Apple In-App Purchase Policy Has Consequences

Apple's policy on in-app purchasing is having some serious negative consequences--just not for Apple. While the policy opened the door for app subscriptions, and gives Apple an edge over competitors like Amazon, smaller app developers and parents are the ones paying the price.

What is the big deal with the in-app purchases? Well, Apple wants to 'encourage' app developers to offer additional content and services through the Apple infrastructure, using your Apple ID and password. There are theoretical advantages from an operational and security point of view for trying to filter all purchases through one channel, but the real reason for the Apple policy is that Apple wants its cut.

Apple logo
Apple in-app purchase policy is angering parents and putting app developers out of business.
The policy states that purchasing done within an app must be done using the Apple system. Some apps, like the Amazon Kindle app, have gotten around this by not conducting purchases within the app--technically. Kindle purchases from within the app are redirected to the Amazon Website. So, Apple added another stipulation that if an app allows content to be purchased outside of the app, it must also provide the ability to purchase within the app using the Apple system.

Crushing The Little Guy
One app developer has already been forced out of business as a result of these policies. Amazon may have the financial resources to go head to head with Apple, but BeamIt Down Software--makers of the iFlowReader app--can't stay in business selling books at a loss.

As long as iFlowReader could redirect users to a Website for book purchases, BeamIt Down software could manage a small profit from book sales. But, selling books within the app means giving Apple a 30 percent cut, which is more than BeamIt Down gets paid from the book publisher in the first place.


Bill Shock for Parents
Parents learned the hard way that those in-app purchases add up quickly...even on "free" games. There are thousands of apps targeted at children that are available for free. Many of those free games, though, offered the ability to level up or purchase content from within the game, enabling children to rack up huge costs without parental consent.

Parents filed a class-action suit against Apple over the in-app purchase bill shock. WIth iOS 4.3, Apple tweaked the process to require the Apple iTunes password for all in-app purchases and prevent children from unknowingly spending hundreds of dollars.

Patent Lawsuits
As if the negative consequences of the in-app purchase policy aren't punishment enough in and of themselves, app developers are now being threatened with patent infringement lawsuits. A company called Lodsys claims that the in-app purchase process violates patents that it owns.

Apple has the deep pockets and legal muscle to engage in a patent battle (which explains why it is engaged in so many patent lawsuits), but tiny app developers who are just trying to follow the rules laid out by Apple can't really afford to defend themselves in patent litigation.

It is Apple's platform, and Apple gets to make the rules inside the walled garden. But, the policy around in-app purchasing seems to be having little impact so far in Apple's battle for ebook supremacy with Amazon, but is having serious repercussions affecting just about everyone else.

With this kind of fallout, developers may think twice about playing in Apple's sandbox, and Apple may find that the in-app purchase policy isn't worth it.

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