Last month Facebook became yet another voice in the chorus against Apple’s 30 percent App Store commissions when it railed against Apple’s policy of applying it to paid virtual events, going so far as to accuse Apple of taking money out of the mouths of small businesses.
This particular controversy gained steam as a result of Facebook’s launch of a new paid events feature that was designed to help small businesses struggling with poor in-person attendance in the midst of the global health pandemic.
In a rare move of altruism, the social media giant also announced that as part of the new program is would waive all of the fees that it would normally collect until August of next year, basically giving 100% of the monies collected for the events back to the beleaguered small businesses hosting them.
Unfortunately, Facebook’s rather generous offer hit a roadblock when it came to delivering these paid events through the Facebook app on Apple’s devices.
In accordance with Apple’s usual policies, Facebook had to use the App Store’s in-app purchasing system to collect payments for paid events on the iOS platform, meaning that Apple would also be collecting its 30 percent cut on all sales, and Facebook therefore couldn’t actually give the full amount of each paid event registration back to small businesses in this case.
Facebook asked Apple to reconsider, but when the iPhone maker refused, it instead decided that in the name of transparency it was only fair to call out Apple’s 30 percent cut on the payment page so that those who felt that they were supporting small businesses would be aware that not all of their money would be making it to the business owner.
Not surprisingly, Apple rejected Facebook’s attempt at transparency, simply calling the information “irrelevant” and citing an App Store rule that prohibits extraneous information from being shown on payment screens.
The Transition to Virtual Classes
While Facebook’s complaint gained the most notoriety, the issue actually began a few weeks earlier when many small businesses such as gyms, health clubs, and educational services were forced to cope with dwindling physical attendance in the midst of the pandemic and began looking for alternative solutions to keep their doors open by running online classes instead.
Many of these businesses had used online apps and services such as ClassPass to handle bookings for in-person events, and as per Apple’s policies on physical goods, they were permitted to use their own payment system and bypass Apple’s 30 percent commission, in much the same way as retail shopping apps like Amazon have always done.
Unfortunately, as these businesses transitioned to virtual classes, their services came under Apple’s umbrella definition of “digital content,” meaning that they suddenly had to use the App Store to process payments and give up 30 percent of their revenues in the process.
The end result was a huge blow to many small businesses, who were already struggling to make ends meet, and the line that Apple drew here — and the side it chose to land on — seemed somewhat arbitrary considering that these companies were simply offering the same services that they always had, just doing it in an online format instead.
Although Apple did make some concessions earlier this month, with a change to its App Store policies clarifying that it would not take a cut from “one-to-one experiences,” which could now be billed outside of the App Store in the same way as physical services. In that same policy, however, it made it clear that it would still be enforcing its 30 percent cut for “one-to-few or one-to-many services.” The result was a policy change that only barely solved the problem for many small businesses like gyms, yoga studios, and educational services; personal trainers and tutors could now collect full fees for private sessions, but as soon as a class had more than two people, it would still be subject to the dreaded “Apple tax.”
In fact, it’s a move that seems all the more unsavoury on Apple’s part with the launch of its new Fitness+ service coming later this year, making it sound like Apple is once again putting its own service at an advantage by being able to collect all of the revenue from Fitness+ subscriptions while also taking 30 percent from every other provider of virtual fitness sessions. It’s the same basic thing that Spotify has been accusing Apple of doing with Apple Music for years, and one of the things that have prompted a recent European antitrust investigation.
Apple Grants a Reprieve
For now at least, it seems that Apple has had a change of heart, albeit a somewhat temporary one.
In a statement to CNBC, Apple revealed that it has decided to waive its normal 30 percent fees from now until the end of the year “to give businesses more time to adapt to digital business models” in the midst of pressures being faced from the pandemic.
To be clear, this is not a reversal of Apple’s overall policy, and the company insists that virtual group events will still ultimately be required to use in-app purchases and pay a 30 percent cut to Apple for “digital events” — for now, the company has merely chosen to give everyone concerned some more time to figure out how to cope with the new reality.
The App Store provides a great business opportunity for all developers, who use it to reach half a billion visitors each week across 175 countries. To ensure every developer can create and grow a successful business, Apple maintains a clear, consistent set of guidelines that apply equally to everyone.Apple
In fact, Apple once again reiterated its usual party line touting the opportunities that the App Store provides third-party developers while also somewhat disingenuously emphasizing that it applies its “clear and consistent” guidelines equally to all.
Needless to say, Facebook wasn’t particularly impressed with Apple’s response, particularly since the social media giant has already chosen to waive its fees for considerably longer — up until at least August of next year, while Apple still plans to begin taking its 30 percent cut starting in January.
This is a difficult time for small businesses and creators, which is why we are not collecting any fees from paid online events while communities remain closed for the pandemic. Apple has agreed to provide a brief, three-month respite after which struggling businesses will have to, yet again, pay Apple the full 30% App Store tax.Facebook
In its statement to CNBC, Apple also emphasized that it doesn’t take a 30 percent cut from ticketing “real-world events” but rather only digital events, adding that it expects Facebook, Airbnb, ClassPass, and others providing similar services to add the necessary in-app payments for events by the end of the year.
Of course, it’s entirely possible that Apple could choose to extend this deadline if businesses are still struggling under the weight of the novel coronavirus pandemic in the new year, but there’s a very valid argument to be made that Apple’s policies on digital events aren’t where they should be in the first place.
While it may be a tricky line to draw, Apple needs to put its battalion of lawyers and policymakers to work in figuring out the difference between events that are purely online from the outset versus those that are actually virtual replacements for physical events, especially since it could very well be months or even years before many businesses are able to return to the kind of physical attendance levels that they enjoyed before the pandemic hit.