Apple will let some subscription-based apps bypass App Store payments, disrupting its commission-based profit

The news: Apple will let some apps prompt users to sign up for subscriptions with a link to their own websites, per CNBC. This is a sea change for the iPhone maker, which previously forbade subscription-based apps like Netflix and Spotify from letting users subscribe to their services through a website. 

  • Apple said the shift was part of a settlement with the Japan Fair Trade Commission but that it would apply the new rule globally.
  • The change affects mostly subscription-based “reader apps” that require monthly subscriptions for ebooks, music, or videos. 
  • The rule doesn’t apply to all App Store transactions—game-oriented in-app purchases still need to go through Apple’s payment system, which charges between 15% and 30% of gross sales.

How we got here: Apple and Google have been forced to loosen their duopoly’s tight grip on their developer, app, and payments ecosystems, mostly due to the looming threat of antitrust regulation in various countries as well as growing developer pushback. 

  • South Korea was the first country to pass a law ending Apple and Google’s stranglehold on their respective app stores. The ruling gives mobile app users the freedom to choose which provider they use to make in-app payments, and developers can choose how they’d like to get paid.
  • US senators introduced a bill last month designed to curb anticompetitive app store policies. The Open App Markets Act would ban companies from forcing developers to use their app store’s payment systems.
  • Apple just settled an antitrust case by letting developers choose from more app price points—though the settlement is considered a minor capitulation because it only benefits US-based developers that earn less than $1 million a year.

The bigger picture: Cracks are showing in app stores’ duopoly model that could slowly open the floodgates to alternative app payment options for developers and their customers—challenging Apple and Google’s profitable 15% to 30% commission structure.

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