Building an update to our current free app this time with Entitlment and itunes subs via a DPS Enterprise account. We are using the "optional library subscription tile url" with our tiles to point at our subscription service and it feels like this is enough. the banner seems excesive but is not optional its compulsory - do we really need both and can I avoid having to create the banner assets but still complete the app builder process?
You need to create an entitlement app in order to add a banner. I haven't tried creating an entitlement app that's entirely free with no subscription. I don't think it would be worth the effort. I think a better approach is to create a multi-folio app with a custom library. Then you can build your banner into the custom library. See the DPS Developer site for details.
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