact that Netflix can’t even tell me how to become a member is because of Apple’s guidelines that prohibit such a thing. The same is true with the Spotify and Amazon Kindle apps. You can’t even purchase Kindle books from within the Amazon shopping app — you have to go to a website. 

Again, Amazon isn’t allowed to tell you that. Instead, you get this message: “This app does not support purchasing. Books purchased from Amazon are available to read in the Kindle app.”

amazon kindle

Having different laws in different states governing how the internet works is simply not reasonable, or even realistic. 

For example, Arizona’s law would also prevent Apple from forcing residents to use its own in-app payment systems, meaning any app that sells something to a resident in that state could use its own payment processing for the transaction. Essentially, Apple would have to create a separate version of the App Store for a single state. 

It’s probably not even legal to have states attempting to regulate something that’s so clearly interstate commerce, a point that’s almost certain to be brought up in the courts if the bill is signed into law by Arizona Governor Doug Ducey.  

There are things Apple could do now to make the App Store better for everyone. 

The best part is, none of them require laws or antitrust lawsuits. Apple can, and should, do all of these things immediately.

It could lower commissions on apps when it offers a competing service of its own.

In the case of services like Spotify or Netflix, Apple should lower its commission to 10% to incentivize developers to accept IAP for subscriptions. Currently, it charges 30% for the first year, and 15% each subsequent year.

Also, it should limit commission to the first year. If a customer is acquired through an app on iOS, it’s fair for Apple to get a commission, but if it offers a competing service — in this case, Apple Music or Apple TV+ — that commission shouldn’t put the competition at a disadvantage by forcing them to pay a high commission rate forever. 

In exchange for accepting in-app payment, it could allow apps to tell customers how to sign up elsewhere. 

Give the customer the choice. Most will probably simply sign up through IAP, so Apple isn’t likely to lose much here, but at least if a customer doesn’t they aren’t left wondering what to do. 

This also has the benefit of addressing antitrust accusations that Apple is putting other developers at a competitive disadvantage by forcing them to charge a higher price than Apple’s product in order to make up for the cut Apple takes from each purchase.  

Apple did launch a program for small developers that cut the commission in half. That was a good start, but it creates a weird incentive that if you’re close to exceeding $1 million in sales you might as well pull your app from the store since it would mean you pay the higher rate for future sales. 

It could allow streaming gaming services in the same way it already allows streaming music and video. 

I don’t fully buy the argument that streaming a video game is exactly the same as streaming a movie on Netflix. At the same time, I don’t buy Apple’s argument that it needs to review every single game within a service separately. 

That was the reason it gave last August when it rejected Microsoft’s Project xCloud service that would allow users to stream Xbox games for $15 per month. At the time, an Apple spokesperson told Insider’s Ben Gilbert: “Before they go on our store, all apps are reviewed against the same set of guidelines that are intended to protect customers and provide a fair and level playing field to developers.”

That makes sense, however, I think Apple can reliably count on a major company like Microsoft to make sure that its apps function the way they’re supposed to and don’t violate Apple’s guidelines. Microsoft arguably would have more at stake in terms of its reputation and would have every incentive to only include content that provides a positive experience for users. 

There’s no reason iOS users shouldn’t be able to play these games, and allowing xCloud would make the iPhone better. 

It could focus more on developer relations. 

When you look at the more recent issues facing the App Store, it isn’t hard to imagine that a lot of it could have been avoided with a little more effort put into building better developer relationships. 

For most developers, a little more transparency about the guidelines, a little more consideration of situations that don’t perfectly fit the existing guidelines, and a little more effort in communicating would go a long way. None of that’s really that hard, and it would barely cost Apple anything. 

Instead, Apple’s communication with developers sometimes seems geared more toward reminding them that they should be indebted to Apple for building a platform for them to make apps.

What happened with the Hey email service is a perfect example. Apple approved the app, only to then reject an update because someone decided it needed in-app purchases. 

Even worse was Apple’s response: 

“Thank you for being an iOS app developer. We understand that Basecamp has developed a number of apps and many subsequent versions for the App Store for many years, and that the App Store has distributed millions of these apps to iOS users. These apps do not offer in-app purchase — and, consequently, have not contributed any revenue to the App Store over the last eight years. We are happy to continue to support you in your app business and offer you the solutions to provide your services for free — so long as you follow and respect the same App Store Review Guidelines and terms that all developers must follow.”

Nothing that comes after “thank you” says anything that would make you think Apple is actually thankful for the developers behind Hey. Even though the companies eventually figured out a way to get past the standoff, it sure seems like the whole thing could have been avoided if Apple had simply taken a different approach.

Apple is the most valuable company on earth. It can afford to be generous with developers and users.

After all, it prides itself on creating a great experience for its customers. If only the App Store was designed to do the same. 

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