BERKELEY, Calif. (AP) — Apple has agreed to let iPhone app developers email their users about cheaper ways to pay for digital subscriptions and media by circumventing a commission system that generates billions of dollars annually for the iPhone maker. The concession announced late Thursday, which covers emailed notifications but does not allow in-app notifications, is part of a preliminary settlement of a nearly 2-year-old lawsuit filed on behalf of iPhone app developers in the U.S. It also addresses an issue raised by a federal court judge expected to soon rule on a separate case brought by Epic Games, maker of the popular video game Fortnite.
App developers will get more flexibility to set different prices within their apps, expanding the options from about 100 to 500 choices. Apple also will set up a $100 million fund that will pay thousands of app developers covered in the lawsuit,, ranging from $250 to $30,000. Under long-standing Apple rules, makers of iPhone apps were forbidden to email users with information on how to pay for services outside the app, which would circumvent Apple commissions of 15% to 30%. The concession now allows app developers to be more aggressive about encouraging their users to pay in other ways, so long as they get consumer consent.
The compromise also addresses a concern that U.S. District Judge Yvonne Gonzalez Rogers repeatedly raised while presiding over the high-profile Epic-Apple trial. She openly wondered why Apple cocouldn’tllow developers to display a range of payment options within their apps, much like brick-and-mortar retailers can show a range of different credit cards they accept in addition to cash. Apple still isisn’tllowing developers to use in-app notifications to prod consumers to explore other payment options. But just emailing users to explain why they should pay outside the app is a breakthrough for developers who have complained about ApApple’sommissions as a form of price gouging for years.
Richard Czeslawski, one of the app developers that filed the lawsuit Apple is settling, hailed the freedom to email users as a “g “me changer”” n a declaration filed with the court in Oakland, California. App developers “w “ll tall advantage of this change in customer communicatioay to reduce further the commissions paid to Apple,'”‘” redicted Czeslawski, CEO of Pure Sweat Basketball.
Apple has already been tinkering with its app store commission system in response to legal pressure and mounting scrutiny among lawmakers and regulators worldwide, taking a more complex look at whether the company’s ironclad control of the store is stifling competition and innovation. Earlier this year, Apple lowered its in-app commissions from 30% to 15% for developers with less than $1 million in annual revenue — a move covering most of the apps in its store. As part of the settlement announced Thursday, Apple is guaranteeing the lower commission for small developers will be extended for at least three more years.
But the lower commissions dodon’telp the largest app makers like Epic and Spotify, the leaders in a coalition trying to topple ApApple’so-called walled garden that prevents outsiders from offering other options. Apple maintains it prevents alternative stores from offering apps on its iPhone to protect iwn cucustomers’ecurity and privacy. At the same time, its critics contend the company is simply trying to save a cash cow that generates billions of dollars in profit annually. Those tensions are likely to come to a boil when Gonzalez Rogers issues her ruling in the Epic case. Gonzalez Rogers will also approve or disapprove the proposed settlement announced Thursday. A hearing on that is scheduled for Oct. 12.
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