iPhone app refund could bankrupt developers

As the iPhone AppStore gets more popular, Apple has made significant changes the way refunds and policies are handled. As the new contract is rolled out, many developers are left scratching their head that their next big application could bankrupt them.

Apple takes 30% commission off every sale, leaving the developer with 70% of the sale going directly to the developer. The new refund policy allows users to request a refund for an application, up to 90 days of purchase, where the developer must refund 100% of the credit to Apple, not the 70% they were given.

The policy change could potentially bankrupt developers if users started requesting refunds after the payment has been made. Apple would still hold onto its 30% of commission, leaving the refund in the developers hands to deal with.

In the clause in the actual contract, Apple states its hold on the refund policy:
In the event that Apple receives any notice or claim from any end-user that: (i) the end-user wishes to cancel its license to any of the Licensed Applications within ninety (90) days of the date of download of that Licensed Application by that end-user; or (ii) a Licensed Application fails to conform to Your specifications or Your product warranty or the requirements of any applicable law, Apple may refund to the end-user the full amount of the price paid by the end-user for that Licensed Application. In the event that Apple refunds any such price to an end-user, You shall reimburse, or grant Apple a credit for, an amount equal to the price for that Licensed Application. Apple will have the right to retain its commission on the sale of that Licensed Application, notwithstanding the refund of the price to the end.

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This is crazy. It's already very difficult to work with Apples rules on the App Store and now they are doing this? Ridiculous.

If the app in question is not faulty but the consumer decides they don't like the app or it was not what they imagined, then reimburse the consumer 70% of the purchase price...

If it takes you 89 days to decide you don't like the app or it isn't what you imagined you're outside the time limit for any refund according to UK Consumer law. The best you can hope for is the 7 day cooling off period, where you can request a full refund, no questions asked. This applies particularly to distance selling, such as online purchases. If you take longer to realise that then that is your own fault.

Warranty, where a product that should be reasonably expected to last or work for n days / weeks / months / years subsequently fails / breaks is a different matter. Even then you aren't necessarily entitled to a full refund as you had use of the (fully working) product before the breakdown.

In any case, if a product is faulty, how can Apple legally justify keeping part of the fee? A faulty product is a faulty product and Apple does not have any legal standing to "fine" a developer 30% of cost.

I think Apple should just handle it like most other online vendors do. If the app in question crashes, freezes, causes error, consumer gets 100% of the money back, developer pays Apple the 100% of the price, Apple keeps the 30% for hosting a bad application and the transactions involved. If the app in question is not faulty but the consumer decides they don't like the app or it was not what they imagined, then reimburse the consumer 70% of the purchase price, keep the 30% of the purchase prices as something like a re-stocking fee and ask the developer to pay Apple the 70% of the purchase price back. That way you avoid the wise guys that think it to be a great idea to buy an app/game, play or use it for 89 days and then request a refund. That way, Apple makes their 30% in any event and the penalty is absorbed by the responsible party.

If implemented sloppily, such as a simple click to return, this could be an effective tool demolish your competition.

Create an automated process to:
1. Buy an app.
2. Return it.
3. Goto 1.

You get all your money back, your competition just got 30%'ed to death.

Reading on the net : after the 3-4 refund, you will not have another refund.

And every refund require a valid excuse.


I know that after 90 days I could get tired of almost anything and the policy to refund could very well allow me to expand my feeding frenzy for iphone apps. Kind of like try before you buy. This is the way it should work. Protect the consumer at any cost and if the developer has a problem then he really shouldn't be developing.

Also, what keeps Apple from holding onto the full purchase price for 90 days and on day 91 they release the developers 70% and they take there so unfair share. If during the 90 days there has been a request for refund then the complete 100% is refunded to the consumer. The developer is not out, and Apple looses nothing. If the developer requests live payments then the developer eats the 30% if a refund is requested. Seems like a no-brainer to me.

The bottom line is to protect the consumer at all costs...

Night Prowler said,
I know that after 90 days I could get tired of almost anything and the policy to refund could very well allow me to expand my feeding frenzy for iphone apps. Kind of like try before you buy. This is the way it should work. Protect the consumer at any cost and if the developer has a problem then he really shouldn't be developing.

Also, what keeps Apple from holding onto the full purchase price for 90 days and on day 91 they release the developers 70% and they take there so unfair share. If during the 90 days there has been a request for refund then the complete 100% is refunded to the consumer. The developer is not out, and Apple looses nothing. If the developer requests live payments then the developer eats the 30% if a refund is requested. Seems like a no-brainer to me.

The bottom line is to protect the consumer at all costs...


So by that logic you should just let the consumer get a 100% refund every time they ask for it. Theoretically I could just buy the same app over and over, and refund it every time. If I did this I could actually directly bankrupt the developer. If the developer is bankrupt he will no longer make apps for the app store. If developers hate the refund plan and leave, there will be no consumers because there will be nothing more to buy. So really, if you protect the developers you also protect the consumers because they will have something to buy. Think about the damage that can be done to developers if a mass amount of people wanted to refund a game.

Now imagine if I have a competing product and want to run my competition out of business really fast. I just need to start a buy and refund campaign, a few weeks of that should be enough to have any developer pull thier app.

(Or what the post after this said... I really should read the whole thread next time.)

With the Last.FM fiasco, and can understand the app developers to be scared of that policy. It's not like it is their fault if they developed an application and got shot in the back.

awww apple continues to amaze me with their idiocy. it seems to compound every time they do something. it's also funny to still see their beloved fanboys defending them when the only explanation for defending them is stupidity and ignorance, or perhaps just lunacy. classy indeed.

This is a well known bargaining method. Propose something even more outrageous than what you really want, then back down to what you want when there's too much backlash.

As a developer this measure is not strange. For example some merchant charge you $6 (plus the payment) for every refund and still exist a lucrative market for indies

The difference is how easy or hard is to ask for a refund and how pre-requisites are enough to ask for a refund, a single "i don't like it" can't be enough in some cases.


Give it about 3 days and we will get "We listened to feedback and changed blah blah." When meanwhile they should have known to begin with that this is outrageous.

You would actually have to be an idiot to develop anything for the iPhone now, the app would actually have to be life changing for people not to keep it for 89 days then get a refund.

Are games sold in the app store? If so then this is ridiculous, since people will just complete them then get the refund...

Bravo Apple, Bravo.
That's totally killed any possibility of development on the iPhone for me - who needs innovation anyway when Apple do it all </sarcasm>

In other words, when a refund is issued, the customer gets 100% of their money back, Apple keeps their original 30% cut which the developer takes as a loss.

Only Apple could develop and implement a mechanism where they "win" even when the customer gets a complete refund. Class act.

I don't see it as being that bad. Currently when people ask for refunds don't Apple just eat the cost? They can't keep doing that. The 30% is meant to be for the costs on their end (taking payment, maintaining the app store) there's obviously their profit but most of the other costs would still be a cost regardless, even if they refund the payment they still have to pay payment processing.

Don't release ****ty apps, while promising it's not ****ty.

You have a valid point about not developing crap. However, that doesn't make this policy just.

If a refund is being given, how is it fair that the developer has to take a loss while Apple makes a profit? A refund is basically a reversal payment. In a sale, Apple gets their cut, the developers get a cut. If there's a refund, Apple should return their cut and the developers should return theirs.

If you want to argue that Apple shouldn't have to swallow the costs of maintaining the app store or arranging payment, how about the developer who made the app in the first place? There's a cost there too.

Given that Apple are supposed to screen applications before they are released meaning that if a refund is required, both the developer failed and Apple failed. The developer shouldn't have to suffer because Apple approved their application.

Not happy about that. I was about to start deving more seriously for the iPhone but will seriously think about that knowing this.. I'm sure there will be responses of 'well... don't release rubbish applications', which I don't intend to, but just knowing this is physically *possible*, is unnerving.

This is due to Google's Android platform. Google 1st only allowed published apps that were "free". There about to or just know releasing apps that have to be paid for but have a refund period.

Since developers that wanted to charge for google apps on android, they new this was coming from the start... unlike apple developers...

Yea, Apple is really screwing up. I knew they would show their true colors some day after they got TONS of people hooked on their products. I have a 30gb iPod but I think I will be getting rid of that soon.

Huh, I remember one person commenting saying that as Apple becomes really sucessful, they will shoot themselves in the foot. Looks like their loading the clip right now.

andrewbares said,
Huh, I remember one person commenting saying that as Apple becomes really sucessful, they will shoot themselves in the foot. Looks like their loading the clip right now.

With $25 Billion in the bank, I'd say they are a tad bit successful.

Another wrong move by Apple. I can see this in the on the News now. The only way to get them to change, is for developers to pull out totally from the store and then they may see what idiots they are starting to become.

i think it is the point.

If was easy for ask for a refund at whim, then i can abuse of the system purchasing a game and later asking for a refund.

Or may be the way to ask for a refund is to send a letter to Apple, asking for a refund because a problem / lack on functionality in the application.

Apple best marketing company in the world.. Not the best company or computer company.

I hope that they experience a mass exodus of developers immediately. They need to remedy it now.

Maybe it was meant to be read that it was a refund of 100% of the 70% the developer receives. Apple still keeps the 30% for hosting and marketing.

We are talking about Apple aren't we...they do not believe in sharing, open source or price shoppers.

mrmomoman said,
We are talking about Apple aren't we...they do not believe in sharing, open source or price shoppers.


Apple is far more open source friendly than Microsoft. Much of their OS is built on BSD (which they re-release as the Darwin open source project), their browser is built on Webkit (a fork of Konqueror) which they release as open source. Perhaps you should look through their open source developers page before you make yourself look ignroant: http://developer.apple.com/opensource/index.html

Heh. Apple OS X Server is nothing more than a collection of freely available open source projects streamlined in a GUI and sold for a hefty profit. How much of that profit do you think goes back to those open source projects?

C_Guy said,
Heh. Apple OS X Server is nothing more than a collection of freely available open source projects streamlined in a GUI and sold for a hefty profit. How much of that profit do you think goes back to those open source projects?


Apple contributes back to open source projects depending on the terms of the license. Of course, since you are so heavily biased against Apple, you probably wouldn't believe anything good that anyone tells you about Apple anyway.

What the initial commenter meant by "open source" was letting everything be open. Apple definitely does not do that. Look at the iPhone. You have to pay Apple and get approved by them to write a program. Definitely not open. With their OS, you can only run it on their computers. Once again, not open. With their new Shuffle, product makers have to pay Apple and get permission to design accessories for the Shuffle. Not open.

I don't like this, As a consumer I would love to get full utility out of an app for 89 days and then get all my money back, but I don't think that's fair to the developers.

I don't want to start any wars here, but lately Apple has been looking very grim in terms of business. I don't understand, they were looking very positive with announcements like the iPhone 3G, and a potentially new iPhone, but these iTunes price changes and refund policies are complete crap.

Apple is learning to control the distortion field.

New Product = Big Plus
New refund policy = Unpublicized Minus
Overall = Big Plus with hidden catches.

Instead of refunds why not just make every app on the Store free for say 24 hours so the customer can check it out and if they like it after the 24 hours they can purchase it.

profets said,
yeah, that makes a lot more sense. a 90 day return policy seems way too long

I doubt I will be using apps after 3 months. So I'll just do exactly that. Sod the developers, I'm getting me money back.

C_Guy said,
How will Apple make their profit on a refund if they do that????


Read the article.

It said that Apple will still keep their 30% commission while the developer has to pay the entire refund out of his own pocket.

I agree, Apple should give a trial period on apps so people can decide if the app is worthy of their money before purchasing.
Now how long that trial lasts? I say it depends on the program.

Yes! I can see it now, a new innovation from Apple! Trying software for a short period of time before handing over your money...as if they were, say, "sharing" the experience of using the software with us temprorarily. They can call it...shareware!

Quickly, to the patent machine!

Sorry Apple, but that's not on.

You can't make developers refund more than they were given in the first place. What were the PR department at Apple smoking when they come up with this?

richardsim7 said,
Money

lol so true. When are fan boys going to relies that apple is just as evil as any other corporation. The only difference between apple and say dell is that apple is willing to pay more money to create this image of them being these kooky artist that love there consumers. Always remember that they run on money and they will do anything to get more of it even if that means creating an image that they aren't money grubbing whores. Treat a corporation like you would any animal because that's basically what they are.

I don't like this. We should refund Apple the 70% we got.
This might make me reconsider my entry into the iPhone development market.

Wow - that seems harsh but maybe it will push the quality of the Apps in the App Store up a little. I get the impression with some Apps that they've been rushed out to release ASAP.

No, it will kill the quality of Apps in the app store, because noone will want to develop iPhone applications anymore.

Even if I found the holy grail of iPhone apps, I wouldn't release it for fear of bankrupcy.

Majesticmerc said,
No, it will kill the quality of Apps in the app store, because noone will want to develop iPhone applications anymore.

Even if I found the holy grail of iPhone apps, I wouldn't release it for fear of bankrupcy.

Uhhh if it was the holy grail of apps then why would they be worried about refunds? If it's so great i doubt people are going to need a refund???

Steven77 said,

Uhhh if it was the holy grail of apps then why would they be worried about refunds? If it's so great i doubt people are going to need a refund???

OK maybe not the Holy grail, but you know what I'm getting at.

Steven77 said,


Uhhh if it was the holy grail of apps then why would they be worried about refunds? If it's so great i doubt people are going to need a refund???


Because people are flakes. Even great products get returns, and perfect software might not be exactly what a particular person wanted for their purposes. Someone might change to a different phone--they won't need that iPhone software anymore.

Seriously now, anyone with even a minimal amount of experience in sales and business knows that the quality of the product only contributes a fraction to its success.

This doesn't surprise me. Apple pulls this crap all the time. They think they're better than everybody else so why not have their cake and eat it too?

If I was an Apple developer I would run for the hills.