Pixel Envy

Written by Nick Heer.

Resetting the App Store

The European Commission on Friday issued what it called its “preliminary view” of Apple’s allegedly anticompetitive market position in streaming music; the Epic Games trial begins today. I thought this piece from Benedict Evans was a good overview of some of the what-ifs:

$10-15bn [in App Store commissions] is real money, even for Apple, but it’s much more interesting to ask what else might change. There’s a small number of businesses where Apple’s payment rules were prohibitive, in Steve’s words, or at least made things very difficult — most obviously, ebooks and music. What other businesses do use Apple’s payment but would be fundamentally different if they had that extra margin? And what never happened at all? What products could not be built because of the ways that Apple’s sandbox works, that now might change? How significant are the changes in payment models I suggested above?

One could say that this is the classic unanswerable counter-factual — we don’t know what doesn’t exist. But a partial answer is to look at Google’s Android, which has always been run with much looser controls. Name ten really big, important, widely used Android apps that don’t exist on iOS. The obvious one is Chrome (there is an iOS Chrome app but it has to use Apple’s WebKit rendering engine), but what else? No, not something that you use, but something with hundreds of millions of users — that’s what scale means in consumer tech today.

John Gruber’s commentary from ten years ago, when Apple mandated the use of its own in-app purchase system for subscriptions, generally holds up. There are some detail quibbles — Apple has introduced tiers of commissions and created various carve-outs and rule relaxations which amount to a modest minefield for developers — but this is prescient:

This is what galls some: Apple is doing this because they can, and no other company is in a position to do it. This is not a fear that in-app subscriptions will fail because Apple’s 30 percent slice is too high, but rather that in-app subscriptions will succeed despite Apple’s (in their minds) egregious profiteering. I.e. that charging what the market will bear is somehow unscrupulous. To the charge that Apple Inc. is a for-profit corporation run by staunch capitalists, I say, “Duh”.

This has turned out to be entirely true.1 Have Apple’s rules have been an impedance to the growth of companies that depend on subscriptions? That is certainly a tough argument to make. Fortnite effectively printed money for Epic Games even after Apple’s commission. Apple’s statement to the press on the E.U. music streaming findings takes some credit for Spotify’s success; unsurprisingly, mobile users have been key to Spotify’s growth for years, coincidentally since around the time Apple launched this in-app subscription model.

I am not arguing this is right, fair, just, legal, or best for everyone. I really do think Apple pushed its luck too far by making few changes over time and being overly protective of every possible hole in this business model; now, it may end up that regulators will set some of the rules instead of Apple. More importantly, I think a lower commission rate really would make a difference for independent developers that build mostly or exclusively for Apple’s platforms, as they are what makes buying into this ecosystem such a draw. You can get Netflix pretty much anywhere, but you can’t get Deliveries or Obscura or Things or Tweetbot on an Android phone. I wonder what some of those developers could do if they had some of the money that Apple is now using to buy back shares.

But for the big companies that are instigating these lawsuits, Apple’s platforms have netted huge rewards. In-app purchases have unquestionably worked in these developers’ favour. Everyone who thinks that the App Store rules should be overhauled — which is something I agree with — or that sideloading should be permitted on iOS should see this as a ten year counterargument.

  1. Unfortunately, the next and final sentence did not fare quite as well:

    If it works, Apple’s 30-percent take of in-app subscriptions will prove as objectionable in the long run as the App Store itself: not very.

    Now that every developer sees how much money they are required to hand over to Apple if they want to allow purchases in their apps, the pitchforks have never been sharper. ↩︎