In-App Purchase in iOS

Overview

In-app purchases can be used to sell a variety of content, including new features, subscriptions and services. Before offering in-app purchases, user will need to sign the Paid Applications Agreement and set up your banking and tax information. But  when does Apple take their 30 percent cut? The revenue-split applies whenever you sell a product using In-App Purchase, which covers four kinds of products:

Consumable
Users can purchase distinct types of consumables, such as lives/gems in a game to further their progress through an app. Consumable in-app purchases are used once, are reduced and can be purchased again.

Non-Consumable
Users can purchase non-consumable app with premium features within it. Non-consumable apps can be purchased once and do not expire, such as additional filters in a photo app. Apple can host content associated with your non-consumable in-app purchases.

Non-Renewing Subscriptions
Users can purchase access to services or content for a limited time period, such as a season pass to streaming content. This type of subscription does not automatically renews. So users need to renew it each time.

Auto-Renewable Subscriptions
Users can purchase access to services or periodically updated content, like a weekly subscription to a magazine or monthly access to cloud storage. Users are charged on a repeated process until they decide to cancel.

85% Net Revenue After One Year

The net earning from the app or the revenue structure for auto-renewable subscriptions differs from other business models on the App Store. During a subscriber’s first year of service, he will receive 70% of the subscription price at each billing cycle (minus applicable taxes). After a subscriber acquired one year of paid service, his net revenue increases to 85% of the subscription price (minus applicable taxes).

Here’s how it works:

  • Auto-renewable subscriptions on all Apple platforms are eligible.
  • Includes paid introductory periods (pay as you go, pay up front).
  • Excludes free trials and bonus periods.
  • Upgrades, downgrades, or crossgrades between subscriptions in the same group do not affect the one year of paid service.
  • A move to a subscription in a different group resets the days of service.

If a subscription is no longer active, for example: Due to a billing issue or a cancellation the days of paid service stop accumulating toward the one year of paid service needed for an 85% proceeds rate, unless the user renews it within 60 days.

Apple’s commission

Selling physical products through an app is not subject to this commission because they are not delivered nor consumed through an iOS device. The same goes for digital products, where the main or original product is not consumed on your device. Pretty fuzzy, right? There are so may discussions a few years back about this subject, more specifically related to electronic tickets. Let’s imagine an app selling tickets for public transportation and the tickets are both delivered and consumed through the app. So Apple would demand their 30 percent cut, right? No. Instead, it was concluded that the core product is the transportation itself, not the tickets.

So what about you?

Considering an app for a subscription-based service? Now you know the rules to consider when facing the Apple terms of service. But keep an eye open, for that rule might change in the not so distant future.

 

Post by Upoma Ahmed

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