Apple required Patreon to use Apple In-App Purchase. Do you have to enable IAP too?
Hey, Nikita is here.
In Payments Weekly, I cover the latest news in the payments industry. If you’re not a subscriber, here’s what you missed this month:
What's happening
Starting November 2024 Apple is requiring Patreon to use Apple In-App Purchase for creator subscription billing. Let’s discuss what is happening in the Apple In Purchase space and how merchants should identify if they have to use IAP for their apps.
While this demand seems unexpected it is unclear why Patreon was allowed to use direct payments in the first place. Today if any Patreon users create their own iOS application with exclusive content, they will have to use IAP for subscription billing.
To resolve the case Patreon is going to offer two options to its creators. Either creators will pay an extra 30% to existing Patreon fees of 5%-12% or creators will increase the price for their customers.
Patreon did not disclose the number of subscribers from the iOS ecosystem or whether Patreon is contesting this decision with Apple. Patreon’s CEO explained the situation and guided their creators community on how to adapt to the current situation in the Youtube video.
Bigger picture*
Apple IAP rules are not always crystal clear. Online services have to use IAP for in-app currency purchases, in game items, digital content, and many more. However the rules do not define all the potential cases. In addition, Apple changes their rules from time to time.
Some read that the IAP is not required if the digital service (not digital content) is also provided outside of the iOS ecosystem.
How industry reacts to IAP
Not everyone is ready to share their revenue with Apple. For example, Netflix and Spotify do not use the IAP in their apps. Customers need to jump through the hoops (go to mobile web) to subscribe to their services.
There are some other notable cases where Apple has faced strong pushback regarding its fees from the industry.
Epic Games
"As a reminder, this whole case got started when Epic challenged Apple’s up to 30 percent fees to developers for in-app purchases through a splashy campaign where it basically ignored Apple’s App Store guidelines and put in its own mobile payment processing system in its popular game Fortnite. ... Ultimately, Gonzalez Rogers found that Epic did breach its contract with Apple with its stunt and ordered it to pay Apple 30 percent of the revenue collected through its outside payment system — about $3.5 million."
Though Apple won on most counts, Gonzalez Rogers also ordered the company to allow developers to use other purchase mechanisms besides Apple’s for in-app purchases."
37Signals (Basecamp, HEY)
Apple vs. HEY, antitrust, and monopoly June 16th, 2020
Our CEO’s take on Apple’s App Store payment policies | HEY (June 19, 2020)
Apple, HEY, and the path forward June 22, 2020
“You can no longer help the customer who’s buying your product with the following requests: Refunds, credit card changes, discounts, trial extensions, hardship exceptions, comps, partial payments, non-profit discounts, educational discounts, downtime credits, tax exceptions, etc. You can’t control any of this when you charge your customers through Apple’s platform. So now you’re forced to sell a product - with your name and reputation on it - to your customers, yet you are helpless and unable to help them if they need a hand with any of the above.”
Spotify
Spotify was one of the first companies who were unhappy with the 30% rule. Spotify created a dedicated website about their relationships with Apple.
Spotify files antitrust complaint over ‘Apple tax’ - The Verge - May 2019
Spotify, Epic, Tile, Match, and more are rallying developers against Apple’s App Store policies - The Verge September 2020
“The Coalition for App Fairness cites three main issues of contention: Apple’s 30 percent cut of any payments sold through the store, the lack of any other competitive options for app distribution on iOS, and a claim that Apple uses its control over iOS to favor its own services”
What’s next
I do not expect that Apple is going to change their policy anytime soon and we can expect other players raising the concern about 30% fees.
Other good reads this week
Klarna introduce balance and cashback new features (thepaypers)
How Adyen does AI (Adyen Medium)
Adyen confident in H2 success as multiple partnerships reap dividends (paymentexpert)
Zip’s one-click BNPL payment method integrated into Stripe (paymentexpert)
Disclaimer
*This article is not a legal or financial advice. If you need to determine whether your app needs to use IAP or not, it is good idea to find professional legal advice.