New iPhone Refund Policies Raise Questions for Developers

While the iPhone gaming space has enjoyed tremendous growth, Apple has enacted new policies that may discourage some developers from building gaming apps for the iPhone platform.

Apple’s new refund policies grant iPhone users up to 90 days to receive a refund for their application purchases. Because most applications experience a staggering drop-off in app retention after the first day, this could harm the revenue streams for many iPhone developers. It also represents a departure from traditional return policies, which stipulate that a buyer cannot return a purchased game for its full price after the wrapper has been removed.

Under Apple’s return policy, the developer must return not only the money from the sale, but Apple’s 30 percent commission as well. So, in effect, the developers must pay back Apple for 100 percent of the sale.

Here’s Apple Contract Refund Clause:

“In the event that Apple receives any notice or claim from any end-user that: (i) the end-user wishes to cancel its license to any of the Licensed Applications within ninety (90) days of the date of download of that Licensed Application by that end-user; or (ii) a Licensed Application fails to conform to Your specifications or Your product warranty or the requirements of any applicable law, Apple may refund to the end-user the full amount of the price paid by the end-user for that Licensed Application. In the event that Apple refunds any such price to an end-user, You shall reimburse, or grant Apple a credit for, an amount equal to the price for that Licensed Application. Apple will have the right to retain its commission on the sale of that Licensed Application, notwithstanding the refund of the price to the end.”

According to a post by TechCrunch, Apple claims this section of the contract is new and must be signed by developers if they want to sell on the next generation App Store (iPhone OS 3.0). However,  some iPhone developers saw similar language in a contract signed in December, leaving the true refund policy unclear.

This 90-day refund policy creates an inherent problem for iPhone developers: less than five percent of users that download a gaming app still play it after 30 days (according to Pinch Media).

Depending on how it’s carried out, Apple’s refund policy could hinder the overall growth and health of the iPhone platform. If the policies drive off developers, Apple will surely revisit how it’s structured these policies.

The full contract can be found below: