Today’s Cache | Is Apple the Zacchaeus of our times?

Apple’s updated App Store policy only tightens its grip over the marketplace it runs

Updated - October 27, 2022 09:16 am IST

Published - October 26, 2022 03:50 pm IST

Apple’s updated App Store policy only tightens its grip over the marketplace it runs

Apple’s updated App Store policy only tightens its grip over the marketplace it runs | Photo Credit: Reuters

(This article is part of Today’s Cache, The Hindu’s newsletter on emerging themes at the intersection of technology, innovation and policy. To get it in your inbox, subscribe here.)

Zacchaeus is an anti-hero in one of the short portions in the Holy Bible. He is depicted as an evil tax collector based in the ancient town of Jericho. People disliked him as he grew wealthy from collecting a large amount of taxes from them.

Apple, in recent times, has begun to gain a poor reputation, similar to Zacchaeus, for its notorious App Store “tax system”. The infamous 30% cut it takes from apps when users make in-app purchase has been a thorn in the flesh for app developers.

At the 2018 developer conference, CEO Tim Cook told the audience that the company had over 20 million registered third-party developers building apps for smartphone maker. He further claimed that developers earned more $100 billion through the App Store. That translates to roughly $14 billion as commission in Apple’s coffers, just $4 billion short of the company’s iPad sales that same year.  

Mobile applications that sell value-added services for a fee to their patrons on iPhones are mandated by the Silicon Valley company to enable transactions via its own payment system. And in that process, Apple takes a cut in the range of 15-30%. Developers earning less than a million dollar in sales annually pay 15% commission. 

Apple claims the commission it takes from these transactions helps it build tools for developers, control fraud on the platform and provide security for users. In 2020 alone, the company says, it prevented about three million cards from being used to purchase goods and services.

In a way it does make sense for Apple to charge a commission for adding several apps on its marketplace, similar to how supermarkets charge brands for stocking their products on their shelves. But the challenge here is the precise value that Apple should charge. Several developers note that the iPhone maker charges an exorbitant price for the little value it provides them.

Epic Games, the maker of Fornite, took Apple to court. In September 2021, U.S. district Judge Yvonne Gonzalez Rogers largely ruled in Apple’s favour after a weeks-long trial. But Rogers expressed concern that developers were being prevented from communicating with iPhone users about alternative prices.

Antitrust regulators in Europe and in Asia have taken steps to pressure Apple to let users make payments externally and to cut the rate it charges for in-app purchase. In Netherlands, Apple has agreed to cut its commission by three percentage points for dating apps and allow users to make payment via non-Apple system. A similar concession was worked out in South Korea where the company agreed to cut the commission by four percentage points for any in-app purchase made outside Apple’s payment system. 

Now, Apple is looking to move into a nascent zone, the Non-Fungible Token (NFTs), with its updated App Store policy. In its guidelines published on Monday, the company says that apps can sell related content using the App Store’s in-app purchase system, but they must not direct customers to external purchasing options other than in-app purchase mechanism.

On NFTs, in essence, what Apple says is, it will allow sale on its platform provided it gets a 30% cut. Apart from NFTs, Apple has also tightened its grip on digital advertising. Digital purchases for content that is consumed in an app, including buying advertisements to display in the same app, and sale of “boosts” for posts in a social media app, must be done via its in-app purchase mechanism, according to the latest App Store guidelines.

That means, purchase of social media promotion and sale of NFTs on iPhones can’t be done without greasing Apple’s hand with a 30% cut.

Apple is starting to look more like Zacchaeus as it maintains a strong hold over both the hardware and the software of the devices it sells. At least Zacchaeus had a change of heart after meeting the Messiah and gave his fortune away. In Apple’s case, the company continues to remain tight-fisted. The result is the extra dollars iPhone users pay for services that they would have received at a lesser price.

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