Apple halved app store fee to get Amazon Prime video on devices
bloomberg.com
bloomberg.com
Hard to know if that's actually how it went down based on the info that's out there right now though.
https://www.vox.com/2015/4/13/11561392/how-to-beat-apples-30...
Apple commented to 9to5mac that this is part of a "program for premium subscription video entertainment providers," and it has some strings attached - integration with the TV app, AirPlay 2, universal search and single sign-on integration.
https://9to5mac.com/2020/04/01/purchases-amazon-prime-video/
From a business perspective I can see why they'd offer this, integration with the TV app and universal search means that users access content through that, so you're putting in extra work in order to mix your content in with everyone else's and give up the chance to upsell whatever else is on offer through your own app. When they first launched the new Apple TV system with its TV app, streaming providers didn't seem very keen on the idea of integrating. Cutting to 15% in exchange lets the providers keep more of their revenue, and lets Apple create the integrated experience that they want to offer.
(and to preempt the counterargument about just using Chromecast, for whatever reason in my experience across a multitude of devices Chromecast has always been extremely unstable, and often is more hassle than it’s worth. Nowadays I just put an iPad on my coffee table and watch that even though I have a huge TV sitting on the wall a few feet away)
the problem here is that they are big enough to do it, if you are small apple might not like it.
The invisible hand cannot help here: demand will ask for cheaper prices (the 99% have a big stack of cash as a group, but a small one individually, so they seek savings), which the economy of scale will only make happen for the bigger players.
At some point, fair competition is not possible anymore.
Not to mention the ability to negotiate is driven by who you can afford to hire, who you know, how sustainable you are, etc.
This is a good point, often subtly overlooked when discussing similar topics.
Is money really the only power? For all I know these companies depend on consumers’ attention and consumption. Not only that, the people who run them depend on continuous growth of those to keep their positions.
To the extent consumer interests can organize (which includes democratic, legal, informational organization and organizing consumption behavior) there are always ways out.
> The invisible hand cannot help here
Maybe invisible hand was never there to help. Maybe that is the origin of such a defeatist perspective.
Companies are not gods, markets are not forces of nature. They are more like semi-useful entities and processes that can also parasitize our stone age psychology for their own ends. It is on to us to realize our own part in that equation.
Which doesn't translate to any great power for smaller developers, who don't command much of consumers attention anyway. Try getting Amazon Prime, or Spotify out of the App Store and there will be a riot. Some smaller app few care about? Not so much...
>Not only that, the people who run them depend on continuous growth of those to keep their positions.
The people who run them will get their bonuses and golden parachutes even if they burn the companies to the ground. And after that they can retire or easily find other positions in different companies soon enough.
It's lesser employees that depend on growth to keep their jobs...
Which was my point. Their power doesn’t come from their money but the fact that their products are found useful by all those who would riot. I’m not saying it is necessarily fair, but it is not like that they are rent seeking in the app store, their apps are found widely valuable. If anything, app store was the rent seeker and now it is conceding due proceeds. Tough luck for the small developers who can’t band together for a lawsuit or a mass app-strike against that discrimination.
> The people who run them will get their bonuses and golden parachutes even if they burn the companies to the ground. And after that they can retire or easily find other positions in different companies soon enough.
Again, the point was the power is not in the money itself, it is in the growth obligation.
And you are wrong that growth is only a lesser employee concern, if anything having more captial means the opportunity cost of not growing the capital is much higher, so they are even more bound by the normativity of growth. Not necessarily growth of their immediate company, but any other investment instrument that eventually ties to the economy at large.
That translates to money pooured though. Without huge VC investments there wouldn't be any Netflix or Amazon. And their huge followers mean more money, more resilience to Apple's demands (they don't depend on it 100%) etc. Whereas for a smaller developer house not of these are true.
If a healthcare provider decides to lower the amount they claim you owe because they believe it will cost them more to pursue you more than they will receive, that’s different than agreeing to a price before the services or products are exchanged.
Hospital pricing is a strange beast.
I never dealt with “procedure codes” and we didn’t have insurance. I just called the doctors office after finding out surgery was needed but before it was scheduled to get a cash estimate for the procedure and negotiate the price, and we made a deal, and then during one of the pre-op consults the doctor herself gave us a new written estimate with even more of a discount.
For a different procedure, a different surgeon just gave us an estimate based on the insurance rate and when I asked if he could do more, he just said, “well if you do XYZ for the rest of your life you could just not have the surgery” and walked away like a rock star. Which is fine, hilarious in retrospect, but the insurance rate was enough of a discount and his point was valid.
As far as I can see, all the hospital systems are combining, doctor groups are combining, and you never negotiate with a doctor directly at these places. The doctor sells their labor to the company, the company sells healthcare to the public, and you deal with the billing department about any money issues.
I know the doctors are monitored for how much revenue they are generating which corresponds to the CPT codes and whatnot they use, so everything is billed based on that.
It feels different, but it's really not. It's perverse that our system's incentives are such that doctors are incentivized to overcharge and that there's an expectation that the price will be negotiated down to the actually-desired price, but that is how it works. It's frustrating, but if you're letting them tell you the sticker price and then pay full sticker price, you're not being lawful good, you're being played for a sucker.
I'm part of a healthshare, which isn't considered insurance, so whenever I have a health care bill, I ask for a "self insured discount", and most places give anywhere from 10-50% discounts (the more common in my experience being closer to the 50%). In my experience labs (blood work) tend to have smaller discounts (10%) compared to hospitals (35-50%).
You seem to already know how what to tell the billing department but I'd wager most Americans don't.
Example: some hospitals have tried taking their debt collections against low income individuals/families to court and have gotten wages garnished. Those same class of defendants have won something close to 100% of cases with the help of pro bono lawyers who help get those bills adjusted to something reasonable. The list price for medical services in the US is ridiculous, but that's because not everyone knows that hospitals don't expect almost anyone to pay list price -- and also because those hospitals get to write off the discounts as losses for tax purposes.
[1] https://www.vox.com/policy-and-politics/2019/1/7/18137967/er...
If they're following accrual accounting, they earned income (at list price) when they performed thr procedure. If later it turns out they accept less money for it, the discount should be subtracted from their taxable income to reconcile. Most business don't use cash accounting.
It's not rational to be excited to write off a discount; yes, it reduces your taxable income, but only because it reduced your actual income.
You seem to be approaching this from a purely accounting technicals perspective.
My complaints have more to do with the massive distortions that make medical goods/services a very opaque market and creates the ability for profitable businesses to write off fake losses for tax advantages.
I agree it's a mess. I didn't comment on that, because I agree with it.
> creates the ability for profitable businesses to write off fake losses for tax advantages
I disagree with this part. It's not a fake loss. It's reconciling projected (fake if you want) income with real income. Any business filing taxes with accrual accounting that invoices with full price and accepts a discounted price on payment (or sends to collections at a discount) is going to have the same thing: recognizing the full invoice as income, and then taking a deduction for the discount when settled.
Why am I picking on this technical detail? For one, this is a technical forum (I'll show myself out). But importantly, a comment lamenting a real issue (opaque market) and normal accounting practices makes a confusing argument. Switching hospitals to cash accounting isn't going to make the market less opaque.
I don’t think their working relationship is all roses or anything—they were feuding a few years back—but agreements like this are negotiated because they leave everyone who agrees to them better off in some way. It could even be as simple as your app being so important that people won’t buy the phone if it can’t run it. Ultimately it doesn’t matter because for a new startup, you’re more focused on creating value from scratch than on optimizing your margins.
Apple should want to encourage a vibrant app ecosystem, no? Who knows how many cool or useful apps just never get made because the developers can't deal with the App Store.
And don’t tell me that’s Apples fault as well, because the 30% on low prices makes businesses unsustainable. Which is it, does the 30% discourage companies from participating, or does the App Store 30% and all enable too much competition for premium apps. It can’t be both.
It’s very likely that breaking up the appstore would change that, and we could get a software market closer to what we see in other segments, free to innovate and generating more winners.
The most successful apps are the ones that make the most money: skinner box slot machines with a credit card system attached. Your idea that software should have things like "intrinsic quality" or "benefit to the user" is not as important as how much money it makes, and if you put more effort into mechanics or gameplay instead of additional monetization techniques, you're losing out.
On the desktop, one can invent p2p or a new type of browser or a magic app that makes unicorns out of tcp packets. On the appstore, entire areas of development are forbidden, in order to guarantee a constant stream of cash to Apple and Google.
On the desktop, if you make a life-changing app, you get competition. On the appstore, if you threaten Apple/Google dominance, you get banned.
Appstores make a mockery of the free market; anybody who lived through the 80s/90s “wild west” of computing should see them for the obscene freedom-destroying schemes that they are.
The fact is the App Store offers the best experience and the best apps. Side loading apps outside stores isn’t a viable business beyond very narrow niches, we’ve seen this happen.
App stores offer a scale alternatives just can’t reach, which brings investment and therefore options in the consumer space that open platforms cannot match. We’ve been running the experiment for over a decade now and the results are in.
App,Stores have crated staggeringly huge markets. That has enormous value for developers take that away, and how are customers and developers going to get connected? We’ve seen how that works out. The resulting markets aren’t 10 time smaller, or a 100 times smaller, they’re thousands of times smaller. I was going to say 30% is peanuts. It’s not, but I do think it’s a reasonable price.
No, post-iPhone it did not. Android is just an inferior experience in the fundamentals, and that's geared towards the Play Store too anyway. There is no decent alternative on the market that offers a truly open platform - none. And of course by now it's also a chicken-and-egg situation, because the mainstream has been thoroughly locked-in, so even if such a platform appeared, users and developers wouldn't give it a chance.
I should be able to choose my appstore, my browser, my programs, on any platform.
> The fact is the App Store offers the best experience and the best apps
Then Apple and Google should not be afraid of allowing interoperability and replaceability of their appstore and their fundamental apps. You cannot objectively decide what is "best" when alternatives are banned or handicapped.
As somebody who went through the browser wars, I find it really depressing to see the battles that were won then are now being thrown away so carelessly.
On Android, half the system is geared towards integration with the Play Store. It's like your fridge only had McDonalds-shaped holes and was preconfigured to order McDonalds for you in a flash. If you wanted to cook, you'd need to order a stove somewhere, sometimes you'd have to learn how to install gas pipes too. Are you ever going to learn to cook, in those circumstances? Fuck no, you're going to click a button and order McD.
There is no market because the platform owners actively ensure that would be the case. They looked at the 90s and thought "Microsoft didn't make enough money, they were too liberal". That's just shameful greed.
And many it is a superior experience because of the restriction to one App Store. Everywhere else seems to have tons of malware.
Why are you phrasing this like a gotcha? "Too much competition" is your argument here, not mine. I think it's the former: the 30% discourages people (not necessarily companies) from participating.
Then there are apps which cost more to develop but have demand from a smaller number of users. There the 30% can easily be the difference between viability and not.
More than that, it takes 30% of the revenue away from the developer, so even if the app exists, the developer has fewer resources to improve it, so it's not as good. Or then that market can't support as many developers and the customer is deprived of the benefits of competition.
> If you can’t get someone to pay $1.49 instead of $0.99 was your app that innovative?
Well yes, because you had a large number of people -- enough to keep you in business -- willing to pay $0.99, or to pay $99 but not $149, and now all of the value of your entire business to both you and the customer is destroyed.
Apple customers are by definition not price sensitive. If they were they wouldn’t be Apple customers.
Everybody already knows that which is why the original price was the expected profit-maximizing price. There is a price which is optimal because above it you lose more customers than you make in unit margins and below it you lose more unit margins than you gain in additional customers. If Apple then takes 30% of that, you can't get any more by changing the price up or down or you'd have already done that from the start.
> The software and game market survived selling games at retail only getting a 40% cut.
Only the ones that did. Others didn't.
> Apple customers are by definition not price sensitive. If they were they wouldn’t be Apple customers.
Then why do any apps in Apple's store cost $1 and not $100 or $100,000? If the customers were actually totally insensitive to price that would surely be more profitable.
Even services like Hey that are mostly used on phones are doing well.
Frequent flier programs give out more bonuses to people who fly a lot and are probably rich, to incentivize them to fly more.
Companies give price breaks to huge volume buyers.
Is this behavior, in concept at least, not familiar?
AWS does this. So does monoprice (volume pricing). My local landscaping place does this (contractors buying more tons of rock get a better price). Home depot has "contractor pricing" when you buy multiples of things.
This Apple-Amazon situation on the other hand is a secret deal between two monopolistic powers, that's why it's coming up in hearings on anticompetitive behaviour. Such a deal is not available to everyone equally, it's not at all similar to Monoline / homedepot pricing.
With Apple, you have no competition. It is accept the pricing model, or leave.
Talking about things like bricks, it would be more like if Home Depot was the only brick seller, and if you didn't like their brick terms, you could leave and buy instead 2x4s elsewhere.
Somebody says "just sell them to Lowes" but in fact you already sell them to Lowes and Home Depot and Lowes is not going to buy any more than they already do if you stop selling to Home Depot, because the customers who can no longer find your bricks at Home Depot would have to move house to another state in order to buy them from Lowes.
> During a hearing before the House antitrust subcommittee on Wednesday, Apple CEO Tim Cook testified that “we apply the rules to all developers evenly” when it comes to the App Store. But documents revealed by the subcommittee’s investigation show Apple senior vice president Eddy Cue offered Amazon a unique deal in 2016: Apple would only take a 15 percent fee on subscriptions that signed up through the app, compared to the standard 30 percent that most developers must hand over.[1]
[1] https://www.theverge.com/2020/7/30/21348108/apple-amazon-pri...
(To make this marginally relevant: apparently Amazon prime is producing a Foundation series)
You have a unfortunate typo in your first sentence (since your excerpted text mentions the correct person: Tim Cook).
Hard to see the real economy of scale in this case though.
You don't get a better deal from AWS by committing to yearly billing over monthly billing because you saving them transaction fees.
You get a better deal because they benefit more from enticing a bigger commitment.
I’ve never seen a seller (of product or services) not give volume discounts. If they didn’t, they would be out of businesses quickly, as I’m sure other sellers would be more than happy to discount.
“That is not correct,” Cook said when asked if some developers are treated differently. “We treat every developer the same.”
Netflix doesn’t integrate with the TV app completely (Netflix’s choice) but when you search for a TV show or movie, if the app is installed , Apple tells you when it’s available for free with one of your third party subscriptions instead of steering you to buy it from them.
I can say “watch DareDevil on Netflix” from the AppleTV and it launches Netflix. If I do it on my phone there is an “open in” button and it lets me choose Netflix.
Apple gets away with charging a flat rate of 30% on the App Store because there are no reasonable alternatives (Apple has worked hard to ensure that there are none)
Amazon gets away with negotiating this down because there is no reasonable alternative.
In my opinion this provides evidence that the App Store cut should be regulated.
Wow. Many? There are only two platforms, Android and iOS. Android barely has any competition with Play and iOS has no competition for the App Store. So who are the rivals?
The Play Store and the App Store do not compete as they cater to distinct audiences.
This was all about subscriptions, and the customers weren't watching or had stopped watching on apple devices in 2016/17, so Apple was willing to concede the rev share % to retain subscriptions that started on their platform. Now Apple gets to count those numbers as subs, even if they aren't watching on Apple devices anymore.
It was a prepared canned response that barely addressed the question, but since each rep only gets 5 minutes to ask questions, Cook (and others) could basically answer however they wanted because there's no time for follow up.
The anti trust laws were designed to prevent exactly this type of action the article is talking about, but we've given big business so much political sway I don't have much faith the laws are enforceable at this point.
The wider they can cast the net, the easier it is to fend off antitrust controls, or at least the threat of them, as far as their stockholders are concerned.
Spotify hasn’t allowed in app purchases for years.
Spotify’s complaint was that Apple gave Apple Music special treatment when it came to its platform like how Siri integrates with it and how it was Spotify couldn’t stream directly over the Apple Watch.
Apple opened up both to third parties over a year ago - and Spotify supports neither.
https://community.spotify.com/t5/iOS-iPhone-iPad/Apple-Watch...
I believe that Spotify just don’t want to integrate well with the system so that they can use it as a leverage.
[1]: https://9to5mac.com/2020/04/29/pandora-shows-spotify-how-to-...
I don't think Apple management sat down and thought, right, how do we kneecap competing music streaming providers? Okay lets build Apple Music support for Siri but not Spotify.
It was just that no iOS apps had deep Siri integration and they've been one-offing implementations for common usecases like timers, alarms etc. for the longest time. I assume someone got a project funded by the Music org to go one off the Apple Music usecase as well and here we are.
Apple also has been adding third party intents for years.
With Shortcuts users can add their own Siri actions and third party apps can exposes programming actions.
The thing they (Spotify) are complaining about now with the EU antitrust case is the 30% gate keeping toll Apple charges which is an entirely different thing.
Spotify complained that Apple wouldn’t allow them on the watch. But they still aren’t taking advantage of it even though Pandora has.
There is no way to set that I prefer Spotify, and I've seen a few occasions when CarPlay showed Apple Music when I started a car (might be related to not having Spotify app in the background, but I never digged deeper).
Suppose two major companies work together, such that their collaborative effort is monopolistic. Is such a collaboration subject to antitrust intervention?
In the US, we have much more stringent antitrust laws than actually get enforced by the DOJ. So the answer is, yes they're subject to antitrust intervention, but only if the people responsible for antitrust intervention choose to intervene.
"The deal, announced in December 2017, also allowed Amazon’s video service to integrate with Apple’s voice-activated digital assistant, Siri, and the iPhone maker’s TV app, which launched in 2016."
To me this means that development for Siri is partly bound to whoever's willing to pay Apple enough money. This is really disappointing from the accessibility side.
Part of the deal for the reduced cut was that Amazon _had to_ do these integrations, not that they were allowed to.
Apple really wanted Prime so it made a deal.
Would be interesting if a bunch of powerful app makers banded together and threatened to pull their apps. If there's a way to impact iPhone sales, which is typically the entry point to buying other Apple products and services), maybe Apple would lower fees.
If you make a new phone OS tomorrow and lock it down to a single store with a 99.99% cut, no one cares and it's not illegal. You don't have oligopoly.
When Apple or Google get a little too strict with their app stores, things get a lot more ambiguous.
The problem is that Apple require vendors not to advertise, link to, or even mention that other payment methods are available outside of the walled garden.
That's the stunning uppercut. The size of the fee is merely a follow-up kick to the nuts.
No doubt Apple's PR team have been feeding Bloomberg background that pulls them towards only thinking about percentages, because "high prices bad" is an much easier story for lazy hacks to write than "Apple's T&Cs are distorting a marketplace and forcing vendors to mislead consumers", and much easier for Apple to leak about and subsequently respond to without addressing the core problem, especially when they're eventually forced to sit down and haggle with consumer/anti-trust regulators.
Because people don't have a choice. If you want to build a successful software as a service offering in 2020, chances are you need to offer apps for it. Those apps have to be available for iOS and Android else they're dead on arrival, especially for iOS.
While Android lets you easily sideload apps (but even that is rarely enough as most users won't deal with that), iOS is a very strict walled garden. You have to play by the rules, and the rules are finicky and vague.
Like in the Hey mail saga, Apple's whim can make or break an entire business. That's not okay.
By obliging merchants to mislead the consumer about pricing, Apple have very likely distorted the marketplace. Which is why half the competition regulators on the planet have a file open on Apple right now.
So no, corporations do not have carte blanche to do whatever the fuck they want. See also: Uber.
Tim Cook, the CEO of Apple said that Apple treats developers equally - under oath. The problem is that Amazon got a special deal. Baidu (the Chinese Google) got a special deal where Apple fast tracks App Store approval for them and have special assigned Apple employees for their app(s). This might be one of the evidence that Apple's CEO lied under oath.
Apple changed it's rules for everyone in this category to get Amazon onboard with their video service.
Why should it take another Amazon in another industry to change rules for that industry? Why did Apple change it's rules in an entire category so that they can get Amazon onboard? Because Amazon is too big and has leverage over Apple? Isn't it?
Well this is precisely why good democracies and competitive countries have anti trust laws.
This also shows that for some arbitrary categories to please companies that have leverage over Apple, Apple will change rules at whim. This also indirectly indicates that Apple does not treat all developers equally - if you look at this in good faith.
.30 cents on a single purchase makes sense from a marketing cost perspective, it just seems like apple isn’t bringing enough to the table to justify the 30% cut after the initial sign up.
Maybe I'm missing the news here -- I'd be happy if someone could correct me or point out what I'm missing for why this is a big headline.
If you replace the company names with "Ma & Pa's Pizza" making a deal with "Dad & Sons Grocery", but keep the article the same (Ma & Pa pay 50% less of a fee for shelf space, Dad & Sons Grocery benefits from the great pizza Ma & Pa make), I don't see it being a Bloomberg story. My analogy might not quite line up (I have 0 clue how grocery shelf space is allocated), but the sentiment remains. Two companies negotiated, they had things to offer in lieu of the standard monetary compensation, and they came to an agreement.
If I am able to leverage assets other than money (intangibles like reach, brand, etc.) to lower the cost of something I am purchasing/becoming involved with, and the other company agrees to lower their cost because they will reap the benefits of the intangibles I offer, why is that wrong? Is it because of the scale involved here?
Two companies negotiated fees. What am I missing here?
So this is potentially evidence of perjury.
The article has a very small paragraph about that, and the remaining 95% was just discussing that a deal was made. I guess since Bloomberg gave much more weight to the fact a deal was struck (rather than weighting the fact that Cook potentially lied under oath), I was focusing on the wrong thing.
Just look at HN and read the comments regarding Apple. Any thread which speaks something positive about Apple (even when it is fake news, like today's false claim about the App store refunds) gets upvoted to the sky, but dare say something negative about Apple and people will hunt you out of the woods.
Devs sure love their Macs. P.S. Windows all the way
Based on what’s happened with Facebook and Mark Zuckerberg so far, which is nothing substantial for the company or him, I wouldn’t worry about Apple or Tim Cook.
I do believe that Apple has arbitrary policies with too many twists and turns on the App Store and that it’s high time it cleans up that part sooner though.
Problems ensue when the behavior is anticompetitive, and when one or more of the parties engaged in the behavior have a dominant position in their market.
This played out with Microsoft's abuse of its dominant position in the operating systems space to advance their browser ambitions.
Apple presents a really interesting case here, since they pointedly do not have a monopoly on mobile app stores -- Apple's mobile business is a minority player measured by device count, and a majority player by revenue. IANAL, and not even really an armchair one, so I really have no idea if their majority-revenue position matters, or is sufficiently dominant, etc.
As another user helped me understand with the context of this is there is a bit of an issue with Cook's denials to Congress vs. what's actually happening. And your point regarding scale is certainly understood.
I suppose I'm just having trouble with where the line gets drawn, so to speak.
https://www.inc.com/justin-bariso/amazon-almost-killed-best-...
Or reduce the app store cut.
Perhaps I'm being overly cynical, but my impression was that high-profile Congressional hearings are mostly a form of political theater.
That, of course, is the problem with these open testimony sessions. Legislators get 5 minutes to pursue random agendas, and everyone knows that the sole purpose of the enterprise is to generate sound bites for people to argue about later on. The real fact-finding is done in writing, and by staffers, not legislators themselves.
The real hearing of Mr. Hughes: https://www.youtube.com/watch?v=GDkTkpoyfL0
I'd be very surprised if Tim Cook lied in his testimony. Politicians seem to have a major problem with big tech,. They just don't understand any of this and hopefully they don't make the same mistakes they made with Bell, that basically fragmented the OS stack and caused more problems than it solved.
When did Cook lie about it to Congress?