Apple to take 30% cut from struggling businesses during pandemic
It maybe naive or ineffective, but during desperate times, we hold out hope and take action. So I decided to write a letter to the CEO of Apple
Dear Mr. Cook
Currently, Mind-body is in negotiation with Apple regarding 30% Branded App fees. I hope hearing the personal story of one struggling business owner during Covid pandemic helps to give a better perspective of the situation.
I don't believe that Apple is the kind of company that had targeting small businesses for 30% cut in the middle of the pandemic in mind when it came up with this policy.
But right now, this is the consequence of this rule.
My name is Dora Gyarmati; I am a proud owner of Spira Power Yoga. Spira has two brick and mortar locations, we are small space in residential neighborhoods. I can fit maybe 30 people in the class, we have Ikea furniture, and my mom's paintings hang on the walls as decorations.
Panni, my large poodle, greets yoga students, what I am trying to say, I love my business, my students are loyal, we are great yoga and mindfulness teachers, but by all means, Spira is a dinky small studio. We are not even one of those large hip studios in downtown.
But a few years ago, I decided to spend a little more money and asked my scheduling and payment processing software company Mind-body to design a "Branded App" for Spira. Students loved it because of the ease of scheduling and communications.
Then the COVID pandemic hit, and I was forced to close both my locations. Being in Seattle, Washington this means that my business has been closed for over four months, but I have to keep paying lease if I am to reopen. So I was forced to use zoom. We never had "digital content" before the pandemic.
As you know Apple is taking 15-30% of the revenue from streaming fitness classes purchased via Apps on Apple phones.
During this COVID-19 pandemic, the fitness industry is scrambling to stay alive, 30% is all the profit that we can have in this industry under the best conditions when things are going well. With the COVID-19 pandemic, small businesses in the fitness industry, such as yoga studios, are already nearing extinction.
Fitness and yoga studios were forced to close now, but many have to continue to pay rent if they hope to return when it becomes possible.
At the same time, they had to move all classes to live-stream if;
they want to stay alive as a business
keep students safe
not to talk about following the law under the pandemic.
Our very survival depends on live-streaming classes; we are talking survival with no profit. Zero, nada, I am not sure how Apple is thinking that we have 30% to give?
We just received a notification from Mindbody, the service we use for payment processing and scheduling, that Apple is going to force us to pay a 15-30% processing fee on all revenues that go through live-stream service on our branded App.
Spira yoga never switched to Mindbody's in-house live-streaming option. We have been using Zoom, and I, as the owner, manually start every class and email students; we do not use any bandwidth from Apple's Apps space. (I mindfully stayed away from that choice) But now Apple announced that they will remove and filter any purchasing option that uses virtual classes, and discontinue showing our schedule on our branded App if I am using Zoom rather than their service. So to translate, I either pay Apple 15-30% of my revenue or they block me on my App for which I already pay over $700/month to Mindbody.
I know Apple did not design this rule for small brick and mortars during the pandemic, but unfortunately, this is where we are and this rule now feels like a blackmail to us, and it is threatening our already questionable survival.
As a business owner, I don't have an issue paying a percentage like 1-3%, for services I use online, but 30%? Very few businesses have a higher profit margin than 20-30% during very thriving days. No business can afford to share this much.
Fitness studios are NOT "digital enterprises" we were forced digital, and each class is still taught live by a teacher for only 5-15 students.
We don't have 30% to give, nor can we possibly be threatening for Apple. Apple, made $260.2 billion in 2019?! Let's just say Spira made a few zeros less...
Fitness is not the only industry targeted during the pandemic by Apple, with its 30% cut practice. Read more complains in this New York Times article
Apple is facing some heat at the u.s. congress about this very 30% rule on it's apps - waiving this fee during a pandemic is not only ethically right, it is also a good P.r. move
Below is a copy of the notification letter from Mindbody and further below that is a reply from a Mindbody agent explaining what is going on, since yes, I asked them for clarification in great disbelief…
1. Notification letter:
Dear Branded App customer,
We want to share updates on what we've been doing "behind the scenes" to ensure that your Branded Mobile App remains available in the Apple App Store and future enhancements that will ensure you can continue to sell virtual content in your iOS mobile App.
First, a little background on what Apple requires to approve mobile apps for their App Store. Any time "digital" content is sold in an iOS app, Apple requires that a feature called "In-App Purchases" be used, instead of other payment methods like credit cards, which can be used for physical goods and services. With the explosion of virtual wellness classes in recent months, more companies have begun to see their apps get rejected for not being compliant with the "In-App Purchase" requirements and selling digital content.
When we saw virtual classes become a key part of many of our studios' business model, our Mindbody mobile team took quick action to ensure that your apps would continue to be available in the App Store:
· Mindbody has worked with Apple to obtain a temporary exception that enables your apps to continue to sell virtual classes using your existing payment methods.
· We are actively developing In-App Purchase capabilities in the Branded Mobile App to ensure that if you choose to sell virtual classes in your App for the long term, you will be able to continue listing your App in the Apple App Store.
In-App purchases provide a number of benefits for consumers, but presents some challenges for you as the seller.
· Seamless purchase flow for consumers.
· Ability to purchase and view virtual content within the App (rather than having to use the web)
· Apple's fees on In-App Purchases are between 15% and 30% of the purchase (depending on type of purchase).
· In-App Purchases flow through Apple's payment processing system so timing of deposits and reporting are different than your existing credit card payment processing.
You will need to configure any products you sell via In-App Purchase in your Apple Developer Account (we will provide you support documentation to help with this).
When In-App Purchase capabilities are available in your Branded Mobile app in the coming months you will have the option to select if you want to take advantage of the benefits it offers your consumers. If you choose not to, you will need to remove the sale of any virtual content from your App, as well as the ability to view livestream content in your App in order to continue listing your Branded Mobile App in the Apple App Store.
Here are some key changes you'll see in upcoming releases to comply with Apple's regulations:
· Soon, we will be adding a paywall to Mindbody's Video on Demand product and we will be adding published videos to your branded App.
· If you utilize Mindbody's streaming service, you will be able to list your live stream classes in your schedule on your branded App. We will be adding an 'In-App Purchase' drop-in pricing option that your clients can utilize to book live stream classes from your branded App. This drop in option will be paid out through Apple and is subject to relevant Apple fees. We will be removing pricing options that include live streaming from the iOS App. Users can purchase these services on Android devices, from their browser, or in person and join the stream from their iOS devices.
· If you utilize a different live streaming provider, you will not be able to list your live stream classes or pricing options in your branded App, per Apple's regulations. We will implement a filter to exclude them from your schedule and buy page.
Stay tuned for more updates from us about In-App Purchases.
All the best in health and wellness,
Your Mindbody Branded App Team
2. Mindbody's response to my question:
This is David from MINDBODY customer support. I understand that you're worried with the third party purchases that was being sold via Apple since you'll be giving out certain percentage of your sales to them. Regarding that as like what's stated in the email "Apple's fees on In-App Purchases are between 15% and 30% of the purchase (depending on type of purchase)." Hence, it will still depend on the type of purchase that your client will purchase via Apple. As stated in the email that you received from the Branded App Team, "If you utilize Mindbody's streaming service, you will be able to list your live stream classes in your schedule on your branded App. We will be adding an 'In-App Purchase' drop-in pricing option that your clients can utilize to book live stream classes from your branded App. This drop in option will be paid out through Apple and is subject to relevant Apple fees. We will be removing pricing options that include live streaming from the iOS App. Users can purchase these services on Android devices, from their browser, or in person and join the stream from their iOS devices." The email also states, "If you utilize a different live streaming provider, you will not be able to list your live stream classes or pricing options in your branded App, per Apple's regulations. We will implement a filter to exclude them from your schedule and buy page."
Thank you for reading,