Apple is apparently in some hot water in China over some changes the company is making to a popular mobile app feature.
The iPhone maker last month informed a host of Chinese app developers, including those who operate popular messages services like WeChat, that they would need to disable “tip” functions in their programs, The Wall Street Journal is reporting, citing conversations with those companies. Apple said that the tipping features, which let users send money to other people through the apps, was in violation of its App Store rules, the report says. If the companies wanted to keep tipping in their apps, Apple would start collecting 30% on all cash transfers, the Journal‘s sources say.
According to the Journal, the Chinese app developers it spoke to aren’t happy with Apple’s (AAPL) decision. They argued that the tipping function, which wasn’t previously subject to Apple’s revenue-sharing model, keeps people using their apps. In most cases, an app user will create something he or she shares with other users. To commend them on a job well done or aid their creation, other users can tip them the sum of their choosing. The cash is immediately transferred between the parties and the app makers don’t make any money off the tip.
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Apple has for nearly a decade shared revenue on all purchases with app developers. In most cases, the split is 70-30, with app developers taking the larger share. Apple has extended its revenue-sharing model to in-app purchases and even subscriptions to app services. Developers who don’t like the idea of sharing 30% of their revenue with Apple have no choice but to accept it or remove their apps from the company’s application marketplace.
The Chinese developers who spoke to the Journal, however, said that the tipping function is different, since they don’t actually generate revenue on those user transfers.
In its discussion with the developers, Apple took a serious tone, according to the Journal‘s sources. The iPhone maker said that they would need to comply with its demands or face the possibility of app updates not hitting the marketplace, according to the report. Apple even reportedly warned that it could remove their apps from its App Store.
The Journal didn’t say what the app developers will do in response to Apple’s demands.
Apple, which did not immediately respond to a Fortune request for comment on the Journal‘s report, is making those requests against a troubling backdrop in China. The country was once Apple’s biggest operating segment. But as demand for Apple’s products has shrunk in China, the company’s revenue has plummeted.
The Greater China operating segment saw revenue slide 14% during Apple’s fiscal second quarter ended April 1. It was the only region that suffered a revenue decline for Apple. It’s now the third-largest Apple market behind the Americas and Europe divisions.
