Power

A new email startup says Apple’s shaking it down for a cut of its subscriptions

Hey launched its email service on Monday morning. That's also when Apple started demanding it change the way people pay, or risk getting thrown out of the App Store.

Hey app

Hey doesn't let users sign up or pay in its iOS app, but Apple's demanding that they do so.

Image: David Pierce/Protocol

Right around the time the team at Basecamp was launching their Hey email service to the public on Monday, Zach Waugh, Basecamp's lead iOS developer, got a distressing email. The second version of their iOS app, 1.0.1 — with a few bug fixes from the original — had been rejected by the App Store reviewers. It cited rule 3.1.1 of Apple's guidelines for app developers, which says in essence that if you want people to be able to buy stuff in your app, you need to do it using Apple's payments system.

Waugh and Basecamp didn't think that rule applied. Hey does cost $99 a year, but users can't sign up or pay within the iOS app. It's an app for using an existing outside service, just like Basecamp's eponymous platform — and Netflix and Slack and countless other apps. "So we were like, OK, maybe we just got the Monday morning reviewer," Basecamp co-founder and CTO David Heinemeier Hansson said. Lots of developers over the years have found that their app-review luck sometimes depended on who happened to be looking, and whether they'd had coffee yet. So Basecamp fixed more bugs, submitted a new version — 1.0.2 — and hoped for the best.

The app sat in the queue for review, then in the "under review" status for far longer than usual. Then Waugh got a phone call. The Apple reviewer said he was calling because the new app hadn't resolved the issue with rule 3.1.1. The issue had been escalated internally, and Apple had determined it was a valid rejection — the only way to move forward would be to implement Apple's payments system. And not only that: Waugh was told that Apple would like a commitment and a timeline for implementing the payment system, or Apple might be forced to remove Hey from the App Store entirely.

When Waugh and Basecamp pointed out that there were many other apps — even email apps like Spark or Edison — that allowed users to log in to their existing accounts without signing up through Apple, the reviewer told them they wouldn't discuss other apps. And that was that.

On Tuesday afternoon, Apple sent Basecamp a slightly softer written notice. "We noticed that your app allows customers to access content, subscriptions, or features they have purchased elsewhere, but those items were not available as in-app purchases within the app," it said. Because Hey didn't qualify as a "Reader" app, Apple said that existing subscribers could log in as normal but Hey needed to make all subscriptions available to new users as in-app purchases.

Apple told me that its actual mistake was approving the app in the first place, when it didn't conform to its guidelines. Apple allows these kinds of client apps — where you can't sign up, only sign in — for business services but not consumer products. That's why Basecamp, which companies typically pay for, is allowed on the App Store when Hey, which users pay for, isn't. Anyone who purchased Hey from elsewhere could access it on iOS as usual, the company said, but the app must have a way for users to sign up and pay through Apple's infrastructure. That's how Apple supports and pays for its work on the platform.

As Heinemeier Hansson pointed out to me, it's bold timing for Apple to take such a strong stance. On Tuesday, the EU announced it is opening two antitrust probes into Apple's App Store dealings, looking into the way Apple uses its platform to squash competitors. Spotify has been complaining for years about Apple's App Store tax, its feature restrictions and more. On Tuesday, Kobo joined the complaint, calling it anticompetitive for Apple to both operate its own book store and to charge a 30% commission on all books Kobo sold on Apple devices. "Apple's anticompetitive behavior has intentionally disadvantaged competitors," Spotify said in a statement to The Wall Street Journal, "created an unlevel playing field, and deprived consumers of meaningful choice for far too long."

It also comes a day after Apple touted that the App Store ecosystem facilitated a whopping $519 billion in 2019. That number includes things like Uber rides, food delivery, plane tickets booked in Expedia apps, and the like. Apple said it only took a cut of less than 15% of those dollars spent. As Apple continues to shift its focus to services, and to growing that part of its business, it may look for ways to get a cut of the other 85% of the money flowing through its platform.

Heinemeier Hansson said he's been hearing stories like this from developers for years — he even testified to Congress earlier this year about the anticompetitive practices of Big Tech. That testimony earned Basecamp some friends in high places, and Heinemeier Hansson said he's been talking with the Department of Justice in recent months and plans to reach out both to Congress and the EU about this issue.

But even as he ranted furiously about Apple's actions, Heinemeier Hansson said he was worried about the repercussions. "If we can't have Hey on iOS," he said, "we're nowhere. We have to be on the biggest platform in this segment, and Apple knows that." When he tweeted about the app's initial rejection last week, he got a number of responses from developers who would privately rail against Apple's policies but publicly make excuses for the company. "You listen to some of these app developers, and they sound like hostages," Heinemeier Hansson said. "They sound like they're reading a prepared statement, because otherwise Apple could hurt their business. Which is true!"

Apple's somewhat confusing app-review policies are an open secret in the developer industry: No matter how many times you've submitted an app, you still hold your breath every time, because who knows what could have changed? Heinemeier Hansson said it's possible that someone at Apple might change their mind and unilaterally decide to approve Hey. But that won't solve his problem. The guy who loves picking fights on behalf of the greater internet good has found a new one. "Even if it goes away for us, this is still a systemic story of abuse," he said. "I think this is where we need this kind of systemic reform that hopefully the EU is pushing."

If nothing changes? Basecamp's not paying that tax. "There is never in a million years a way that I am paying Apple a third of our revenues," Heinemeier Hansson said. "That is obscene, and it's criminal, and I will spend every dollar that we have or ever make to burn this down until we get to somewhere better."

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