Apple Abruptly Tells Developer It Wants a 30% Cut from In-App ‘Tips’

The App Store has been mired in multiple controversies in recent years, and while most of those are just a result of folks who don’t like the way Apple does business, sometimes it feels like the company is going out of its way to antagonize its developers.

Although Apple’s overall App Store policies are typically easy to understand, there are enough shades of gray in the mix to make life difficult for both App Store reviewers and the developers who have to deal with them.

For instance, Apple has always been clear that it takes a 15–30% cut from “digital goods” that it doesn’t levy on physical items. That’s why Amazon will happily sell you a hardcover book in its iPhone app that will land on your doorstep with same-day delivery but won’t provide the same book in a Kindle format. While Amazon could sell Kindle books in its app, it’s chosen not to as it doesn’t want to give Apple a 30% cut of all e-book purchases.

On the surface, those rules are seemingly black and white, with “digital goods” being anything that you would typically consume through the app, such as e-books, movies, streaming subscriptions, and in-game currency, to name a few. Goods and services consumed outside the app, whether actual products or services like Uber and Airbnb, are exempt from Apple’s commission structure.

Unfortunately, the rise of COVID-19 and the lockdowns that accompanied it blurred the lines between those services. For example, ClassPass, an app that scheduled physical exercise classes at local gyms, was forced to pivot to virtual classes when those gyms closed down during the pandemic and suddenly found itself on the other side of Apple’s policy — forced to give up 30% of its fees for the same sessions it was previously scheduling in-person because they were now being conducted using an in-app video feed instead.

However, Apple has also long had one interesting exception to the rules, as found in section 3.2.1 of its App Store Review Guidelines:

(vii) Apps may enable individual users to give a monetary gift to another individual without using in-app purchase, provided that (a) the gift is a completely optional choice by the giver, and (b) 100% of the funds go to the receiver of the gift. However, a gift that is connected to or associated at any point in time with receiving digital content or services must use in-app purchase.

This seemingly created a loophole by which customers could at least provide “tips” to hosts of virtual sessions that would bypass Apple’s commission. At least one app successfully took advantage of that policy for over a year, but now it seems Apple has changed its mind and pulled the rug out from under them.

As reported by TechCrunch, a meditation app, Insight Timer, that allows teachers to host virtual sessions, has recently been told by Apple that 30% of the tips given to those teachers must now go through the App Store payments system like any other in-app payment, with Apple taking 30%.

What makes this frustrating for the company’s CEO, Christopher Plowman, is the capriciousness of Apple’s decision. Insight Timer has been using this model on the App Store for over a year, seemingly with Apple’s blessing, across a total of 47 updates to the app.

Apple’s App Review is often a hit-or-miss process where one rogue reviewer can reinterpret Apple’s policy differently from others, upsetting a developer’s entire business in the process. Sarah Perez, TechCrunch

While Insight Timer’s primary business model is selling premium in-app subscriptions — for which it’s always happily paid Apple its 30% cut — it also allows customers to send gifts to their favorite meditation teachers, healers, musicians, and other guides as tips. While premium subscriptions unlocked several other features, 50% of this revenue was also used to pay the teachers, so they weren’t relying on donations. The tips were just a bonus, sent through Stripe rather than being processed by the App Store.

Plowman assumed this was allowed under section 3.2.1, and not only did Apple not object, but whenever the question came up during an App Store Review, his company explained that these were donations that went directly to the teachers. The App Store review team found that answer satisfactory, as it would approve the updates without further questions.

However, that came to a sudden stop late last year when an app reviewer for the next update told Insight Timer that these donations were considered “digital content” and not “gifts” and would have to be moved from Stripe to standard in-app purchases.

That decision didn’t do anything to Insight Timer’s bottom line, as it never took a cut from any of that money, but it does mean that the teachers will face a 30% pay cut when the new version of the app goes live.

Apple reportedly never explained why it suddenly changed course on something that had been fine for over a year. The company did offer one small compromise, saying that it would allow commission-free donations to be made directly from teachers’ profile pages in the app, but only in those specific locations. Donations made from live events or the meditations themselves had to be processed as in-app purchases, with only 70% going to the teachers. Apple also said such gifts can only be given during one-on-one sessions; if a teacher runs a workshop with two or more people, it’s considered “digital content” and therefore subject to commissions under 3.2.1(vii) as it’s “connected to or associated […] with receiving digital content or services.”

To add insult to injury, Apple is also following its absurd anti-steering policies here, forbidding Insight Timer from pointing users to those teacher profile pages to make donations. Presumably, Apple can’t police what the teachers say during their sessions, but Apple won’t allow Insight Timer to mention anywhere in the app that only donations made from the teacher profile pages go entirely to the teachers.

“And I was like, well, what’s the point of building an ice cream stand across the road if you won’t let the customers cross the road to buy the ice cream?” Christopher Plowman, Insight Timer CEO

Despite months of negotiations, Apple has held firm on this new interpretation of its policy, culminating in Insight Timer being blocked until the company releases a compliant update. Plowman made a lengthy post on LinkedIn outlining the situation and politely and respectfully calling on Apple’s leadership to rethink this policy, which he believes hasn’t “caught up with today’s creator economy.”

Everything rests on Apple’s interpretation of the words “digital content”. When Apple wrote clause 3.1.1 it was most probably intended for Apple’s gaming developers. These companies make billions selling virtual items like ammunition upgrades, sharper swords, bigger shields, extra lives, golden coins and cooler Fortnite skins. These items are ‘digital content’ because they have no inherent value and cost nothing for gaming developers to digitally replicate. If Apple wants to take their 30% cut, fair enough. But virtual coins and ammunition upgrades are light years from the time spent by teachers working to engage with Insight Timer’s community. No reasonable person could miss the difference here. In other words, Apple’s guidelines haven’t caught up with today’s creator economy and so our teachers find themselves caught in a definitional crack. A no-man’s land where, from today, thousands of them must now give one third of their donation income to Apple because Apple hasn’t yet figured out a way to differentiate virtual digital items from a teacher’s precious time.

He goes on to liken the work that Insight Timer’s teachers do to services provided by Airbnb and Uber, which have always been exempt from Apple’s commission.

Plowman believes Apple is willing to listen and is optimistic that he can convince Apple’s leadership to bring about change. However, as the CEO of a platform that “values generosity and compassion over greed and anger,” he emphasizes how important it is that the disagreement “rises above toxicity and brings about change with respectful, intelligent debate.”