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Apple vs Epic: What the new payment rules mean for publishers and how you can react

by Admin on September 23, 2021

The legal battle between Apple and Epic Games has dominated the news at various points over the last 12 months. It came to a close, leading to a host of new changes coming as early as 2022 for the $380bn market for in-app purchases. 

But the effects of this month’s ruling aren’t contained to just gaming. Publishers that reap the rewards of long-term subscription relationships have the opportunity to claw back the 30% fee they are currently paying to Apple with each new purchase or renewal. But just because the changes might seem simple doesn’t mean they are easy to navigate.

Those that add unnecessary friction along the path to subscription will offset the gains from moving purchases off-app. 

To help you succeed in this new landscape, we answered the 5 most important questions digital publishers need to keep customers converting and maximise revenue.

How did it start? 

Apple makes around 14% of their profits through the App Store, making it a high-margin commercial stream. They allow developers to upload apps to the store for free, but claim a 30% cut of all in-app purchase (IAP) revenue for the first year and 15% for all subsequent years. For large developers, such as Epic Games - the creator of hit sensation ‘Fortnite’ - this 15% was a bitter pill to swallow considering they have made over £600m in revenue from the App Store alone.

And in August 2020, Epic Games introduced a new payment method in Fortnite that purposefully bypassed the App Store IAP fees. The game, despite having an original concurrent player base peak of 78.3m, was removed from both the App Store and Google play store for violating terms and conditions. The conflict culminated with the Founder and CEO of Epic Games, Tim Sweeny, filing lawsuits against both Apple and Google for antitrust and anti-competitive behaviour last year. 

What happened next? 

Over a year later and the trial has finally come to a conclusion, albeit a somewhat ambiguous one. 

Apple has been cleared of anti-competitive behaviour, but has been forced to change the way the company processes IAP’s through the App Store. Apple Pay will no longer be the only way to purchase products in-app, and all types of apps will soon have the freedom to direct customers to their own payment systems, if they so choose. Apple’s 30% fee is no longer the only option available to developers - but whether in reality this will bring in greater revenues is yet to be seen.

The effects are due to come in early 2022, and developers have already begun building new strategies for when it does.

Why should Publishers care?

At a glance it might seem like a simple choice to move away from Apple payment systems in exchange for an extra 30% in subscription fees. It is likely that any additional revenue captured through your own payments processes rather than Apple goes straight to your business’ bottom line.

However, the relationship between App Store payments and subscription purchases is defined by the ease with which payments can be made through Apple. With just a tap of your finger or glance at your face, you can buy almost anything with minimum effort. This seamlessness undoubtedly contributes to higher conversion rates for IAPs. 

And so the decision to stick or shift comes down to a simple question: can you maintain conversion rates whilst taking customers out of the app? If the additional steps required to make a purchase ‘out of app’ lead to a 15% or higher drop off in conversion, then you are better off staying with Apple’s own system.

The modern consumer values instant gratification highly, and any new process that doesn’t live up to current methods could send subscription numbers falling. 

What does this mean for digital publishers? 

Like it or not, change is on the horizon. 

Publishers and news organisations have as much to gain from in-app subscriptions as the gaming world does. On top of the potential to retain that 30% of revenue, moving purchasing away to their own platform gives publishers the opportunity to collect more first-party data than is provided via the default Apple forms. Control over this crucial part of the overall subscriber journey allows media companies to leverage their existing data and implement deeply personalised messaging and offers to their potential customers.

However, these positive outcomes are caveated by the ability of digital publishers to adapt and adjust to this new environment. While there is great opportunity for independent innovation, companies creating new bespoke subscription packages and systems will have to compete against one another to stay at the forefront of the market and keep customer satisfaction high. Digital publishers must keep a keen eye on any friction within the conversion process, to avoid last-mile bounce.  

How should Media and news companies react?

Quickly, but not hastily. 

Rushing away from Apple and onto your own systems might seem like an obvious move but getting it wrong could cost you. The recurring theme of this discussion has been the uncertainty and competitive nature of the digital world of IAP’s going forward. The rewards for creativity and change are high - but equally the risk of failure could be highly damaging. 

Progressive publishers with innovative technology and tools are primed to benefit most from the changes. Imagine, for example, a dual approach that gives readers with a lower likelihood to convert (such as those reading at 8am on a mobile device) the usual Apple experience, but prompts renewal prospects with a high likelihood to convert (say, repeat visitors on a desktop) to subscriber via an off-app registration form. The resources are out there to segment and A/B test different customer journeys, helping uncover the strategies that cater best to your audience and lead to higher conversion and retention rates.

Felix Danczak, COO of Zephr, explains: 

“The changes to the Apple Store rules gives publishers an opportunity to take back control over their revenue streams and Zephr is primed to enable this change. It continues to be an exciting time for the subscription economy and we will see an explosion of ideas and strategies as people experiment and grow.”

Opening the door to experimentation and customer experience defines success 

In short: if you are set on moving away from Apple’s own payment methods then you need to make it worthwhile. 

Some publishers will fail to capitalise on the opportunity and end up worse off than they were before with clunky, inefficient conversion efforts that turn potential subscribers away. Others will embrace the change and implement data-informed and highly personalised experiences that keep conversion rates high whilst recouping the 15-30% fee they were previously paying.

Which category your business falls into depends solely on the user experience.

Looking to take your subscription experience to the next level? Find out more about Zephr’s best-in-class solution.

   

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