This article is part four in a series that discusses the dynamics around APIs, integrations, and fees in the SMB world. Here are parts one, two, and three.
Before too long there will be a major legal ruling on the economics surrounding Apple’s App Store. This case will tell us if the world’s largest app store is using its monopolistic heft to extract taxes and violate the principles of market power.
Regardless of the US Supreme Court’s verdict, there are third party developers who are taking matters into their own hands.
Netflix is the highest grossing app on Apple’s App Store. This means that more App Store users create and pay for Netflix accounts through the App Store than they do for any other paid app. Here’s a list of the top-10 grossing apps if you’re interested:
- Netflix – $790.2 million
- Tencent Video – $490.0 million
- Tinder – $462.2 million
- iQiyi – $420.5 million
- Kwai (Kuaishou) – $264.5 million
- YouTube – $244.2 million
- Pandora – $225.7 million
- Youku – $192.9 million
- QQ – $159.7 million
- Hulu – $132.6 million
Apple collects a tax every time one of its App Store users signs up and pays for a third party app through the App Store. Markets, however, are incentivized to avoid taxation. Thus many app providers have turned off an App Store user’s ability to sign up and pay for their app through Apple’s App Store. In this way you can download and access the Netflix app through the App Store, but to create an account and pay you must do it directly within the Netflix app.
Netflix issued a public comment on the matter as well:
We no longer support iTunes as a method of payment for new members. Existing members who currently use iTunes as a method of payment can continue to do so. Apple is a valued partner with whom we work closely to deliver great entertainment to members around the world across a range of devices including the iPhone and Apple TV.
This is a marked change from Netflix’s prior stance, but they aren’t the only ones.
- Amazon has restricted movie and TV rentals to directly within the Amazon ecosystem.
- Spotify discontinued enrollment in its premium service from Apple’s App Store
- Epic Games eliminated payment options from Google’s Play store, which similarly charges a 30% tariff
If you’ve been paying attention, many POS companies are all too eagerly following in Apple’s footsteps. Some are worse than others, but too many are asking that their customers pay substantially more for third party solutions simply because it’s on their POS – i.e. a competitive POS with open APIs can offer the same solution for much less because they don’t impose an integration tax. We shared a table of major offenders previously.
We’d like to think there’s a growing trend towards openness and transparency but let’s assume we’re wrong; let’s assume that many POS companies – particularly the ones that have taken investor money and need to show a return – turn to integration fees to placate their investors. What then? Will developers do what they’ve been doing across Apple and Google’s app stores and find ways around paying the toll? How does that look?
Of course we’d love to see a third party developer figure out how to skirt the POS integration tax. From our perspective POS taxes are based on individualized contracts whereas Apple has more of a one-size-fits-all given the multitude of boiling pots they have to watch.
POS companies that demand a piece of the action without offering third party solution sales or support should have no ethical leg to stand on. But whoever accused POS companies of being ethical? Now that payments entities are subsuming POS, ethics will be the last trait considered.
RIP human decency.
