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Tech

Apple to loosen payment rules for Netflix, Spotify in antitrust concession

By
Theo Wayt
Published Sep. 2, 2021
Updated Sep. 2, 2021, 2:09 p.m. ET

Apple is loosening the grip of its lucrative and controversial payment policy that’s at the center of the company’s battles with app developers and antitrust regulators around the world. 

The iPhone maker said late Wednesday that it would let some apps including Netflix and Spotify link to their own websites for user payments, allowing them to sign up new users on Apple devices without giving the tech giant its typical 30 percent cut. 

The change was made in exchange for a Japanese regulator closing a five-year antitrust investigation into the company and is set to take effect in 2022. The Japan Fair Trade Commission confirmed the agreement in a statement early Thursday. 

The slight concession applies only to so-called reader apps like Netflix and Spotify. In a reader app, a user must go to the app maker’s website to buy a subscription — one can’t be bought on the app itself.

The concession therefore doesn’t cover apps that feature in-app purchases or subscriptions, such as the dating app Tinder or the game Fortnite, which is at the center of a closely watched legal battle between developer Epic Games and Apple over app store fees.

Netflix and Spotify, as “reader” apps, currently do not allow users to sign up for subscriptions within their apps and do not include links for users to sign up on their own websites. This is because Apple currently forbids app developers from allowing users to use alternative payment systems within their apps or from directing them to outside websites where they can use non-Apple payment systems. 

The Japan Fair Trade Commission is closing a five-year investigation into Apple.
The Japan Fair Trade Commission is closing a five-year investigation into Apple. Alamy Stock Photo

These ironclad rules helped Apple take in a reported $53.8 billion in services revenue in 2020 — a figure that includes payment fees and made up 20 percent of the company’s total revenue that year. The rules have also drawn the ire of app developers and antitrust regulators, who argue the company is abusing its monopoly power to take a disproportionate amount of money from developers. 

In an apparent jab at Apple, Netflix’s iPhone app currently tells users who download the app without having a Netflix subscription, “You can’t sign up for Netflix in the app. We know it’s a hassle.” 

Spotify CEO Daniel Ek said the move from Apple was a “step in the right direction,” but didn’t solve the problem. “Our goal is to restore competition once and for all,” he said. Netflix didn’t comment for this story.

Spotify and Netflix apps
In an apparent jab at Apple, Netflix’s iPhone app currently tells users who download the app without having a Netflix subscription, “You can’t sign up for Netflix in the app. We know it’s a hassle.” 

The rule change Apple announced Wednesday does not resolve all of the issues Spotify has with Apple, a source familiar with the company told The Post. 

It also does not resolve the complaints made by non-reader app developers like Epic Games, whose CEO Tim Sweeney took to Twitter Wednesday to accuse Apple of taking a “divide-and-conquer” approach by changing the rules for only a small category of apps.

Apple’s control over its payment system took a major blow on Tuesday when the South Korean parliament passed a law that will force Apple and Google to let app developers use alternative payment systems. 

While South Korea represents a drop in Apple’s revenue bucket, the law could give a boost to politicians and antitrust regulators around the world who are targeting the company’s payment practices, analysts say.

“This speaks to more regulatory scrutiny for Big Tech globally going forward both in the Beltway and Brussels,” Wedbush Securities managing director Dan Ives told The Post of the Korean law. “It could have a ripple impact.”

In the US, bipartisan lawmakers are pushing bills that are similar to the South Korean measure. A pair of bills introduced in the US House and Senate earlier in August would bar Apple and Google from requiring app developers to use their payment systems. 

And across the Atlantic, the European Union said last year that it is investigating whether Apple and Google’s app store payment policies unfairly squash competition. 

Apple has strongly condemned any attempt to overhaul its payment systems, but threw another bone to critics in August when it said in a proposed lawsuit settlement that it would allow developers to gather users’ contact information and then use that information to pitch them alternative payment systems. 

Developers would still be barred from pitching alternative payments within apps under the terms of the settlement, which must be approved by a California judge.