iPhone app refund could bankrupt developers

MonkieMann · 27 Mar 2009 at 10:09

Hi All,

Sorry if this is a repost, basically apple are going to offer refunds for iPhone applications. Developers do not only have to refund the 70% they got but also the 30% they didn't even get, whilst Apple get to keep their 30%!

I have been developing an iPhone for a while, and this is making me doubt whether or not to actually publish my app for fear becoming bankrupt! :mad:

Source: http://www.neowin.net/news/main/09/03/26/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.

Hatter The Mad · 27 Mar 2009 at 10:12

Do you really think you're going to sell so many hundreds of thousands of your app, and that a majority of people are going to ask for a refund because it sucks?

I don't understand why you 'fear' becoming bankrupt. I think you're being hysterical:

1) Your app is not going to be that popular
2) Your app isn't going to suck so much that everyone asks for a refund

MonkieMann · 27 Mar 2009 at 10:22

Hatter The Mad said:
Do you really think you're going to sell so many hundreds of thousands of your app, and that a majority of people are going to ask for a refund because it sucks?

I don't understand why you 'fear' becoming bankrupt. I think you're being hysterical:

1) Your app is not going to be that popular
2) Your app isn't going to suck so much that everyone asks for a refund

Okay, so maybe 'fear' wasn't the right word to use, but still, there is a 'chance' that it could bankrupt some developers, i'm not saying my app is going to be all that popular, but i don't think Apple should make developers pay 100% back.

Users do get 90 days to ask for a refund too, so say I develop an app and I only make £250, I have 90 days to spend that money, and then 90 days down the line 50% of the people want their money back, i'd have to pay out £125 of money that i've already spent.

I just think it's wrong that's all

Mull3t · 27 Mar 2009 at 10:23

I think what he means, is that people will demand a refund regardless if the app is good or not.

MonkieMann · 27 Mar 2009 at 10:28

Mull3t said:
I think what he means, is that people will demand a refund regardless if the app is good or not.

aye, that is what i meant to say, i have plenty of games on my iPhone that are great fun but i only play them for a few weeks at most, so people can buy games have some fun and then demand their money back

Vegeta · 27 Mar 2009 at 11:34

90 days is far too long, only offer a refund button maybe for 2 hours max - so they can test it and see if they get on with it - I've bought a million things I dont like after fidling about with them for 5 minutes.

MonkieMann · 27 Mar 2009 at 11:36

Vegeta said:
90 days is far too long, only offer a refund button maybe for 2 hours max - so they can test it and see if they get on with it - I've bought a million things I dont like after fidling about with them for 5 minutes.

exactly, i'd be happy for user to get 24 hours to decide whether or not they like the app, they could even download the app for 24 hours for free, and then if they like it they pay for it, or delete it, easy

Vegeta · 27 Mar 2009 at 11:43

MonkieMann said:
exactly, i'd be happy for user to get 24 hours to decide whether or not they like the app, they could even download the app for 24 hours for free, and then if they like it they pay for it, or delete it, easy

Could be a 'try before you buy' aswell as buy button - give them say 24 hours as you say - i'd prefer to give them less however some can clock games within that time ideally 2hours maybe and after that period if you access the app it gives you a option of 'buy' or 'delete'. Surely that's whats going to happen I doubt apple will implement this.

Hatter The Mad · 27 Mar 2009 at 11:45

Vegeta said:
Could be a 'try before you buy' aswell as buy button - give them say 24 hours as you say - i'd prefer to give them less however some can clock games within that time ideally 2hours maybe and after that period if you access the app it gives you a option of 'buy' or 'delete'. Surely that's whats going to happen I doubt apple will implement this.

That would never work - the average amount of time an app that costs < $2 stays on a phone is < 2hours

Hatter The Mad · 27 Mar 2009 at 11:46

MonkieMann said:
Okay, so maybe 'fear' wasn't the right word to use, but still, there is a 'chance' that it could bankrupt some developers, i'm not saying my app is going to be all that popular, but i don't think Apple should make developers pay 100% back.

Users do get 90 days to ask for a refund too, so say I develop an app and I only make £250, I have 90 days to spend that money, and then 90 days down the line 50% of the people want their money back, i'd have to pay out £125 of money that i've already spent.

I just think it's wrong that's all

This is life, I'm afraid. All shops who process credit card transactions go through exactly the same. They don't get their merchant fees back, either. You just need to bank on people not chargebacking within that 90 days. Regardless of who doesn't like your app, Apple incur the same costs. It is not their fault if you, the developer, cannot deliver.

I think it is a good rule. It forces developers not to produce crap, or mislead users about the product.

fez · 27 Mar 2009 at 11:49

Its just going to mean that everyone starts doing what remember the milk does, give users a trial for 90 days and then after that make them pay for it. Shame because as you say, there are plenty of apps that after 90 days you just dont use any more. You shouldnt be able to get any refund after that unless there are bugs that ruin it. I think apple might have shot themselves in the foot a little here.

Caged · 27 Mar 2009 at 12:02

Hatter The Mad said:
This is life, I'm afraid. All shops who process credit card transactions go through exactly the same. They don't get their merchant fees back, either. You just need to bank on people not chargebacking within that 90 days. Regardless of who doesn't like your app, Apple incur the same costs. It is not their fault if you, the developer, cannot deliver.

I think it is a good rule. It forces developers not to produce crap, or mislead users about the product.

Merchant fees aren't 30% though.

Hatter The Mad · 27 Mar 2009 at 12:09

Caged said:
Merchant fees aren't 30% though.

So? A credit card company just needs to process a transaction. Apple have to host the app for you, advertise it, audit and review it (and subsequent updates), and process merchant fees for each purchase. Sure, it probably doesn't add up to 30% of the cost of the app. But they're a business, not a charity.

Factor the risk of refunds into your business model; you'll be fine.

JAMAL · 27 Mar 2009 at 12:37

Hopefully it will stop the app store filling up with crap (and buggy) applications.

Hatter The Mad · 27 Mar 2009 at 18:56

JAMAL said:
Hopefully it will stop the app store filling up with crap (and buggy) applications.

Precisely! Hopefully it will kill the quantity over quality culture.

MonkieMann · 27 Mar 2009 at 19:35

Hatter The Mad said:
Precisely! Hopefully it will kill the quantity over quality culture.

this may be true, and I can see what you're saying, but surely you can see that 90 days is far too long? I would expect to buy a game for my xbox and then demand a full refund 89 days later, I know that with xbox games at least you can trade them in.

JAMAL · 27 Mar 2009 at 19:51

The percentage of people doing the refunds isn't going to be a massive problem, most people wont be arsed for the sake of a quid!

Spyhop · 27 Mar 2009 at 20:02

I've always wished that they had a system similar to the excellent Xbox Live Arcade where it's compulsory for every game to have a demo (that you can 'unlock' to the full version on the spot, IIRC). Having to buy stuff blind is plain rubbish.

russ0r · 27 Mar 2009 at 22:20

TiPB is reporting that this isn't even true anyway.

TiPB said:
TiPb contacted several developers to find out what was going on. While some were aware of the potential for a 100% refund charge back, none had experienced it. Uniformly, they reported very few refunds, and when they did occur, charge backs only for the same 70% cut Apple had originally passed along to them.

Article here.