Apple Making Developers Pay Up For Any Refunded iPhone Apps?

from the restocking-fees dept

Tue, Mar 24th 2009 8:27pm — Mike Masnick

Lucretious points to a Kotaku post claiming that Apple is changing the terms for iPhone developers, such that when users ask for refunds, Apple gives them back the full amount but still demands a 30% fee from the developers. For obvious reasons, this is upsetting developers who worry about getting hit with huge chargeback fees. I would imagine that Apple's response is that if developers make a good enough app, they shouldn't have to worry about refund requests. But, in the meantime, it certainly increases the liability of being an iPhone developer.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: developers, iphone, refunds, restocking fee
Companies: apple

32 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

some old guy, 24 Mar 2009 @ 9:03pm

Restocking fee is too high!
Really good idea.. but a tad on the high side.

This WILL prevent devs from pricing their apps too high.

Imagine the "I am rich" app... even tho he only sold what.. 8 copies? for 9999$ each, he would effectively owe apple 12k for that PR fiasco. Of course, he never would have tried it with that form of risk.

This is a really good idea.. but apple should have put some restrictions on it so as to not scare off the independents.
[ link to this | view in thread ]
Lucretious, 24 Mar 2009 @ 9:40pm

Its a helluva thing to drop in developers laps who are on the verge of releasing an app.

How much of warning did they get I wonder?
[ link to this | view in thread ]
Lutomes (profile), 24 Mar 2009 @ 9:48pm

Reasonable costs
Assuming apple is saying their 30% goes towards the hardware, bandwidth, software, distribution, testing etc. Its quite reasonable.

If you were publishing your own software, on your own servers and customer asks for a refund. You still incur the bandwidth costs, merchant fees, hardware costs of the server etc. Why should it be a free ride if you use the apple platform?
[ link to this | view in thread ]
Anonymous Coward, 24 Mar 2009 @ 9:59pm

Re: Restocking fee is too high!
Actually, it wouldn't have prevented the Rich app at all. He could have just saved 30% (should be easy, no developers to pay for an app like that) and walked away with 70%.
[ link to this | view in thread ]
Anonymous Coward, 24 Mar 2009 @ 10:00pm

this seems to be just rumor, but i do find it harsh specially that we have no data concerning refunds and such (knowing Apple we shouldn't hold our breath).
[ link to this | view in thread ]
Anonymous Coward, 24 Mar 2009 @ 10:27pm

If the apps work then developers don't have to worry. This is good for apps that sound great but just don't work or crash every 2 minutes. I am an app store junkie (or at least I used to be) - but I bought way too many apps that just didn't work or crashed so much I deleted them off my phone. It's good that Apple is putting this new term on the contract - this should be made more public - because I would definitely purchase more apps knowing that if it did not work as advertise (or work at all - as I experienced in some cases), that I could get a refund - thus increasing business for REAL apps, and killing stupid apps that have no place in the app store.
[ link to this | view in thread ]
Jesse, 24 Mar 2009 @ 10:27pm

I don't get why Apple gets a monopoly here anyways. Why shouldn't Microsoft charge people that make programs for Windows and PCs?
[ link to this | view in thread ]
Anonymous Coward, 24 Mar 2009 @ 10:29pm

Re:
Does Microsoft give you 30 million potential customers on a single device while also handling all all the hosting, and e-commerce solutions that go along with purchasing applications? No. Not yet anyway - and btw when the Microsoft "Marketplace" does launch they'll be charging THE SAME as apple (30/70) split but the developer package is not $99 like it is for apple it's $299.
[ link to this | view in thread ]
Anonymous Coward, 24 Mar 2009 @ 10:52pm

Re:
I read this in one of the kotaku comments and found it hilarious (plus it answers ur question perfectly).

"Apple will get away with it somehow.
you'll all be singing it's praises by the weekend.
In the real world only Bill Gates gets screwed for doing stuff like this."
[ link to this | view in thread ]
Anonymous Coward, 24 Mar 2009 @ 10:57pm

I'm a registered iphone dev and there is nothing about this in the 3.0 agreement, nor has there been any chatter in the dev community. There is still no info on demo sales nor refunds that's been shared with us. One of the problems with the NDA is that people can make up any stupid rumor and there's no way to counter it without someone in the know breaking the NDA, like this. As far as I know, this rumor is crap and their source might as well be Jim Cramer.
[ link to this | view in thread ]
Dr Evil, 24 Mar 2009 @ 11:42pm

:)
All I have to do is buy lotttttttttttttttts of apps and return them.
[ link to this | view in thread ]
Tamara, 25 Mar 2009 @ 2:33am

Can be very easily taken advantage of. Apple staffers and their families can buy up $1000s worth up apps each, return them, and Apple still gets paid. Very questionable
[ link to this | view in thread ]
rwahrens (profile), 25 Mar 2009 @ 3:45am

wait a minute
Tamara,

What do you mean "Apple still gets paid? If they have to give the customer a FULL refund but only demand 70% from the developer, then they are still eating the 30% costs they are NOT asking the developer to pay. They are only asking for the 70% back that the developer got in the first place!

And isn't this a risk that any developer takes just by being in the business?? Either you produce a product people can and do like and use, or you have to give them their money back when they realize it sucks.

Welcome to the real world - what do people think - Apple will just eat the cost of returns? Not freakin' likely.

If the app store were mine, I'd have put that in the first paragraph, in big red letters.

TANSTAAFL - There Ain't No Such Thing As A Free Lunch!
[ link to this | view in thread ]
Andrew, 25 Mar 2009 @ 4:13am

Oh No
Apple fans will love it, those indifferent or against Apple will not.

Two important things that need to be added here. One, how long do you have to return an app for a refund? Two, what percent of the app price goes to the developer?
[ link to this | view in thread ]
Pablo Sanchez, 25 Mar 2009 @ 5:59am

Re: Re:
Actually Microsoft DOES offer MORE then 30 million potential customers on a single device, while providing ALL of that stuff... Its called Xbox 360, and the developer package is $50 a year.
[ link to this | view in thread ]
John Duncan Yoyo, 25 Mar 2009 @ 6:17am

Apple should take a small hit for poor approval process
If a shoddy app makes it past Apples' app approval process Apple should feel some of that pain beyond the 70% they make on the initial sale. Perhaps it should a 1% bonus returned to the displeased customer.
[ link to this | view in thread ]
Weird Harold, 25 Mar 2009 @ 8:07am

In a sense, I think this might help to make developers think twice before releasing a crappy app that over promises and under delivers. I also think it will help to keep app prices reasonable.

If the app is under a certain price (say less than $5), there is a good chance most people wouldn't even both to return or complain, they would just delete and move on. More expansive (and I don't know where that point is for his device) and people are more likely to spend them time to complain and get money back.

I don't think this is going to be a big deal for the 99 cent app guys, just for those selling the significantly more expensive apps, especially if they just don't deliver on the promises made.
[ link to this | view in thread ]
Anonymous Coward, 25 Mar 2009 @ 8:37am

Re: :)
how is that a good thing?
[ link to this | view in thread ]
Anonymous Coward, 25 Mar 2009 @ 8:39am

Re:
Thats only true if Apple's cut from the original sale is less than 30%. I'm unsure of what their cut is, but I'm just noting that. If its more than 30%, then Apple is losing money from each refund.
[ link to this | view in thread ]
Anonymous Coward, 25 Mar 2009 @ 8:43am

Re: Re:
Wait, the math isn't right there. Actually, I think it'd be really difficult for Apple to make money here. They'd require quite a large cut from the original sale to make up for it. My math was *way* off.
[ link to this | view in thread ]
Anonymous Coward, 25 Mar 2009 @ 8:45am

Re: Apple should take a small hit for poor approval process
That really doesn't make sense. Does Walmart give you a bonus when you return something? I mean, they approve of everything their store sells. I don't like the way Apple does things, but that doesn't mean I approve of ridiculous statements like this. Unless Apple is charging a 70% cut from the original sale, Apple loses money with every refund.
[ link to this | view in thread ]
Jobssucks, 25 Mar 2009 @ 8:45am

Re: Re:
Since when are there 30 million iphone owners? You've been drinking the cool-aid too long, and become an iDiot!
[ link to this | view in thread ]
Weird Pancreatic Steve, 25 Mar 2009 @ 8:52am

Why would there be ANY apps that are crappy or don't work? Don't they all have to be approved by crApple before they make it to the store? If crApple is vetting the products before allowing them in the store (and they supposedly are), then crApple should bear the responsibility for any that don't perform as advertised.
[ link to this | view in thread ]
Paul, 25 Mar 2009 @ 9:00am

Re: Re: Re:
There are 30 million iphone os devices out there. ~17 million iphones & 13 million ipod touches. Apple gave those numbers at the iphone os 3 preview. Who's the idiot now?
[ link to this | view in thread ]
Anon, 25 Mar 2009 @ 9:06am

Re: Restocking fee is too high!
Uh no. It was $999.00.
[ link to this | view in thread ]
Weird Harold's former #5 fan, 25 Mar 2009 @ 10:25am

RTFA, people!
Since so many people here either didn't read the article or flunked first-grade arithmetic, here's how it would work -

1. iPhone customer buys an app for $10. Of that $10, $7 goes to the developer and $3 goes to Apple.
2. Customer decides to get refund on app.
3. Apple gives customer his $10 back.
4. Apple charges developer the full $10 - meaning the developer has to pay back not only the $7 he received from the sale but also the $3 that Apple received from the sale.
5. Developer is $3 worse off than if the customer had never purchased the app in the first place.

Great deal for Apple, not-so-great for developers.
[ link to this | view in thread ]
magnafides, 25 Mar 2009 @ 11:55am

Re: RTFA, people!
Yeah, it didn't seem that complicated to me either.

For the fanboys trying to justify this as a "cost-recovering" measure, please explain how Apple's costs for serving a $50 app are 10x as much as for a $5 app. Even better, please explain how an app download costs Apple even a penny.
[ link to this | view in thread ]
Hector, 25 Mar 2009 @ 12:06pm

Kind of like this
This should put a end to the pranksters whom charge some dumb fool $5k for a app that does nothing more then display a picture.. imagine the pay back for all them refunds.. Now whos laughing? LoL

But beyond that it should push developers into not rushing apps out and making sure for the money the customer is getting feature packed software.. It means now they need to rethink the value of their software before pushing it out to the public. Glitchy or over priced software will be penalized by consumer demanding refunds beyond the usual money back.

And to apples defense they should be paid for their services which made it possible to sell your product weather or not the general public likes or hates your product.
[ link to this | view in thread ]
D0M1N8R, 25 Mar 2009 @ 12:21pm

Re: Re: RTFA, people!
I certainly do not consider my self to be a apple fan boy. I tried and returned the iPhone. I dont own a MAC. I dont even use itunes. But because I or anyone else disagrees we must be fan boys! How convenient it must be to put a label on everyone whom does not agree with you.

Why not justify why you do not agree and be constructive?
[ link to this | view in thread ]
Tamara, 25 Mar 2009 @ 2:31pm

Re: wait a minute
No rwahrens what you say isn't correct. Apple demand the 30% payment from the developers. Apple make that quite clear, so don't know how you could miss that bit. The developer doesn't get paid at all. Apple still make 30% for all sales, even for refunds, and developers make 70% on items that are kept, and lose 30% on all items that are refunded.
[ link to this | view in thread ]
magnafides, 26 Mar 2009 @ 9:09am

Re: Re: Re: RTFA, people!
I actually did justify my position, if you read closely. Presumably, charging developers a fee when an app is returned is to recover some fixed cost to support the download/return process. Keeping the 30% does not support that premise--it is just a money grab.

And to those who say that this will keep poor apps out of the app store, I'd have to ask why Apple doesn't spend as much time testing apps for quality as they do rejecting them for arbitrary reasons. I mean, they ARE taking 30% for *something*, right?
[ link to this | view in thread ]
Terry, 26 Mar 2009 @ 10:13am

An opposing view
Before you judge Apple, please read at least one other view: http://iphonedevelopment.blogspot.com/2009/03/kotaku-and-technicolor-contract-clause.html
[ link to this | view in thread ]