A lot has been made about the significant amounts of money some of the most successful (and lucky) iPhone app creators are making.

The lure of instant fortune has turned iPhone app development into a get-rich-quick pursuit for thousands of developers who all hope that the App Store does for them what it has done for the most successful app developers.

But what if you could lose money offering an app in the App Store? No I'm not talking about losing your investment of time in developing iPhone apps that don't sell; I'm talking about real money.

Thanks to refund terms that are now present into the contract Apple provides to iPhone developers, this is now a possibility. The clause states:

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-user.

Since Apple shares 70% of each app sale with the developer, the clause effectively means that developers have to cover Apple's share of any refunds. What this really amounts to is a payment of 30% of each refunded app's price to Apple from the developer - for nothing!

Needless to say this is one of the more foolish clauses I've ever personally seen inserted into any contract. If somebody pays for an app and that purchase is refunded, why exactly should the developer be asked to cover 100% of the refund amount when he only received 70% of the revenue?

This ridiculous clause deserves to be called what it is: boneheaded.

When I issue a refund on PayPal, for instance, PayPal refunds the fees it collected as part of the transaction; it doesn't ask me to cover them. Obviously PayPal knows that wouldn't be fair (and probably not legal).

As much as I love Apple (I own a number of Apple products), I'm starting to get the feeling that Apple just doesn't get it and doesn't really care about developers. Certainly it has created an ecosystem in which developers largely have to do things Apple's way but using that to take advantage of developers isn't smart business for any company, no matter how much leverage Apple has.

If Apple doesn't start treating developers with a bit of respect (common sense) and continues pulling nonsense like this, Apple will eventually squander much of the goodwill it has developed around iPhone development.

Photo credit: Johan Larsson via Flickr.

Patricio Robles

Published 27 March, 2009 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Comments (2)

Vincent Amari

Vincent Amari, Online Consultancy at Business Foresights Ltd

What is the message they are giving to mobile phone app developers?

Forget iPhone, go develop for the Google Android platform instead!

over 9 years ago



This really is insane, I think App purchasers will become a great deal more discerning and will start asking for refunds more often, if developers can then lose money they will quickly migrate away from iPhone.

about 6 years ago

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