Nick Statt, writing for The Verge
Amazon’s Prime Video iOS and Apple TV apps now let customers make in-app purchases, including renting and buying films and TV shows. The change marks a huge shift in Amazon’s approach to the App Store, which mandates a 30 percent cut on all in-app purchases. Prior to the change, Amazon would not allow you to rent or buy content on the Prime Video app, instead, directing users to a web browser to avoid the App Store fee.
Now, when users log in to the Prime Video app, there should be a message reading, “Browse, rent, or buy new release movies, popular TV shows, and more — now within the app.” (Big thanks to George Watson, who tipped us off to this change.)
Apple originally didn't allow in-app-purchases in the App Store. Free apps had to stay free. When they changed that policy, they created a new one that didn't allow linking out from the App Store to another transaction service. For digital goods, at least. It never covered physical goods.
In other words, Apple didn't want every app in the App Store to suddenly go free and link back directly to the developer for payments as a way to do an end run around the 30/70 revenue split. To stick Apple with the hosting but deny them the transaction.
Thanks to giant games like Candy Crush and Pokemon Go, and on-again-off-again relationships with streaming video providers like Netflix, that's allowed App Store revenue to explode of the last decade. Since App Store revenue is a huge part of services revenue, and Apple has told investors to expect a huge increase in services revenue, it's something Apple probably wants to protect.
But, it's also an old, outdated system that results in impossible margins for middle vendors or extreme inconvenience for customers.
Basically, if Amazon wants 30% from content creators to aggregate videos for Prime, and Apple wants 30% from Amazon to aggregate Prime for the App Store, and the content creator still wants 70%, it breaks the math.
A few years back Apple dropped the second year subscription revenue share down to 15%, but that still makes multiple middle vendors tough. Neither Amazon nor Apple can earn together what they would earn separately, selling directly.
So, did Apple drop the rate for individual purchases (full out or rental), did Amazon agree to cut Apple in (full share or partial), and if they came to a deal, is it a new deal for everyone or something special for Amazon and maybe just other major vendors?
It seems clear, if and when we emerge from COVID-19 and regulatory attention turns back to tech companies, App Store policies will be front and center.
That's why it would behoove Apple to come up with something more modern, something that lets them defray the cost of hosting the App Store and serving free apps, but also drives revenue based on security, privacy, and convenience, rather than policy, and that allows all these apps to provide better and more convenient experiences for all their mutual customers.
Maybe this updated Amazon implemenation could be a first step towards that?