Apple, Apple Music, iOS

Apple is already not performing exceptionally well in China and now it seems to have landed itself in hot waters once again. This time, however, Cupertino’s troubles do not pertain to slumping iPhone sales but the change in an App Store policy that has upset most Chinese social networking app makers.

Under this new policy change, the Cupertino giant has informed a cohort of Chinese app developers that the ‘tips’ feature will now be recognized as in-app purchases going forward. This also includes the country’s biggest messaging giant WeChat. As reported by the Wall Street Journal, citing several executives from these app makers, Apple has instructed them to disable the ‘tipping’ feature from their apps to comply with the norms of the App Store.

Cupertino is sending out notifications to app developers because the feature, which enables a user to exchange money and tip their favorite content creators who provide them with free stuff, is now being termed as in-app purchases. It has now become equivalent to purchasing add-ons, games, music, or costumes among other things from within the app and will see Apple take a 30 percent cut on every transaction.

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The developers who do not support Apple’s idea of 70-30 split revenue sharing have only two options open for them — either move out from the App Store or beck down to its demands — due to lack of choice and alternatives. In the notification sent to developers, Cupertino has taken a tough stance and stated that they’d have to comply with the new policy or face the possibility of their updates not making it to the App Store. This can easily be followed by total elimination from the App Store, say sources.

The tipping culture is Western countries (or the United States, specifically) is unlike that in the land of the Dragon. The Chinese do not view giving out tips as an in-app purchase and this has them annoyed to the core. The app developers view the two as distinct as the former depends solely on the user and they can shell out tips for consuming content or ordering food from within apps, such as the wildly popular messaging client — WeChat — which now acts more like a bundled operating system. In-app purchases can, however, be defined by the developer to push you to purchase something or spend more time interacting with their app.

Thus, the app developers have approached the Chinese ministry and this could be a significant worry for the Cupertino giant. It has already been faced with slumping sales and intense backlash, which it is trying to compensate with two R&D centers, but search for a larger cut in revenues. And that too, when the revenues from the China App Store are quite larger than that of the U.S. It exceeded the latter back in 2016, with in-app revenues of around $2 billion in the fourth quarter of 2016 alone. The Wall Street Journal states,

One executive says his company is talking to the Ministry of Industry and Information Technology, a regulator, about whether Apple is imposing unfair rules by turning tipping into in-app purchases. MIIT says it isn’t involved. The People’s Bank of China, which regulates electronic payments, didn’t respond to a request for comment.

This development comes on the heels of the massive decline in the Apple’s revenue from the Chinese region. There’s no hiding from the fact the iPhone sales in the said region have been collapsing year-over-year, even though it’s a one percent change. This has been affecting the company’s bottom line as revenues have become scarce, courtesy of a hefty 14 percent decline year-on-year. The same has been specifically attributed to lack of interest in older-gen iPhones due to rumors of a completely overhauled iPhone 8 flooding the interwebs.

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