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Apple’s App Store payments loss isn’t Epic enough

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The first 185-page Apple-v-Epic judgment didn’t please anybody when it arrived on Friday. Apple will be required to permit people to pay for apps and in-app purchases using third party payment services that  developers will be entitled to link to.

Epic is appealing the decision, but it’s interesting that while it sued Apple and Google over the 30% fee, it has not started litigation against Nintendo, Microsoft, or Sony — all three of which charge the same fee at their online stores.

What does the ruling mean?

Judge Yvonne Gonzalez Rogers’ ruling means that when you pay for a Spotify subscription or some in-app power up you may be given a link that lets you pay through payment systems other than Apple.

I guess developers will get to choose which payment systems to use, but I imagine Apple will still be able to insist on its payment systems being a choice. Developers will have a choice. Some will offer their apps/services at up to 30% less than the equivalent cost via the store; others will try to keep the extra change. Some will not bother offering alternative payment systems; others can’t wait to do so.

What this means in practice

What the judgement has done is set in motion a new kind of competition at the App Store, and if it happens there, it will happen elsewhere. After all, if Apple is required to open for payments competition (even a little), so logically should every other app store provider. Basically, app store payment systems just became a new competitive space, and while that’s bad for Apple’s bottom line in the short-term, it may be able to turn that challenge around.

What can Apple do?

Apple can compete. The judge noted the 70% profit margin generated by App Store sales right now, which is incredibly high and shows why Apple’s existing 30% margin should change. At the same time, Apple’s payment systems are relatively robust and some of the benefits of using them somewhat unsung. That’s going to change.

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