Apple vs Epic: What's the Impact of the Court Ruling on In-App Payment System?

Apple was forced to loosen grip on its App Store payment system, but does the ruling bring big changes?

Apple vs Epic: What's the Impact of the Court Ruling on In-App Payment System?
  • App makers will be able to avoid giving Apple commission
  • Apple avoided being branded an illegal monopoly in the case
  • Apple requires developers to adhere to its rules for what apps can do

Apple was forced to loosen the grip it holds on its App Store payment system, after US judge ruled Friday in a closely watched battle with Fortnite maker Epic Games.

Though app makers will be able to take steps to skirt the up to 30 percent commission Apple takes on sales, the tech giant avoided being branded an illegal monopoly in the case.

Here are some key questions on the App Store and the impact of the ruling:

How does the App Store work? 

The App Store acts as the lone gateway for mobile applications of any kind onto iPhones or other Apple devices.

Apple requires developers to adhere to its rules for what apps can or can't do, and makes them use the App Store payment system for all transactions there.

Apple takes a commission of up to 30 percent of app purchases or transactions, contending it is a fair fee for providing a safe, global platform for developers to hawk their creations.

Apple maintains that 85 percent of the approximately 1.8 million apps at the digital shop pay nothing to the Silicon Valley-based tech giant.

What was the ruling? 

The ruling by US District Court Judge Yvonne Gonzalez-Rogers said that Apple's control of the App Store did not amount to a monopoly, but that it must let developers include links to other online venues for buying content or services.

App makers will be able to provide links that users can click on to take them to another website to buy content or otherwise interact.

Apple can still require its payment system be used for in-app purchases, meaning it should still get its share of transactions such as buying virtual gear in a game or a subscription.

Gonzalez Rogers wrote that Apple violated California's laws against unfair competition but that it was not "an anti-trust monopolist... for mobile gaming transactions."

Big change? 

The biggest change lovers of Apple mobile gadgets might notice is that apps should start showcasing links enticing them to leave the App Store to spend money.

Apple representatives called the ruling a validation of the App Store business model.

The judge did not order Apple to let Fortnite back in the App Store, and studio's CEO Tim Sweeney tweeted the game would only return "when and where Epic can offer in-app payment in fair competition with Apple."

Bite out of Apple's revenue? 

It will be difficult to estimate what sort of bite the ruling will take from the company's income.

Most of the offerings at the App Store are created by small developers who haven't built their own payment systems the way Epic Games runs its own online shop, noted analyst Carolina Milanesi.

Small developers likely see benefits to using Apple's payment system and provided perks, such as promoting apps or handling refunds, the analyst reasoned.

App users might also feel more comfortable trusting transactions on Apple's platform rather than entering credit card or other information in on third-party websites.

"How many developers can do something else when it comes to payment systems and how many customers are interested in using something else?" Milanesi asked.

"I don't think this ruling is a problem for Apple from a revenue perspective."

And, Apple may be planning to more than offset any lost revenue with its own advertising business, according to the analyst.

This week on Orbital, the Gadgets 360 podcast, we discuss iPhone 13 leaks and what we expect from the Apple event. Orbital is available on Apple Podcasts, Google Podcasts, Spotify, Amazon Music and wherever you get your podcasts.
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