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Apple has started to bend its own rules as it seeks to grow subscribers for its digital services businesses

Key Points
  • Apple has used push notifications and streamlined sign-up pages to promote its new subscription services.
  • Some developers say that those techniques violate Apple's own App Store policies.
  • Spotify and presidential candidate Sen. Elizabeth Warren have said that Apple is using its own platforms to disadvantage its competitors who distribute their software through the App Store.
Apple CEO Tim Cook speaks at Apple's Worldwide Developer Conference (WWDC) at the San Jose Convention Center in San Jose, California on Monday, June 4, 2018.
Josh Edelson | AFP | Getty Images

When Apple released its new subscription news service last week, third-party app developers were up in arms, noticing right away that Apple was providing favorable treatment to its homegrown product.

The service, Apple News+, is being promoted to users as a free trial with its monthly $9.99 subscription price noted on the smallest font on the screen, a format that outside developers said would draw scrutiny during Apple's App Store review process, and could potentially lead to a rejection from Apple's reviewers.

Apple also did not include a block of required fine print it requires for third-party developers to use Apple's subscription sign-ups, including mandatory links to a privacy policy and support page, as well as information about how to cancel a subscription and when it will be billed.

Apple's newfound willingness to bend its own App Store guidelines to promote paid subscription services like Apple Music and Apple News+ comes as the company is increasingly turning to revenue from online services as growth for its primary iPhone business slows.

The shift is also happening as Democratic presidential candidate Sen. Elizabeth Warren and rivals like Spotify have started saying that Apple is using its own platforms to disadvantage its competitors who distribute their software through the App Store.

Apple declined to comment.

CNBC Tech: Apple News+ signup screenshot

In a long thread last week in response to a tweet that has since been deleted, a group of developers complained that Apple was able to design its subscription sign-up screen to maximize engagement in ways that other developers cannot, such as where the price of the monthly subscription is located and the size and contents of any fine print, which can have a huge effect on getting users to pay for digital subscriptions.

Other developers noted that Apple News+ stops working shortly after the subscription is canceled, even if the user is still in the free-trial period. Developers are required under Apple's rules to continue providing their service through the end of the billing period, or if there's time left on a free-trial.

Some recalled that for the past few months, Apple has started to send promotional push notifications to encourage iPhone owners to sign up for some of its services, like Apple Music's family plan. Apple's guidelines strongly discourage push notifications for "advertising, promotions, or direct marketing purposes."

Other developers said that Apple's choices are within Apple's purview. After all, it is the owner of the platform, so it makes the rules. Plus, Apple's apps are pre-installed on the iPhone, and they are only distributed through the App Store in case users delete them.

"As the platform owner, Apple has a couple of advantages," one developer, who asked to remain anonymous because they feared retribution from Apple, told CNBC. "But it is frustrating from the point of view that [Apple] knows it works better to get more paying customers, and they won't let us do it."

A curated platform

Apple says that humans review every submission to the App Store before users can download apps.

"What users want from us and what we've always provided them is a curated platform," Apple CEO Tim Cook said last year in an interview with Vice. "We think that what the user wants is someone that does review these apps."

But some developers complain that Apple's approach has led to inconsistent policing, given that the App Store has over 2 million different apps on it from a variety of companies, ranging from small start-ups to tech giants like Google and Facebook.

Apple has to also fight scam apps, like a recent and ongoing rash of "sneaky subscription " apps that try to fool users into accidentally signing up for expensive monthly subscriptions, which is the reason for many of Apple's App Store billing guidelines.

The App Store review policy has led to some developers treating recommended best practices as actual guidelines. One complaint with the Apple News+ signup screen is that Apple did not put the $9.99 price on the signup button, as many developers believe is required because Apple has slowed down the approval of some apps because subscription pricing isn't clear.

But Apple doesn't actually require apps to put the subscription price on its button, according to a person familiar with the App Store guidelines. The price just needs to be clearly visible and comply with California laws about automatic renewals. (Apple publishes a 4,000-word guide to how to design for auto-renewing subscriptions that says that "the amount that will be billed must be the most prominent pricing element in the layout.")

Lots of companies send push notifications advertising products and services, despite the fact that the practice is discouraged in Apple's own guidelines. But promotional push notifications are permitted, the person familiar with the guidelines said, and if developers are thoughtful about what they push, they can send marketing push notifications.

A new services company

Apple is pitching itself to investors and customers as not only a hardware maker and platform owner, but also a company that sells a variety of services to its users.

Last week, Apple held a launch event at its headquarters in California to underscore the shift and announce new subscription services, including Apple News+ and a new a streaming video package called Apple TV+.

Apple CEO Tim Cook has implied he wants the company's services business to generate $50 billion in revenue by 2020. Apple's services include fees collected from the App Store, subscriptions like iCloud and Apple Music, gadget warranties from AppleCare and licensing fees from Google to be the Safari web browser's default search engine.

But at the same time, several groups have started to accuse Apple of abusing its power over the App Store to favor its own services over third-party apps.

"Apple, you've got to break it apart from their App Store. It's got to be one or the other," Democratic presidential candidate Sen. Elizabeth Warren said in an interview with The Verge. "Either they run the platform or they play in the store. They don't get to do both at the same time."

Spotify recently submitted an antitrust complaint against Apple to the European Commission.

"In recent years, Apple has introduced rules to the App Store that purposely limit choice and stifle innovation at the expense of the user experience — essentially acting as both a player and referee to deliberately disadvantage other app developers," Spotify CEO Daniel Ek wrote in a letter. Apple posted a response to Spotify on its website that said that Spotify was trying to use Apple's platform without paying the cost.

However, whether Apple's control over the App Store is anticompetitive is a tricky question, antitrust experts said. One reason is that consumers who want an alternative can easily buy an Android phone, meaning that Apple may not be technically dominant.

"Apple doesn't have the same broad monopoly power that Google and Facebook have," Open Markets legal director Sandeep Vaheesan said.

"Antitrust challenges arise when Apple tries to restrict other entities on its platform," he continued. "It's a real concern because Apple has told both iOS users and developers if you want to sell or purchase you have to go through the App Store, and there's no other way for the two sides to connect with each other."

Another fact that could stymie Spotify and Warren's arguments is that Apple has legitimate product reasons to control access to the App Store, including security and its brand value.

"Apple generally believes they have to control the entire user experience from beginning to end, and all of these rules on the App Store can be said to be necessary for the quality of the experience," said Chris Sagers, a professor of law at Cleveland State University.

"Antitrust cases boil down to the details. Figuring out what exactly these rules that Apple imposes and how they actually keep other people from competing with Apple — that's complicated," he continued.

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