Four big questions raised by the Epic v. Apple ruling

Four big questions raised by the Epic v. Apple ruling

On September 10th, a verdict finally arrived in Epic v. Apple, and it has left the App Store model in a precarious state. Epic wanted to do away with the system entirely, breaking Apple’s control over software distribution on iOS — but the ruling stopped well short of that. Instead, we got an ambiguously worded injunction that seems to open the door to developers skirting Apple’s commission system — or at least making it easier to use non-Apple payment methods outside their apps.

In the immediate aftermath of the ruling, Apple pushed to cast it as a victory — and Epic seemed sure it had lost. It’s understandable: until we see how Apple reacts and how the court looks on Epic’s recent appeal, it’s hard to know for sure what the injunction will actually mean. The ruling could be a significant leak in Apple’s carefully controlled ecosystem. But for that to happen, Epic and its allies will need a lot to break in their favor, both inside the courtroom and out. There are still lots of places for Apple to fight, and lots of ways to pare back developers’ small glimmer of a victory.

Here are the four most important questions from those fights, the questions we’ll be watching particularly closely in the months to come.

How much freedom does this ruling actually give developers?

For all the complexities of the case, the actual order issued by the court is simple. It zeroes in on a single sentence in Apple’s App Store guidelines, which Apple is now forbidden from enforcing:

Apps and their metadata may not include buttons, external links, or other calls to action that direct customers to purchasing mechanisms other than in-app purchase.

The one thing that’s clear is that developers have to be allowed some way to forward users to outside payment systems. But as my boss Nilay points out here, the “buttons” clause is ambiguous and could let developers make those systems look a lot like Apple’s official option, even if they open Safari or another app for the actual payments.

Enforcing that interpretation will take a lot of legal work from developers and a lot of developer-friendly rulings in court. From the other side, there will be lots of opportunities for Apple to chip away at the injunction’s force. It’s hard to say how interested courts will be in defending it. But if they aren’t, the App Store could still be a very risky place for developers using alternate payment systems.

In particular, there’s a real threat that Apple will still be able to impose the so-called Apple tax on whatever new payment system is allowed. In theory, the App Store’s commissions are levied to support the entire store, not just the payment system, and in her ruling, the judge considers the idea of Apple allowing alternate payment methods but requiring the same 30 percent cut via audits or other systems. (My colleague Adi explores this in the seventh section of her deep dive on the ruling, under the heading “Apple could collect an ‘Apple Tax’ even without in-app payment charges.”) If that’s borne out in an actual legal order, the door would slam shut on alternate payment systems pretty quickly.

How will Apple change its App Store rules in response to this ruling?

The other half of the equation is Apple itself, which is almost certainly going to change its App Store rules if the order stands, if only to change the anti-steering clause. The specific rule about referring to outside payment systems is out, but Apple still has broad legal authority to write its own rules for the App Store. So what new rule will the company write to replace the old one?

In particular, there are lots of ways Apple could discourage outside payments without banning them entirely. There’s the commission rate idea we’ve already discussed, but Apple could also place restrictions on how outside payment links are presented. The company could require specific price differentials between Apple’s IAP system and any competitors, and it could require the systems to be presented side by side — whatever the company thinks will pass muster with the court and keep developers using the Apple system.

What will external payments look like on the App Store?

When the dust has settled on both those questions, developers will be left with some alternatives to Apple’s built-in payment system. It could be a simple button or a maze of links and forms — and a lot will be riding on where external payments land on that spectrum.

The specific numbers on this are important, since developers will be balancing the cost of friction against the extra money they get from sidestepping Apple. On the face of it, a Fortnite-style app will get an extra 30 cents for every dollar of in-app purchases that don’t go through Apple’s system (minus whatever fees the cost of providing the alternative service eats up). But it also seems likely that leaving Apple’s walled garden will add friction to the process, which means there will be fewer overall dollars being spent through the alternate path.

But how many fewer? If you lose four out of every ten customers by kicking to an outside payment system, then there’s no point putting it in place — but if it’s only two, you’ll still come out ahead. The specific UX details will make an enormous difference in determining that attrition rate: How large is the button? How many extra taps? Can Safari force you to enter in your credit card number each time you make a new purchase? Each extra step will nudge developers back toward IAP, and make Apple’s App Store profits that much safer.

How much of the App Store will move to external payments?

Tim Sweeney’s dream in launching this lawsuit was to break Apple’s control over software on iOS. That didn’t happen, and as long as the ruling holds up on appeal, Apple’s control over iOS looks more solid than ever. Under the rules of the injunction, the only way Sweeney can hurt Apple is if developers vote with their feet and leave, taking their commissions with them.

Apple is particularly dependent on big developers like Epic, which have enough profits to pay 30 percent commission rates and generate the bulk of the App Store’s revenue. Crucially, the court’s injunction isn’t limited to games or in-app payments, so there’s no telling how much of the developer base will leave Apple’s payment system. If that happens, Apple could be forced to switch to give up the commission system for good.

So far, it doesn’t look like that’s happening. The response from most developers has been noncommittal, and some already seem to think it won’t make sense for them to pursue payments outside the Apple system. But with the actual changes still months away (and already under appeal), it makes sense for developers to wait and see whether the new system is worth pursuing. But after the many possibilities opened up on Friday, it seems hard to believe none of them will be interested in exploring their options.

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