Sony App Rejection Signals Stronger Enforcement Around In App Purchases

Apple’s app store review guidelines have long said that the company will reject apps that use systems other than the In App Purchase API to let consumers buy content or services. But for a long time, Apple sent mixed messages about how strongly it would enforce that rule. Amazon’s Kindle, for example, lets its users buy books by sending them from the app onto its web site.

Apple app review guidelines, Section 11.1:

Last night, in what could signal a shift in how Apple enforces the rule, The New York Times reported that Sony’s iPhone app was rejected from the store because it didn’t use Apple’s In App Purchase API when consumers buy books. Sony said publicly, “Unfortunately, with little notice, Apple changed the way it enforces its rules and this will prevent the current version of the Reader for iPhone from being available in the app store.”

Apple clarified this morning, saying that if developers wanted to sell content or services through their apps, they would need to offer Apple’s system as one option of many. But Steve Haber, the president of Sony’s reader division denied this, saying yesterday that Apple representatives told him all purchases had to go through Apple’s system.

We expect the back and forth to continue between the companies. So here are a few interesting pieces of context around the dispute:

It comes at a time when in app purchases have grown rapidly on iOS. About 91.8 percent of iOS app downloads were free in December, up from around 80 percent three months earlier, according to research firm Xyologic. Third-party offers providers like Adknowledge have also moved into the space, betting that the free-to-play with virtual goods business model that have taken off on the Facebook platform will also emerge on iOS and Android. Developers have discovered they can get more than 10 times the number of users if their apps are free and that they can convert enough of these free users to more than make up the difference in revenue.

It’s also happening at a time when other technology companies like Amazon and Facebook are looking for ways to extend their e-commerce and virtual goods-related revenue onto mobile. Amazon is in the process of launching its own app store while Facebook may be testing ways to extend Credits onto mobile devices through HTML-5.

It also raises interesting policy questions about how far a platform can go in enforcing a single payments infrastructure and whether that raises antitrust issues. In a similar move last week, Facebook finally set the deadline for making Credits the sole payments option for canvas applications in July. Presumably, because Credits has been on the roadmap in some variant for four to five years, the company probably had a large team of lawyers vet all possible antitrust concerns. But having both Apple and Facebook consolidate power around their payments infrastructure in a single week may raise attention from policy makers. To be fair, iOS is far from making up a monopoly in the smartphone market, with 17.25 percent market share.