Apple-Epic judge asks why offering iOS users a choice is bad
pcmag.com
pcmag.com
It's not so much about offering choice (implying the choice multiple app stores on iOS), as it is allowing users to be directed off iOS for purchases.
This judge does actually seem to be looking for middle-ground between the parties.
With the increasing prevalence of online shopping, the increasing importance of reliable and efficient international money transfer to the global economy, and the seemingly never-ending ways the financial services industry can mess around both senders and receivers of money when all they wanted to do was send $X from A to B, we needed something like that long ago, but better late than never.
(/s)
It becomes more complicated because Fortnite is not iOS , nor apple. In the end the decision will be made over anticompetitive tactics. Because mobile marketplaces are a closed oligopoly, they 'll establish customer rights.
With most Android devices, you can unlock the bootloader and replace the Rom, root the device for administrator style access, debloat and remove system components, generally modify the hardware as you see fit.
With all Android devices that aren't managed (read: business device), you can sideload a third party app store without the need to use system exploits to 'jailbreak.'
Neither can be done on iOS. Attempting to modify the system or sideload apps on iOS requires using exploits that are security flaws and will likely be patched out in a future OS update.
If you already have an iDevice and can't replace it, you basically don't have any choice.
Is an average Android user actually going to do any of that?
It really doesn't matter if the average Android user will do it.
What matters is that you have the option to do so.
That must be why there isn't a large jailbreaking community behind iOS.
Or why there hasn't been a lawsuit over...
An educated consumer would know that before they bought the phone. It’s never been possible to legally side load apps on iOS (well outside of your own) so it’s not unreasonable that anyone who’s bought an iPhone would expect to have that functionality. It was never taken away from them. They bought into that walled garden, whether they knew it or not.
It's entirely unreasonable to expect the average person to read up and become an expert on everything that they purchase. This is the whole reason consumer protection laws exist.
I’d argue it is the responsibility of the consumer to know if their food has allergens. It’s convenient for consumers to have the declarations on packaged products, but that doesn’t stop an allergic person from being responsible for grabbing a street bite that ends up having nuts in it.
The airbag example is a contractual obligation with a a warranted product.
The light bulb cartel example is totally unrelated and throwing it in the mix only adds a sinister tone to the original topic. If you were talking about their salary collusion it’d be relevant. But it has no relation to iOS not allowing side loading.
I’m not saying a consumer need be an expert in everything. But expecting that a product has functionality that’s never been advertised or suggested is unreasonable.
"Android device users face switching costs when switching to Apple devices, such as losing their apps, data and contacts, and having to learn how to use a new operating system"
But the other way around.
If Apple had 99% market share ( it is currently edging close to 70% in US, 75% of U.S. App Store revenues, and over 80% of time spent on the mobile internet ), and you have a choice of of using Android, would that 1% even count as a choice? In that case monopoly would not exist in any market.
It is about Market power ( and imbalance )
"That wouldn’t eliminate the market power Apple has here, but it would certainly diminish it ... it would not be much of a solution at all."
I thought this sentence sums it up pretty well. Apple has far too much power and we have plenty of evidence of email shown in court they are abusing it.
I find it interesting that Apple is being accused of such anti-consumer behaviours while simultaneously demonstrating the success of their overall product strategy in the truly free and open marketplace of smartphone sales. There are dozens of very strong competitors, most with a much wider spectrum of options and price points than Apple offers.
There is a different between Sales Unit Market Share, and actual usage market share.
As long as Apple user dont migrate to Android, and the total smartphone user in US being the constant ( most adult already got a smartphone ). Even if Apple sold zero smartphone in a whole year. They will still have the same market shares.
Even with the store metaphor, "loss leaders" to draw people in so they'll spend money on other things are a popular technique.
It’s insane that in my product I cannot tell people about ways you can purchase it. Defending this rule seems like Stockholm syndrome.
is there a 15/30% fee for physical goods such as DoorDash, Amazon, etc? thought it was just for digital goods, subscriptions, etc.
Apple sells apps. Apps that were made by others. Walmart sells X. X that was made by others.
I'm sure Apple is very pleased with the profit margins they get on in-app payments, but I'm equally certain that Apple's desire to keep people using their payment system is just as much about maintaining a great user experience for users.
Obviously the flip side is that some companies - Netflix! - then decide just not to offer payment in-app at all. That's also bad! But I don't know how to compromise on allowing apps to direct users to payment systems outside the app store without opening the floodgates to a million different payment experiences, which I (again, selfishly) would love to avoid.
It's absolutely and fundamentally first about the platform-monopoly and control.
Apple has a considerable number of other 'bad users experiences' to point at to suggest that this issue, while might be a part of their legit product strategy, is way second tier to their control of the distribution.
Finally, there's also a fairly heavy 'bad user experience' in blocking from doing the things the want to do.
The answer to your question is actually in the economics:
Apple should be able to charge a premium to using their 'great experience' commensurate with the likelihood that vendors will use it, given that premium.
With a 15%/30% cut, vendors will not use the service.
With an 8% cut (assuming they'd have to pay Stripe 4% or whatever), then it may very well be worth it for vendors.
i.e. if the 'Apple Checkout' were forced to compete as an actual produced (even with it's entrenched position in the platform), the profits would be a measure of the value at least on some level.
In that situation, maybe the user would have eventually signed up through a different platform, and the company could have been directly paid 100% of the price. But it's also possible that the user would simply never have signed up, in which case Apple's 30% cut would look like a steal compared to the alternative (receiving nothing).
Which is an admission that Apple is rent seeking.
I doubt there's any publicly available hard data around the costs of running the gift card ecosystem, but a number between 15 and 35 percent would not surprise me at all.
https://www.cnbc.com/2020/05/24/how-amazon-and-walmart-make-...
Then again, given that other payment processors have more experience, I'm not sure their UX is worse. There's more to UX than Face ID (chargebacks, dispute resolution, being able to move your subscription to Android should you desire it, etc.).
Therefore the issue is Apple getting monopoly rent (which you pay for indirectly), not UX. Your selfish interest should ask Apple to open up.
I'd prefer a system that allowed subscription to last and one that didn't require switching stores but I'm not allowed to use another store
Steve Jobs Apple, Yes. Modern Apple that is no longer the case.
It is very clear from 2016 when they announced their focus on services revenue. Every little changes, being implemented and enforced YoY was all to push for that double services revenue target.
If you have followed Apple long enough you start seeing all these changes. From Apple Retail focusing on AppleCare+ Target, retail staff having their KPI to include Apple Services Revenue Push, as well as enforcing rules where it wasn't previously enforced on App Store.
The economics of the situation are clear and massive, and they outweigh any 'usability' concerns.
Apple has tons of usability issues, they're not going to trade something marginal for 10's of billions of dollars in revenue opportunity.
This is a straight up realpolitik war over platform control.
The charger thing just sealed it how low they can stoop to make people pay for things customers shouldn’t in the first place.
But users are equally responsible. They literally encourage it by continuing to buy into the walled garden.
As a person working in tech I understand it, but it's still silly.
https://www.theverge.com/2020/4/1/21203294/amazon-prime-vide...
What Apple should’ve been doing (IMHO) is by controlling the conversation and thus the outcome. It’s going to be bad if a court decides this.
Apple added a small developer program to reduce their cut. This is clearly just a PR move and shows it’s not about costs anymore (it would’ve been when this was a much smaller venture). It’s simply a profit center now.
This move was completely backwards. If Apple had been willing to offer larger customers a smaller cut, scaling down to say 10% (remember this includes credit card processing) then I believe they could’ve completely avoided the risks of this lawsuit.
Why? If someone sues you, you just kick them out of the discount program. Would Epic risk a lawsuit in this case? I have doubts.
I don't agree with this but I think it would be a good argument by Apple.
[0] Assuming that these free apps would be functional but very limited so they don't have the same problem as the Hey app.
If apple continues by complaining that they need the extra money to operate their app store then well, they are free to allow alternative app stores.
Obviously every developer would prefer to transact directly and bypass the cut, while relying on the App Store for advertising and visibility.
Also "shopping center" analogy somewhat breaks down because you buy something from a shop and use it somewhere else. When you buy an app, you use it in the device only (inside the shopping center) using the device's affordances. So they are somewhat more intimately tied.
In the end, this all boils down to ideological differences. One camp says "it is their store, take it or leave it, they already have competitors - if the value proposition wasn't there, it would fail - and if they screw up it will fail" and I'm in this camp. Apple as a company does not owe anything to anyone. Can they discontinue the app store tomorrow if they wanted? Sure they can, it is their store and platform. Can they decide to get 99% cut from all purchases? Yes, it is their business, their platform. Up to them. If the value proposition isn't there, it will fail on its own. If it is there, whining feels to me like entitlement.
The other camp thinks private companies should be bound to rules such that even if they provide immense value, there should be a "limit" to how much return they can get from it, mandated by governments etc. I don't agree, but I can see where they are coming from.
American law abandoned this outlook at the early 20th century. Also, what Apple is doing is making it harder for customers to switch from Apple if they want to. It's ridiculous to invoke competition as a defence when Apple is trying to prevent competition.
"Making it harder to switch" is moot, once you start purchasing stuff in X platform it is already hard to switch since your purchases do not carry over and sometimes they are not even available on other platforms.
And competition involves getting ahead, and it will feel like you are trying to prevent it from happening because if you are a lot more successful than others, it doesn't feel like competition anymore - even though others are absolutely free to get their shit together and outperform. It is important to discern the difference between "competition is being made irrelevant" and "competition is being prevented".
You can if I can easily set up a store next to you. Selling more of less the same stuff.
By your analogy USA currently only has two store, App Store and Google Play. And there are no third store allowed. Setting up a third platform is literally creating another State to join the US federation.
There are limits. From safety to counterfeiting prevention to marketpower/monopoly considerations to various legal duties. In this case, Apple is using its position in the app store to force companies to use Apple's payment processor, and that's classic antitrust.
>"Making it harder to switch" is moot, once you start purchasing stuff in X platform it is already hard to switch
If the relationship was with the vendor directly, one could simply switch the subscription to the vendor's Android app. Because the vendor doesn't necessarily know even who the customer is (since Apple even takes other the email address), it's much more difficult to do. It's true that there can be other obstacles, but this one is an artificially made by Apple just to prevent competition.
> even though others are absolutely free to get their shit together and outperform.
The point is that others aren't allowed to. They can't run with iOS apps, and the user can't switch away from Apple unless the user cancels all subscriptions.
I would have more sympathy for that position if having one of two types of smartphone were not now assumed by so many organisations and if people buying those phones hadn't dramatically reduced the alternative devices those people might otherwise have bought.
Like an essential utility, a smartphone has become a practical necessity for many people to be able to live a normal life. When you have attracted so much influence, you are no longer just another business, and again like an essential utility, regulation is appropriate for the protection of the little guy.
Apple as a company does not owe anything to anyone. Can they discontinue the app store tomorrow if they wanted? Sure they can, it is their store and platform.
Sure, but if they did that, Apple's influence would rapidly diminish and the problem I described would solve itself as well.
If the value proposition isn't there, it will fail on its own.
Well, that's really the big question here, isn't it? Does Apple's App Store actually provide good value for what it costs, or is it being artificially supported through other means? One of those is just good business. The other is a potential violation of competition law in many places.
Netflix for instance can choose to refuse being on the platform under Apple's terms. It must be worth it so they stay. If Apple wanted 99% cut, would they stay? No. So the current cut must be somewhat appropriate.
If this was a bad deal for Netflix, they'd remove their app from the platform. But they feel they'd be harmed by doing so. That means Apple is providing a "valuable enough" service to them under current terms.
Then they can charge apps for downloads that dont go through their own payments.
But more importantly that's assuming that Apple needs to have rates as high as e.g. stripe, but they can probably get better much better rates due to their size, hell they have the cash to create their own bank (as they should as they re becoming a services company).
Huh, are you suggesting that there's no money to be made in the online payment processing industry? No differentiation in prices between processors that provide more or less service and ease-of-use?
Allow users to install app stores then.
"How dare you bypass the App Store!"
"Alright, can we make our own app store?"
"No!"
I suspect the best way to bust those marketplaces and reduce them to making profits commensurate with the true value they offer is to prohibit them from handling any financial transactions between the two parties at all. Instead, let them simply get paid by the sellers on some agreed terms. If they offer enough value to justify the rate they ask, the sellers will pay it. If they are too greedy, the sellers will go somewhere else. And if they have a monopoly or monopsony position, they are subject to the same competition law as any other business buying or selling anything else in an exclusive or dominant position.
Apple literally made the town in which their marketplace resides. They attracted residents to their town from the goodwill of their brand name, through the creation of a desirable product, and through substantial investments of marketing. People are continually attracted to this town because the crime rate is low and the city council's ordinances are suitable for the vast majority.
Apple literally built all of the existing buildings, provided anyone who wanted to participate in the economy with a garage full of tools, provided free and near-free training to anyone who wants it, and supplied people (again, for free) many of the basic raw materials which people used to build products.
Apple literally built the marketplace itself. They did an imperfect but not terrible job at minimising the number of outright hucksters. They made it so financial transactions were perceived as secure transactions[0], and that merchants' customers felt confident opening their wallets more often than in the adjacent town.
[0] This is more important than you remember. Ten years ago the concept of trusting your credit card through an app on your phone was new. By making the system highly trustworthy from the get-go, people's trust was rapidly won and rarely shaken.
But even if you do insist on separating them, you don't get to arbitrarily bisect them wherever you want to suit your argument. The "retail" App Store is only the surface layer of the iOS app ecosystem which Apple has developed, it's certainly not the totality of it. There's the toolchain, APIs, documentation, training resources and many other things besides, which are all necessary parts to that marketplace's existence.
You might argue that Apple chose to give away their developer tools rather than license their use with a revenue share arrangement (like Epic does with Unreal Engine). You might argue that Apple charges for their tools with the $99 annual developer fee. I disagree that these are relevant. How Apple chooses to monetise their own work is up to them. For example, Apple could have instead defined their 30% revenue share requirement as a license condition for the use of their tools and libraries. The outcome for consumers and developers would be largely identical, but the "store monopoly" argument would make a lot less sense.
Even Epic themselves understand that developer ecosystems are valuable and it's fair for a percentage of top-line profit to go to them regardless how the app is sold or how payments work.
More broadly I must admit some occasional frustration by people who insist Apple must change, as this insistence is all too often paired with a somewhat arrogant paternalism, that they know better than I do what I should want. "Free market" is certainly the simplest argument to side with and the easiest one to wax lyrical about, but that doesn't automatically make it the best one.
I'm not going to spend too much time explaining why I think the iOS ecosystem would be worse if "free markets" were forced upon it, because unfortunately Hacker News debates on this topic generally see more people throwing down-votes rather than engaging with the debate. But fundamentally I see the difference of opinion stemming from whether you see the smartphone as a computing platform or an appliance bundled with systems administration services from the vendor. I think of my smartphone as an appliance, despite being a software developer by trade. But I'm glad that the market includes many brands of Android phone so that everyone who cares can have a choice.
The question of what's been done elsewhere isn't relevant, because there are many elsewheres, each with their own origin stories. Most of them look more like iOS than macOS—the personal computer marketplace is something of an outlier when it comes to software distribution.
I guess my point is that App Store metrics (total revenue, subscription revenue, average revenue per user, etc) continues to grow and maintain their lead over Google Play so the chilling effect can't be too bad.
I suggest that in terms of metrics, Apple's App Store vs Google's Play Store isn't really the right comparison to see the chilling effect I'm talking about, because both mobile ecosystems have broadly similar dynamics. A more telling comparison might be something like iOS app developers vs. web developers offering SAAS. How many businesses that run successful SAAS websites charging subscription fees for access also offer an equivalent mobile app where customers can subscribe, accepting Apple's 30% cut and other restrictions?
And let's be clear, this isn't an argument over competing methods of payment, it's an argument about whether Apple should be entitled to a percentage of revenue for iOS app sales, regardless how they are sold, regardless where they are sold.
We should be mindful to keep this question separate from whether there should be more than one place to acquire apps, or whether it matters if the financial transaction occurs prior to downloading or after the app is installed.
If it's the latter, then Epic disagrees with you.
Epic's own business model says they're entitled to a cut of your revenue if you use their tools and libraries. They don't care what payment method you use. They don't care if you sell copies or sell in-game hats. If you make revenue, they're entitled to a slice of it.
(Yes, Epic does waive their fee for low revenue games. That's very nice of them, though in reality it's obviously a clever strategic move to lure game developers over to their ecosystem, in the hope that more breakout indie successes happen to be built with Unreal Engine. But that doesn't change the underlying principle: they would be entitled to it if they had asked for it.)
Though I disagree with arguments about whether Apple are "extremely well compensated" already. Arguments of principle should not take into account any company's particular monetisation strategy. For example, it's often stated that game consoles are sold at razor thin margins, or even a slight loss, and this justifies why they can charge high license fees for games. I think that's a perfectly valid strategy, but the fact that the game consoles aren't a profit centre (whereas iPhones definitely are for Apple) shouldn't affect whether it's decided that a 30% manufacturer's margin on digital software sales is appropriate or not.
But I would also argue that when the software in question is a game, a game console can indeed be a relevant analogy. Games are games—whether you are buying them to play on a smartphone or a GameBoy or an Xbox. The "business models" and "stakes for society" are the same regardless.
If I were in charge of Apple, I would lower their store percentage to a very low 10% for non-game apps. 30% might have been a reasonable amount in the early days, but Apple's market success means they don't need it. (I would also completely abandon their pointless stance over reader content and allow Spotify, Netflix etc to bill customers directly in-app.)
But for games, I would have Apple match the prevailing percentage set by Sony, Microsoft and Nintendo—which I believe is 30% across the board.
I suppose you could bolt a rudimentary spreadsheet feature onto Call Of Duty but that doesn't stop it from being any less of a video game. This isn't interesting and it certainly isn't clever.
A more interesting question would be if Microsoft Excel iOS had a little Sudoku mini-game buried in a submenu.
They would do this by transparently showing the markup to the user, and allowing the user to choose if they want to pay 30% more or not.
That seems like a pretty reasonable solution to all of this. Give users the choice to buy on the app, and have them pay the full fee if that is actually what the user wants.
Apple's in very deep shit in this lawsuit and losing this will open a can of worms.
For example, is it okay to bundle a default web browser with an OS and forbid any other browsers from being installed? All iOS browsers are required to use Safari's WebKit under the hood, despite the appearance of choice in the app store. This cripples the features and performance of 3rd-party browsers like Firefox.
And unlike this spat with Epic, there might be some strong precedence on that question.
https://en.wikipedia.org/wiki/United_States_v._Microsoft_Cor....
There are hundreds (or depending on how you count them, thousands) of products where exactly this is the case. Try installing an alternative web rendering engine on your LG smart TV, or your Toyota, or your Playstation.
> there might be some strong precedence on that question
This precedent isn't analogous. Microsoft had an initial marketplace monopoly over desktop computer operating systems, which was not ideal, but legally fine. They then illegally buttressed and extended their monopoly by arm-twisting the largest OEMs to lock competitive operating systems out of the open market. Finally they used this illegal monopoly to force their way into an existing competitive market of commercial[0] web browsers. Had alternative operating systems such as OS/2 and Linux not been illegally suppressed, or had the question been asked in the iOS/Android era, Microsoft's actions around Internet Explorer wouldn't have justified the same level of scrutiny.
For the analogy to hold, you'd have to show that Apple has used their market dominance to illegally suppress market access from its competitors.
[0] It's often hard for us to remember in 2021, but web browsers weren't always entirely free. Netscape was commercial software; initially free for evaluation purposes only, then later free for non-commercial purposes only. Netscape was set to be a very successful company through commercial web browser sales.
Sure, and that's problematic, but let's focus on the bigger fish for now.
[0] And before you start arguing in opposition to intellectual property rights, remember that copyright law is necessary to enforce the GPL. Without the protection of copyright, GPL software cannot exist—everything becomes de-facto public domain, with none of the benefits of copyleft rules.
Who argued for that? No one, it's a strawman.
> And before you start arguing in opposition to intellectual property rights, remember that copyright law is necessary to enforce the GPL.
Ordering companies not to lock down the customer's hardware does not require abolishing copyright.
Apple charges (and is able to charge) a lot for an iPhone in large part because the iPhone gives the purchaser access to the App Store. But they also bundle a payment service into the app store, force developers to use it whether they want to or not, then charge a very hefty premium for it as well.
Obviously Apple likes being able to charge a hefty premium to both sides - why wouldn't they? But there's no obvious moral reason why we, as a society, should let them, nor any obvious empirical reason why we wouldn't collectively be better off if we stopped them.
Nothing stops Apple from charging a competitive rate for payments, or for download bandwidth, or for app reviews, or for offering various plans or bundles of these services. Apple should be more than capable of making the best iOS app store! "$500 per submission and $1 per 10k app downloads, first 1m downloads free for new apps, download fees waived for apps from non-profits, charities, and students are registered educational institutions, ask us about our payment plans, starting at a 15% cut of all revenue, discounts for high volume apps available, all payment plans come with free submissions and downloads!" Sure, why not?
But the more they create a single bundle or services, and the more they use non-market power to force people into accepting the bundle, and prevent anyone from offering a competing bundle of services, the worse it looks for them.
> I don't agree with this but I think it would be a good argument by Apple.
The argument is basically "if you stop us from forcing developers to give us more money, then we'll have less money". And IF Apple is abusing their market dominance to extract money from developers, then that would be a terrible argument for them to make, because the entire point of all this is to stop them forcing developers to give them "unearned" money. Rather than a defence, this would just be admitting the court had stumbled across the correct target.
Now, personally, I'm not entirely sure I agree that Apple is abusing their market dominance and should be stopped. But if you do think that, then "this would cost them money" is an argument in favour of the policy. (Conversely if you don't think that, then it's all irrelevant, because Apple can do what they like.)
Apple has subpoenaed the living daylights out of everyone in near orbit of operating a market. This argument wouldn't stand up to evidence acquired from Google Pay.
I also think Apple should give up on their awkward stance over "reader" content and treat content sales within reader apps identically to physical goods sales. Let the content providers use their own payment gateways. It's the right thing ethically, but Apple should also do this because it side-steps some of the stickier arguments from the likes of Spotify and Netflix, which Apple directly competes with. Apple might do well to avoid being in a position to lose a legal fight over those questions.
But as long as the game consoles are entitled to charge a 30% revenue split for digital sales of games, I don't see why Apple should be forced into accepting a lower percentage for game sales. Games are games—whether you are playing them on a smartphone or a GameBoy or an Xbox.
(It's also a very neat way whereby both Apple and Epic would comprehensively "lose" and that feels like a very satisfying outcome to me.)
Yeah services do come and go, but they are mostly just distributors and not product owners. Any sane software developer will always gonna give you a key for software you previously bought, but for the new platform if something like that happens.
On other side Apple do push developers off their platform all the time and old apps getting abandoned all the time when API breaking and App Store no longer sell the app.