Thursday, December 8, 2022

Twitter Blue pricing plans ($7/month through web, $11/month through App Store) leaked: app makers must hassle users due to Apple's in-app purchasing rules

It's becoming clearer what Twitter acquirer Elon Musk and Apple CEO Tim Cook agreed upon when they met at Apple Park.

At a time when Apple's astroturfers and other lobbyists are fighting hard to dissuade Congress from enacting the Open App Markets Act (see this tweet by Epic Games CEO Tim Sweeney), Mr. Musk apparently prioritized Twitter's portion of Apple's advertising budget--presumably also hoping that Apple's presence on Twitter would affect other advertisers' view of the now-controversial platform--over long-term strategic interests that also matter to Tesla. Tesla will be competing with an Apple Car in a few years' time. Before that happens, Apple's and Google's "digital carjacking" may already have succeeded and Tesla may have no choice but to adopt Apple CarPlay and Android Auto.

Another part of the Musk-Cook peace has apparently just been leaked to The Information:

While Apple will formally subject the Twitter Blue subscription service (which started at $8/month with limited availability, but will be relaunched shortly on a much larger scale) to its app tax, Twitter will make the subscription 36% cheaper if purchased through the web: $7 vs. $11.

That steep discount is unusual. By comparison, Tencent-controlled Supercell offers web options for some in-app purchases at price points that let the app maker and its customers split the gains of bypassing the app tax: customers pay significantly less, but the app maker makes more money than otherwise. And the in-app purchasing options offered by those games are actually taxed at the maximum rate, which in some countries even exceeds 30%, while Twitter Blue is a subscription service and the reduced app tax (of 15%) applies from the 13th month of a particular customer's subscription. So, for customers that remain Twitter Blue subscribers for more than a year, Twitter's income from a $7/month subscription (let's ignore the 2-3% that a third-party payment processor will charge) is approximately 25% lower than the $9.4/month Twitter would get after deducting the reduced app tax.

The question is now what Twitter's long-term plans are. Psychologically, the difference between $7/month and $11/month appears massive (it feels like paying almost twice as much on iOS as on the web), and Twitter won't be affected too much by Apple's anti-steering rules as it gets lots of publicity and people will be talking about this on the social network itself. The vast majority of Twitter Blue subscriptions will likely be made through the web. Therefore, the $11/month subscription price on iOS can be viewed as almost prohibitive.

We may never find out whether the two CEOs agreed on these price points. Maybe all that Mr. Cook told Mr. Musk was that Apple would be fine with Twitter benefiting from App Review Guideline 3.1.3(b):

3.1.3(b) Multiplatform Services: Apps that operate across multiple platforms may allow users to access content, subscriptions, or features they have acquired in your app on other platforms or your web site, including consumable items in multi-platform games, provided those items are also available as in-app purchases within the app.

Twitter is an app that operates across multiple platforms, and unlike certain games that offer IAP items through the web but aren't playable as web games, the subscription in question can actually be used when accessing Twitter through the web. The $11/month option to sign up on iOS satisfies the requirement that "those items are also available as in-app purchases within the app."

The multiplatform services rule is similar to the reader app exception that was at the heart of a Japanese antitrust settlement. That "Reader" Apps rule is App Review Guideline 3.1.3(a). Twitter couldn't argue that users of its iOS app merely consume "previously purchased content or content subscriptions (specifically: magazines, newspapers, books, audio, music, and video)." So Twitter will have to rely on the Multiplatform Services rule.

Apple's rules do not come with Amazon's controversial policy--also called a "most favored nation" clause--that any product must be sold on Amazon at a price that is equal to or lower than the price on other sites (including a seller's own website). The State of California filed a lawsuit against Amazon over that one in September.

If more companies do what Twitter has in mind, iOS users will at some point go to app makers' websites as they would expect to find better deals there. That wouldn't be a positive development for privacy and security. Bad actors would create fake and fraudulent apps to take advantage of it. It appears that Apple would rather let its app tax erode than do what would be in the interest of end users and the competitive process: to allow third-party app stores as well as third-party payment options.