How iPhone Apps Have Evolved with the App Store’s Recent Dominance

The landscape of iPhone apps has evolved recently. The Kindle app now enables users to purchase books directly. Spotify is offering a free trial for users, and Patreon is adjusting its subscription fees, leading to higher costs for creators.

This shift reflects the impact of recent court rulings on the iPhone shopping experience. A federal judge ruled that Apple must allow apps to provide promotions and accept payments directly, facilitating features like direct book purchases from the website. The ruling has the potential to lower consumer prices by circumventing the 30% fees Apple charges on app sales.

For over ten years, Apple mandated that apps use its payment systems and collect commissions on sales.

Everything is now subject to change. Here’s why:

What did the judge rule?

Judge Yvonne Gonzalez Rogers, who became involved in the case following Epic Games’ lawsuit against Apple in 2020, ruled that Apple can no longer take commissions from sales linked through the app. She also stated that developers cannot be hindered by warning screens that restrict the creation of buttons and links for users to pay directly for products and services.

How will the iPhone app be changed?

For years, Kindle avoided selling books within the app to escape Apple’s 30% commission. It has now introduced a “Get Book” button that directs users to its website for purchases. Likewise, Apple has previously blocked Spotify from offering free trials, but now Spotify includes a button for a three-month trial in the app.

Other applications are now able to feature links for direct purchases from online stores, eliminating the need to pay Apple’s 30% fees. This means apps can provide lower prices and potentially reduce monthly subscriptions to $7.

Does this cost Apple?

Morgan Stanley estimates that Apple generates $11 billion annually from app sales in the U.S. While it won’t lose all of that revenue, $2 billion is currently considered at risk.

How much Apple stands to lose motivates changes in user behavior. The decade-old process for purchasing software and services via apps is not only well-known but also convenient. Users trust Apple with their payment information, and the company simplifies subscription cancellations, centralizing the experience. Many users may be hesitant to leave the app store for purchases, influencing apps to retain the existing system.

What does this mean for other parts of the world?

As Apple is required to permit apps to handle payments directly without levying a commission, similar expectations are emerging in the U.S. European, Japanese, and South Korean regulators, whom Apple is appealing to for leniency regarding the App Store, would likely oppose their developers and citizens facing higher costs than Americans.

Can Apple roll back changes?

Apple has announced plans to appeal the ruling, but overturning the decision may prove challenging. In 2021, the judge issued a non-normative ruling. Apple circumvented previous regulations by implementing a 27% commission on app sales. Mark A. Lemley, a Stanford antitrust professor, mentioned that the U.S. Court of Appeals for the Ninth Circuit will likely uphold the judge’s initial ruling from 2021, suggesting that “they have to take their licks and let it happen.”