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.
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.
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?
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.
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.
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.
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?
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.
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.
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".
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.
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.
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.)
Allow users to install app stores then.
"How dare you bypass the App Store!"
"Alright, can we make our own app store?"
"No!"
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.