Comments on: Apple refund clause: Bad for developers?

A clause in the App Store contract regarding refunds to customers could require developers to pay an extra fee that lets Apple still make money off returns.

Is this clause unusual for on-line resellers? Did you speak with developers of any other on-line resellers? What makes you think this will bankrupt developers? If Apple delivered the product and processed the credit card info....why would they not be entitled to their fee?

Did you do any additional research before you published?

[chrisfrary]

Well my guess is that the average iphone developer is a one man shop. If the application is sold only a few dozen times and they all returned this could be a small problem or a big one. If that person already doesn't have a job and spent the last month or 2 just developing this app with the last of their money. I can see how this could happen, but you would have to assume all developers are in this sort of state.

[Seaspray0]

I could accept a clause like this if developers had a choice to sell their wares through another venue. However, that's not the case. Apple restricts all apps: 1. they must be approved by apple, 2. they can only be distributed through ituens, 3. apple gets 30% of the take, and now 4. developers have to pay above what they are receiving for each app returned.

I'm not surprised developers aren't screaming bloody murder at this monopolistic treatment.

[SiliconValleyJoe]

It is amazing what people are writing here.

"Apple is doing little". Really? So you, as a developer, is doing all the international marketing? AppStore expansion, support, hardware leasing, support, 24/7 NOC operations? You are maintaing your own website, sales and making your own App available to an international clientele?

Does anyone have any common sense left these days? Apple does not set your product pricing. You can add an additional 30% to your sales price so that the 70% you receive is the actual 100% price you want. This is Kindergarten business. Please do not claim that you cannot charge that much. That is NOT Apple's problem. In any business, the manufacturer (you) has to decide the price and determine whether it is worth making a certain product to sell at a certain price. Do you own market and business research before jumping in.

Every business has cost of doing businesses and iPhone developer has some too. So price that cost into your product price! If you do not, it is NOT the responsibility of Apple.

Now 30% is truly a premium, Apple should lower it to 15%-20% as a return surcharge.

Again, this whole thing is exaggerated. Unless developers are selling nothing and thus are complaining when they sell one and have one returned, most are still making a profit if they know how to make "sticky" application.

[butchlajuan]

giving back double to many times will bankrupt anyone. i guess the developers are counting on few to return anything. the are making plenty of money, think about it.

[SiliconValleyJoe]

Let's NOT get carried away.

There is NO DOUBLING. You are wrong. It seems few people are business people and few understand the cost of doing business.

My product sells 1000 copies at $5 each and Apple pays me $3500. Customers returned 20% of my product and that totals 200 copies. I cut a check of $1000 to Apple and I still earn $2500. 20% return rate is extremely high.

If return rate is 10%, my cost is $500 and earning is $3000. If the rate is 5%, cost is $250 and earning is $3250.

If my product sells only 1 copy and I must pay back $5 resulting in a loss of $1.5, may be I should get out of this business? If I cannot make something that can sell and I cannot afford the $1.5?

Has anyone asked this developer who complained what was the financial damage? How many copies did he sell? What was his revenue before the return-charge? How much was his return-charge to Apple? How much profit did he make?

Finally, Apple hosts the software and provides all engineering and marketing support as well as servers, bandwidth, back-up and etc. It is not free.

[sparrowhyperion]

A clause like that ought to be criminal. If APPLE CHOOSES to give a refund, they should forfeit THEIR cut as well as the developers. Then again, thew morons over at Apple are a greedy bunch of goobers anyways. I seriously hope someone outdoes them and puts develops hardware good enough to to beat the Ipod and Iphone; Both of which are very overrated and extremely overpriced. People talk about the MickeySloth monopoly, well, Apple is just as bad, if not worse because of how much they ream their customers for their overpriced trash...

[NewsTrader]

I agree fully. The entire clause is ridiculous. Although our firms apps are unlikely to suffer from as many refunds due to "boredom, etc" as others, the entire process should be reviewed or at least have a bi-lateral approach considered whereas the developers are allowed to have some say in the process. This only compounds some of the issues already present on the app store such as reviews being completely disconnected from the developers. Perhaps OS 3.0 will see some revisions of the entire process to more align with a proper application delivery and payment turnkey solution.

Jacek M
CTO
TradeOffNews

[blogbrowser]

Sounds to me just like the restocking fees paid to many companies if you return an item. A little steep maybe, but certainly not criminal. Once again, if you work hard, provide a good service, and are fortunate enough to become wealthy doing it, there will be many people treating you as if you made all your money off their back. It seems like it has become a crime to be wealthy in America these days.

[nachurboy]

It's nothing like a restocking fee. A reseller is recouping their margin. They bought the thing for say 80% of sale value, sell it for 100%. If it gets return, they keep 15-20%. A developer who accepts this will lose money because they have 70% margin, but are required to refund 100%. And it's obviously not a crime to be wealthy, since Apple, for doing very little, gets a 30% margin, even if it's returned. It's the little guys like the developers getting shafted since it's Apple who decides whether to process a refund or not, not the developers.

[Gorbag]

Criminal? If a developer is selling apps not as advertised, and Apple agrees with the consumer and refunds their money, how is that criminal? Bad developers should be reimbursing Apple for Apple's costs, and instead concentrate on providing the value promised.

[nihouma]

^^Apple is not some kind of saint or messiah that must be compensated for taking the time to even give a nod to us mortals. Seriously, Apple gives devs 70% of the price, so devs should only refund 70% of the price. What if I bought a Logitech mouse, decided it wasn't quite what I thought.What a world it would be if Wal-Mart, the place I bought it from, go to Logitech, and say "Hey, I bought this from you at $15, but someone returned it at the price I put up at $30, so you owe me an extra $15!"

[viper396]

If it becomes a crime then practically every store and product manufacturer is guilty of it. This policy is no different then what happens in alot of retail stores. Have you ever wondered why some products often have notices on them asking you to call the manufacturer directly instead of returning the product to the store if there is a problem? Store returns cost the store money who then passes that cost onto the manufacturer who not only has to deal with the returned product but has to replace it as well. Returns traditionally cost more to the manufacturer and is often the motivation to provide a quality product that won't get returned in the first place.
In this case Apple is the retailer and the manufacturer is the developer.

Either way, when has it become a crime for anyone to succeed and make more money then others? God forbid that your wish for "someone" to outdo Apple actually happen and you then accuse them of also being criminals.

[another_cissp]

It seems fair to me. The only developers that are going to go broke over this clause are the bad ones. You would need for 70% of your applications to be returned before you would lose money, if I did my math right.

[Seaspray0]

No, you did your math wrong. It all depends on the profit margin. In general, many products being sold today only have a profit margin of a few percent (i.e. 3%). In a case like that, if you had a 1% return rate (which is considered low for many products), you'd lose 15% of your companie's profit (2% returns = 30% of the company profits). Software profits tend to be higher so it's not as bad, but if you had 70% returns, you'd go bankrupt very, very fast, even with a very high profit margin.

[renGek]

Your assumption is that the developer wrote bad software. What if someone wrote a game, person bought it and tried it out for a week and then decide they don't like the game any more and return it. What if you bought an app and you're a hacker and you make a copy of it then return it. What if its like music where it sounded great on the radio this morning and you play it 1000 times over the next 24 hours and then the next day you grow tired of it.

Though I doubt apple will let a developer lose a lot of money because that would be a pr nightmare and the app supply would dry up. Then again, mega corporations have been known to do really stupid things.

[Arbalest05]

It's an old saying: "Live by the sword, die by the sword". Replace "the sword" with Apple.

For the iPhone developer, by the time they accept the fact that they are putting their lives in Apple's hands, this reversal-of-profit-upon-return clause should be no big deal. This isn't a democracy here folks - it's Apple.

[paul427454]

Seems to me that Apple Corp is doing the very same stuff that has us in the place we are in as a nation, they are asking for money they have not earned, and are using the "what the market will bare" mentality that does not work when coupled with greed. Frankly I will never buy an apple product based on this business model. With the greedy "bastard" mentality your money is worth less now because we put in a trillion dollors in the system. printing new money has never made old money worth more.

[NeverFade]

Just FYI,

Apple Corp is the recording industry that The Beetles created.

Apple Inc, or just Apple is the manufacturer you are referring to.

[Boomstickedition]

Neverfade, I don't know who The Beetles are. Are they a new insect rock band or something? The Beatles on the other hand were pretty good.

[Mr. Dee]

How in heavens name are you going to use the iPhone as a study aid? That's ridiculous, go to your room, open a text book, read, understand and apply. The iPhone is a multimedia device, its good for some things, but its not a replacement for text books and traditional teacher to student interaction. We love to use technology as an excuse for everything.

[172pilotsteve]

The bottom line is that it's a civil contract, and nobody makes ANY developer agree to it. If enough people pushed back, it would change, but just like the average EULA, I'm sure most developers just accept it and go on.

The real answer is to let the developer set their own return policy for their apps, so they could protect themselves from the problem if they want, and then the CONSUMER would have the choice of whether the APP was good enough to buy even if there's no chance to return it. Not everything can be returned, even in a retail store.

-Steve

[Dalkorian]

by 172pilotsteve March 26, 2009 6:49 AM PDT
The real answer is to let the developer set their own return policy for their apps ...

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Riiiiiight, because there is no such thing as an unethical developer out to rip people off.

[samkass]

I've seen this once or twice with my ChessClock app. It's even a little worse than the article implies. Since Apple only deals with developers via direct-deposit, essentially they're withdrawing the money directly from your bank account. It essentially shows up as a negative-priced sale on your report. Of course, of the thousand or so downloads ChessClock got, I only got 2-3 refunds, so it's didn't exactly break the bank.

[JaneiPhone]

"So essentially, if Joe iPhone plays with this developer's $10 App for a while, decides he's bored with it and manages to convince Apple to give him a full refund, the developer will have to return not only the $7 he got from the sale, but also an additional $3 he never saw."

Apparently, many developers have read and understood this clause. Thus the "Lite" (free trial) versions of apps.

Boredom is not the issue. Many apps turn out to be duds. They don't perform as advertised. You could argue that Apple ought to exert more control, and that apps should live up to the Apple standard in the first place. Very well. Then Apple should stand behind the products and take the financial hit alongside the developer. However, Apple seems to have opened the floodgates and applies only mild standards, letting everybody take a crack at success. A developer should take the risk, considering what he or she is getting by way of distribution, marketing, and sales support. It's not "money he never saw". If he sold the app on his own site, he'd have incurred similar expenses, with arguable lower sales figures.

In order to lose serious money, he has to make an app that is terrible quality, but promoted well enough to lure a lot of people into buying (despite bad reviews). It has to be overpriced. Few will go to the trouble to ask for a refund of .99 or $1.99. We'll delete and move on. By the time the first refund requests start coming through, the developer has had feedback and the opportunity to fix any problems and provide updates. He would have to have an enormous percentage of refund requests versus sales to be bankrupted by this system. I imagine the product would have been pulled from the iTunes Store long before that many refunds could be processed.

But the real news here is that there is even a possibility of refunds!

[Seaspray0]

And how do you define an app as being good/bad when one like the fart machine makes a great profit? Does that means an app that only plays fart sounds is a good app?

[Dalkorian]

Take a step back and get back in touch with reality, Seaspray0. Does the app offer what was promised? THAT would be a "good" app in most people's books, apps that failed to deliver what they promised would be "bad" apps.

If I downloaded the fart machine because it promised to make fart noises, I expect it to make fart noises. If it does, I'm satisfied. If it promised to make me lost weight and it only made fart noises, I would be upset.

[nicmart]

Apple has always engaged in more than its share of disreputable business practices. Nothing has changed.

[etshea]

what disreputable business practices are you referring too?

[shadowself]

WRONG.
You state, "The clause basically says that if for any reason a customer wishes to return a previously purchased iPhone application within 90 days, Apple "may" choose to give a full refund." The "if for any reason" is totally wrong. The paragraph states particular reasons both technical and legal. If the developer is selling apps that fall into those specific reasons, then they deserve to have to pay.

[usarioclave1]

Well actually, anyone who takes CC payments has the same issue. Depending on how the refund is done, the CC vendor may charge you with an extra fee (chargeback fee), which is usually about $10. If you sell for < $10, you're SOL.

[johnqh]

Nonsense.

First, this clause is not new. It has been in the contract from day 1. Nothing has changed.

Second, Candace Lombardi has no idea how e-commerce works. The payment gateway for credit card charges a fixed fee + a percentage for each transaction, for example 15 cents + 3%. A 99-cent app costs Apple 20 cents to process. Then, the refund is ANOTHER transaction. When a 99-cent app got purchased and then refunded, it costs Apple 18 cents x 2 = 36 cents.

You tell me what Apple should do in this case.

[Seaspray0]

How about give developers the ability to sell their apps without going through apple? Everyone else gives developers that option.

[johnqh]

Seaspray0,

Is that even related to this topic?

If a developer has his own e-store and merchant account, the refund will cost him 40%. Do you think that if a developer has his own store, the refund has zero cost?

Or, you mean that the developer should set up a table by the roadside, take cash, and send the app to the customer somehow?

[skycorgan]

Apple is reflecting the cost of doing business.

Let's say I make a clock application that tells people the time, and I charge 10 USD for it. Apple took $3, I took $7. Now, 100 users download my app, only to discover that I as a developer live in Arizona and have some grudge against Daylight Savings Time. As a result, the clock app doesn't work for 1/2 of the year for people in 49 states. So 80 of those people ask for refunds; that takes a lot of time, work, customer service, etc. to correct an issue caused by a 3rd party developer.

So then someone says, "Apple should examine the apps more closely before putting them into the store." How short everyone's memory is, as Apple was doing just this during the launch period and everyone complained about how their app couldn't get published because of Apple's extended review period and stringent guidelines.

As the reseller, they have to have some way of ensuring that they aren't going to be the ones covering customer service costs for bad applications, and still balance that against being able to allow developers to quickly deliver their wares.

Some would say that the amount is too high; others would say that is the free market at work in the purest form. If you don't like it as a developer, develop for a different mobile platform. If your program is good enough, it may become the catalyst for driving the other platform.

[sandman619]

So, since the App Store opened, after millions of paid downloads, has even 1 refund transacted ? This seems like a non-issue really. As for Apple releasing itself from the obligation of refunding their fee... When a physical item is ordered & shipped, most likely the shipping fee won't be refunded. When it is, the seller is is wholly liable for that amount, not the shipping service. The same is true for credit card purchases. A percentage of every credit card sale is retained by the credit card processor. No processor refunds their fee, the seller makes good on that amount, plus, the credit card processor charges a fee for processing the refund as well

Cheers !

[kyleman2k]

This is ridiculous. I can't believe another reporter picked up techcrunch's trash. Apple's Itunes TOS explicitly says that all sales are final, UNLESS there is a technical or legal problem that prevents a user from using the application. Refunds are not given to users who simply get bored of a game, or get buyers remorse after buying the $1,000 "I'm Rich" application.

This policy is not criminal. The only malicious act that's been committed has been from CNET and TechCrunch for trying to make Apple look like a bad guy.

[execulive777]

Apple reminds me of Amway, little people push products that are over priced and underperform

[MooseBoys]

When you're dealing with a legal monopoly, expect to get shafted. As long as developers accept these agreements they'll continue to get worse.

Now will someone please create a decent alternative to the iPhone already? Please? Despite all its shininess, for some reason the Apple logo makes me vomit. I think I know why now at least.

[dlsith76]

Apple refund clause: Good for consumers? Developers dont make garbage and it wont get returned! Apple dose a lot of questionable things but the reality is they are providing the platform here. If developers dont like it let them make apps for blackberry or palm, GOOD LUCK.

[cmw1025]

This is purely speculation, not fact that they will be charged the 30 %