Pixel Envy

Written by Nick Heer.

Hey, Nah

Yesterday, Basecamp began sending invitation codes to people who had previously registered interest in Hey, its much-anticipated new email-like product. Hey has a bunch of quirky new features that, unsurprisingly, cannot entirely be shoehorned into existing email protocols so, while it uses SMTP, it does not support IMAP or POP. Users must use the proprietary Hey suite of apps to access their @hey.com inbox, and cannot use other email addresses within Hey’s apps.

The company says that its apps are all “full-featured native apps” but its desktop apps are Electron-based. That’s not entirely relevant to this post, but it is my policy to shame websites masquerading as native apps.

Anyway, while Apple was busy touting the results of a study it funded that estimated the total economic footprint of the App Store at over half a trillion dollars in 2019, the company was busy rejecting a bug fix update to the already-approved Hey app for iOS.

David Pierce, Protocol:

Hey does cost $99 a year, but users can’t sign up or pay within the iOS app. It’s an app for using an existing outside service, just like Basecamp’s eponymous platform — and Netflix and Slack and countless other apps. “So we were like, OK, maybe we just got the Monday morning reviewer,” Basecamp co-founder and CTO David Heinemeier Hansson said. Lots of developers over the years have found that their app-review luck sometimes depended on who happened to be looking, and whether they’d had coffee yet. So Basecamp fixed more bugs, submitted a new version — 1.0.2 — and hoped for the best.

The app sat in the queue for review, then in the “under review” status for far longer than usual. Then Waugh got a phone call. The Apple reviewer said he was calling because the new app hadn’t resolved the issue with rule 3.1.1. The issue had been escalated internally, and Apple had determined it was a valid rejection — the only way to move forward would be to implement Apple’s payments system. And not only that: Waugh was told that Apple would like a commitment and a timeline for implementing the payment system, or Apple might be forced to remove Hey from the App Store entirely.

When Waugh and Basecamp pointed out that there were many other apps — even email apps like Spark or Edison — that allowed users to log in to their existing accounts without signing up through Apple, the reviewer told them they wouldn’t discuss other apps. And that was that.

It’s hard not to quote Pierce’s piece at length because it is so comprehensive. Pierce says that Apple admitted that it shouldn’t have approved the app in the first place; Apple also said that Hey doesn’t qualify as a “reader” client app nor is it a business-focused software-as-a-service app, so it apparently must implement Apple’s own in-app purchases API. This is news.

David Heinemeier Hansson of Basecamp:

We did everything we were supposed to with the iOS app. Try downloading it (while you can?). You can’t sign up, because Apple says no. We don’t mention subscriptions. You can’t upgrade. You can’t access billing. We did all of it! Wasn’t enough.

This extraordinary rejection comes on the very same day that the European Commission announced that it was opening two antitrust investigations into Apple’s business practices. One concerns Apple Pay, and the other is about the App Store; obviously, the latter will be my focus. The Commission:

The Commission will investigate in particular two restrictions imposed by Apple in its agreements with companies that wish to distribute apps to users of Apple devices:

(i) The mandatory use of Apple’s own proprietary in-app purchase system “IAP” for the distribution of paid digital content. Apple charges app developers a 30% commission on all subscription fees through IAP.

(ii) Restrictions on the ability of developers to inform users of alternative purchasing possibilities outside of apps. While Apple allows users to consume content such as music, e-books and audiobooks purchased elsewhere (e.g. on the website of the app developer) also in the app, its rules prevent developers from informing users about such purchasing possibilities, which are usually cheaper.

Apple’s response, via Manton Reece:

It’s disappointing the European Commission is advancing baseless complaints from a handful of companies who simply want a free ride, and don’t want to play by the same rules as everyone else… We don’t think that’s right — we want to maintain a level playing field where anyone with determination and a great idea can succeed.

This is the worst, most insulting statement from Apple that I’ve ever seen. Everything in it is backwards.

There remains a fair argument that Apple can take some cut of sales made through the App Store and its own in-app purchase APIs, though I think 30% is too high. Apple maintains the store, offers marketing benefits, and pays for hosting, distribution, and credit card fees. But, as subscriptions have become the preferred way to charge for apps — a shift encouraged by Apple — the App Store commission increasingly seems like a form of rent-seeking.

Add to that Apple’s prohibition on references of any kind to digital purchases being available outside of iOS apps — a prohibition that extends to website materials linked from within an app — and things begin to look ridiculous. Amazon finds itself in a situation where it can sell paperbacks through its app and offer samples of Kindle books, but cannot sell Kindle versions without giving 30% of the sale to Apple, nor can it explain why or where the book can be bought. Spotify faces a similar quandary with its subscriptions, and its complaint to the E.U. is cited as a triggering factor in the Commission’s investigation. I’ve written about that complaint, which I think has problems.

Regardless of what you think about Apple’s rules and restrictions, none of the above prohibitions apply to Hey’s rejection. The Basecamp team explicitly designed around Apple’s rules and ensured that there were no references to subscriptions or billing from within the app. It’s possible that this is a mistake but, as it has already gone through the dispute process, it appears to be entirely deliberate. A reversal would only be responding to the negative press coverage this has generated.

Apple’s response to the E.U. antitrust investigation says that all apps in its store are subject to the same rules, but that is plainly not true, either. The way Apple is splitting hairs in Hey’s service offering and refusing to compare it to other apps is grossly unfair. The reason I included a detailed description of how Hey works at the outset of this post is because this appears to be the main difference between it and any other email app. But that is an undocumented, unclear, and almost wilfully pedantic interpretation.

Meanwhile, bigger tech companies like Netflix, before it stopped offering in-app purchases, negotiated sweetheart deals with Apple to take a 15% cut on every subscription instead of 30% for the first year and 15% for subsequent years. Then there are the “premium subscription video entertainment” providers who, in exchange for implementing many tvOS features, have been allowed to use their own in-app purchasing mechanism instead of Apple’s APIs, allowing them to keep the entire subscription cost.

WWDC begins in six days. Apple is using the lead-up to strongarm a well-known developer following its policies and issue dishonest statements and press releases about competition in the App Store on the same day that the E.U. announced an antitrust investigation into these practices. Audacious.