
Apple, Epic, and the App Store - kaboro
https://stratechery.com/2020/apple-epic-and-the-app-store/
======
cromwellian
"But Apple needs to fund the App Store. XCode, payment processing, reviewers,
it all costs money". Yes, very little in comparison. Apple made $50 billion in
revenue from the App Store in 2019. $50 BILLION. The data centers costs to
serve up this are miniscule in comparison. Apple could build 50 datacenters
PER YEAR EVERY YEAR for that revenue.

Reviewers? A staff of 10,000 fulltime reviewers paid $200k per year would cost
$2 billion.

Sorry, I'm not buying this excuse. OSX/iOS is free for every piece of HW, and
it surely has much much larger costs to staff.

A $1250 iPhone had a $450 cost to make, giving Apple a staggering 64% gross
margin, and $800 gross profit.

The costs to run the Apple store should be _included_ as a sunk platform cost
of the phone just like OSX. The cost to run the store is _marginal_. The cost
to serve up an additional developer app, to review an additional app, and to
let someone buy one, is an insignificant fraction.

It should be _free_ like the Web, or some extremely low cost to cover CC
processing fees (~3%) and electricity to keep the lights on.

I'm shocked at the number of apologists who think this 30% cut is somehow
necessary for poor little Apple, with a hole in the pocket, with living on
their spare change. It's egregious and unnecessary, and exists for one reason
only: rent-seeking behavior. iPhones are reaching saturation, and Apple can
either find ways to raise the price of the phone even more, lower the costs
more, or increase service revenues, in order to keep their stock going up.

That's why you see focus on service revenues, because they can't really lower
costs much to make the devices, and they can't really increase the price much
more.

~~~
harryf
This is a great picking apart of Apples justification but I think the issue
that most irks everyone who’s not apologizing for Apple is where did this
magic number 30% come from? Which market forces created it?

Here on HN most of us probably feel that product manager at Apple licked their
finger, felt the wind and said “Yeah 30% seems about the most we can get away
with”

And what irks even more is once Apple set the precedent, as their we’re no
outcries Google was like “Let’s copy that!”. Let’s hope there was no collusion
...

~~~
MobileVet
It is interesting that few people are recognizing that the 30% buys you
distribution on a billion devices.

Yes, I know, the web is free...and the App Store search is broken so discovery
isn’t what it was... but still. Market access is VERY significant and worth
something and the incremental cost to Apple has no bearing on what it is
worth.

As discussed, prior mobile cuts were far more one sided. We payed the carrier
50% and then Qualcomm 20% of what was left. Bottom line, we walked away with
40% and we were happy.

~~~
weixiyen
> It is interesting that few people are recognizing that the 30% buys you
> distribution on a billion devices.

It's interesting that few people don't understand the difference between
permission to distribute versus actual distribution.

If Apple was doing any distribution for you at all, you wouldn't need to pay
Facebook and Google for distribution.

Note how this was different in the early days, where simply being on the app
store would get downloads. That has not been true for 7-8 years now.

~~~
deadlocked
> It's interesting that few people don't understand the difference between
> permission to distribute versus actual distribution.

Not sure what distinction you're trying to draw here but in order for Apple to
take their 30% cut, someone has to download the app, at which point Apple have
de facto distributed it to someone.

> If Apple was doing any distribution for you at all, you wouldn't need to pay
> Facebook and Google for distribution.

This makes very little sense to me. Are you saying that if I pay Apple to
distribute my app on the App Store then they should also distribute it on
every app store? And that if they aren't then they're somehow failing me?

> Note how this was different in the early days, where simply being on the app
> store would get downloads. That has not been true for 7-8 years now.

The App Store is a shit-show in terms of discoverability, this is true. I'm
not even sure what they can do to improve things at this stage.

------
tc
Here's the thing. Even if you're OK with Apple (or whoever) controlling what
you can run on your computers, this is a centralization of power that will be
co-opted.

Let's say that Australia wants to ban consumer encryption. This would
currently be difficult to enforce for PC software. But on mobile, this is
easy. Just make Apple and Google enforce it! Make them ban such apps from
their stores. Now you've achieved perfect enforcement on Apple hardware. Even
on Android, where people could in theory side-load the banned apps, this would
prevent those apps from achieving any scale or network effect.

That's what I think people are missing here. No matter how much you trust
Apple, once the mechanisms for this kind of power are in place, you won't be
able to control what happens next.

~~~
darkwizard42
I don't think you are using two points that are similar enough.

If Australia bans encryption, you as a consumer who resides in Australia has a
high switching cost (moving, new job, residence, etc.) and thus the consumer
loses out.

If Apple starts to use that power badly... you can switch to a number of
competitor feature phones with largely the same feature and app capabilities
(Android being the most obvious)

In a market with 2+ competitors and where its low switching costs (moving
contacts is quite easy these days, not a lot of deep 2-year contracts for
phones/providers) this point doesn't hold true

~~~
ohazi
The points are not supposed to be similar... you're missing the part of the
parent's argument where one is used as a tool to enforce the other, when
otherwise it would be difficult/impossible to enforce.

There is only one real competitor: Android. Google would very much like to
have the same degree of control that Apple does over their ecosystem, but
they're holding back for now so that they can point to Apple as being worse
when the congressional inquiries heat up.

Feature phones are not real competitors to smartphones.

~~~
sudosysgen
I'd argue there is a third competitor in the form of Huawei/Xiaomi. Despite
fears of spying by the Chinese, which might be justified, their phones tend to
have better prices all the way to the ultra market, and due to the fact that
they want to allow you to sideload GsmCore and Play Services, will never be
locked down.

------
cschneid
The Hey saga emphasized that Apple has multiple products interacting in a
single app store.

* Screened apps - Apple only lets "safe" apps into the store. * Discoverability - Apple in theory lets users find apps that they didn't know about before. Customer Acquisition * Payments - Apple makes it easy to accept payments, for their 30% fee.

One or all of those are useful and great. Where I have an issue is when they
use one (the required screened apps aspect) for force you into the others.

Hey wanted an app on the store, as an extension to their primarily web based
experience. But they couldn't purchase just the rubber-stamp that says they're
not malware and the app store hosting. They were being forced to buy into all
3.

That feels like using an existing monopoly (actually a duopoly w/ google's
similar practices) to force developers to purchase products they don't want.
Hey didn't want to accept payments via apple, but Apple's market power and
decisions were focused on forcing them to.

If Apple had a yearly fee of $1000 (arbitrary number, maybe pay per download
or device or whatever), for an app to simply be reviewed & hosted, that would
be reasonable. They provide a service, businesses can opt into that. But
they're taking their core value prop of "closed app store helps customers" and
forcing their way onto "and now you have to pay us a portion of revenue".

~~~
vageli
> That feels like using an existing monopoly (actually a duopoly w/ google's
> similar practices) to force developers to purchase products they don't want.
> Hey didn't want to accept payments via apple, but Apple's market power and
> decisions were focused on forcing them to.

In order to sell goods in a place like Walmart, a manufacturer is subject to
onerous terms. Why is the app store different than a retailer limiting access
to their shelf space? I personally feel they are different but I cannot put
into words why.

~~~
romanoderoma
Because you can buy the same exact item on Zalando and put it on fire if you
want to

Imagine if you could buy shoes only at Walmart because you bought the shoe
rack there.

~~~
thewebcount
> Because you can buy the same exact item on Zalando and put it on fire if you
> want to

No you can't. Walmart often requires vendors to make a special Walmart-only
version of their product. So there is nothing that's truly comparable.

~~~
romanoderoma
We are talking about the same exact item with the same exact features, just a
different brand

There is no "vendor lock in" for t-shirts

You are not forced to buy walmart special editions using Walmart payment
gateway and vendors don't have to pay Walmart a 30% cut, the opposite is true,
Walmart HS to buy at least N items and pay in advance to be able to require a
special edition, even though they don't know if they are going to sell all of
them

------
projektfu
I think it’s absurd that you can neither buy a kindle book from the iOS kindle
app nor the Amazon app. How user unfriendly!

And yet, Apple runs their own digitsl bookstore... since there’s no way to
remove 30% revenue from apple’s own venture, they’re using a monopoly position
to monopolize another market.

Oh, but Apple isn’t a monopoly because there’s Android.

Why did we think Microsoft was a monopoly? You could always buy a Mac and
avoid the MS tax. But in the end the courts decided that MS was a monopoly
unfairly restraining trade. We’ll have to see how this turns out. But by not
allowing other app stores, Apple has put themselves at risk here.

~~~
notriddle
Windows still has 87% market share on desktop and laptop web browsing
statistics. It was higher at the time that trial took place, and cell phone
web browsing wasn't as popular back then. iOS still has less than half of the
smartphone market.

p.s. Right to Repair laws ought to make it illegal for Apple to prevent users
from installing third-party software on the iPhone. This talk of them being
some sort of "monopoly" is totally irrelevant.

~~~
projektfu
These arguments feel empty to me. There is only one source of software for the
iPhone: Apple. The android ecosystem has no utility to the iPhone user. There
is an Apple tax on every piece of software and every digital purchase on the
platform. I don’t see where the competition is.

~~~
notriddle
You didn't have to buy an iPhone.

~~~
efreak
You didn't have to use Windows either. Linux, BSD, etc have been around for
quite a while.

------
enra
While I don't like Apple's 30% cut on multiplatform/subscription products, I
think Epic's real motivation here is to run their own App Store, build a
bigger moat and get the profits themselves (they take 12% cut, 5% if you use
Unreal Engine, from developers in their store). They also make exclusive
deals, bribing developers with funding/marketing support, so that the games
can only bought in their store for 6-12mo. Clearly they are not welcoming to
competition themselves.

Buying games on PC now means that you have to install 5 different app stores
which are usually slow, buggy and not that well written cross-platform code
(pretty much like Fortnite itself).

Tencent is also 40% shareholder in Epic, and there has been criticism on Epic
sending user data back to China.

> In early December 2018, Epic Games announced that it would open a digital
> storefront to challenge Steam by using a 12% revenue split rather than
> Steam's 30%.[20] Epic also said that it would not impose digital rights
> management (DRM) restrictions on games sold through its platform.[20] The
> store opened days later, on December 6, 2018, as part of the Game Awards,
> with a handful of games and a short list of upcoming titles.[21][22] The
> store was open for macOS and Windows platforms before expanding to Android
> and other platforms.[20] Epic aims to release a storefront for Android
> devices, bypassing the Google Play Store, where it will similarly only take
> a 12% cut compared to Google's 30%. While Apple, Inc.'s monopoly on iOS
> currently makes it impossible for Epic to release an App Store there,
> analysts believe that if Google reacts to Epic's App Store by reducing their
> cut, Apple will be pressured to follow suit.

~~~
danShumway
I'm going to heavy push back against both-sides-isms here.

> I think Epic's real motivation here is to run their own App Store

Yeah, you're right. That is the outcome that we want. We want multiple stores
on iOS. I thought advocates for this position had been really clear, but maybe
we haven't been clear enough.

For the record, we want there to be multiple app stores on iOS.

> build a bigger moat and get the profits themselves

You're worried that Epic's store is going to eventually overrun Apple's and
then Epic will somehow prevent other stores from being installed on iOS
devices? You're worried that we'll get a _bigger_ moat than literally not
being able to run any code on the device that doesn't pass through Apple's
review process?

What on earth would that theoretical bigger moat even look like?

> and get the profits themselves (12% cut, 5% if you use Unreal Engine)

I want to follow up on this in the context of your worry about moats. We live
in a world where Apple has complete control over the app ecosystem, and you're
frightened that another company might get control and... offer better terms
than we have right now?

What specifically is the horror scenario that you're frightened of?

> They also make exclusive deals, where the games can only bought in their
> store for 6-12mo.

I can only imagine how upset you're going to be when you learn about how Apple
Arcade works.

> Tencent is also 40% shareholder in Epic

Apple _actively_ censors thousands of apps in China from the app store right
now. You are worried about accidentally funding censorship through indirect
means, and your response to that is to directly take the side of one of the
censors.

~~~
ericmay
> Yeah, you're right. That is the outcome that we want. We want multiple
> stores on iOS. I thought advocates for this position had been really clear,
> maybe we haven't been clear enough though.

Right, and the rest of us don't want that, and I also don't want games or apps
that don't adhere to Apple's rules. You want another option of App Stores
because you want don't want to pay for the user base that Apple created and
maintains. You want to embed permanent location tracking in your apps, abuse
user data, and not have to have your crappy practices out in the open when
Apple shows the "nutrition scorecard" for your app.

That's not what I want on my iPhone. If your app doesn't conform to the App
Store, then that's your problem, not mine. I'll vote with my dollars here. I
want the iPhone just the way it is, even if that means fewer apps from bad
actors.

> We live in a world where Apple has complete control over the app ecosystem,
> and you're frightened that another company might get control and... offer
> better terms than we have right now?

Yes that's exactly what I want. I want Apple to have complete control over the
ecosystem. They've earned my complete trust.

~~~
kelnos
I don't own an iPhone in large part because I cannot install an alternative
app store or install non-Apple approved apps.

> _Right, and the rest of us don 't want that, and I also don't want games or
> apps that don't adhere to Apple's rules._

Why do you care? If you don't want to install a third-party app store, then
don't. The games available on Apple's store will continue to adhere to Apple's
rules, and if you want that curation, you still get it.

> _They 've earned my complete trust._

This blind devotion to the Apple Way is baffling, especially considering how
Apple-approved apps are not free of the tracking and user-data abuse you
(correctly!) rail against.

~~~
rched
> If you don't want to install a third-party app store, then don't

I've been seeing this argument a lot and it makes the assumption that allowing
alternative app stores has no impact on people who choose not to use them. I
don't think this is true.

An app developer may decide to only list their app on an alternative store
because they pay lower fees and they can handle payments themselves. As a user
you now need to choose between not using the app or giving your credit card
information to the app developer you may not trust.

If you get value out of the current App Store rules, like the person you
replied to, then there is absolutely a cost to allowing alternative stores.

~~~
AnthonyMouse
> An app developer may decide to only list their app on an alternative store
> because they pay lower fees and they can handle payments themselves. As a
> user you now need to choose between not using the app or giving your credit
> card information to the app developer you may not trust.

But then this is competitive pressure for Apple to charge lower fees and allow
apps to handle payments themselves, at which point the app would be back in
Apple's store because the customer prefers to buy it from there. Everyone
benefits (except Apple).

Meanwhile if you don't want to give the app your credit card number, you still
don't have to. Refuse until they use Apple's payment method. If most users
share your unwillingness then developers will still have to use a payment
method you do trust. If they don't, what right do you have to constrain the
choices of the other users?

~~~
ghostwriter
> But then this is competitive pressure for Apple to charge lower fees and
> allow apps to handle payments themselves, at which point the app would be
> back in Apple's store because the customer prefers to buy it from there.
> Everyone benefits (except Apple).

No it isn't. The next moment Apple significantly lowers its comission, the
same people will start whining about Apple "dumping the market" "to sink its
competitors", and that it should be prosecuted under the same flawed anti-
trust legislation. Been there, seen that: if your rates are too high you are a
monopolist; if your rates are low you are dumping; and if your rates are the
same as of your competitors then there's a "collusion".

~~~
sjy
If you’re a seemingly unstoppable corporate juggernaut, you’ll make enemies
who think (rightly or wrongly) that your business practices are unfair, and
they may successfully sue you using the laws intended to stop huge companies
from engaging in unfair business practices.

I’m not sure what your point is here. That antitrust litigation is futile or
counterproductive? The threat of it seems to be having positive effects
already, looking at the front page of HN:
[https://techcrunch.com/2020/08/17/apple-expands-its-
independ...](https://techcrunch.com/2020/08/17/apple-expands-its-independent-
repair-program-to-mac-after-us-antitrust-investigation-examined-companys-
repair-policies/)

~~~
ghostwriter
It's counter-productive, it aims at punishing successful where mere "bigness"
is used as the proof of "unfair". We don't know how much cheaper Apple
products could be if it hadn't have to spread costs of lobbying its interests
in Washington DC across their device prices.

> The threat of it seems to be having positive effects already, looking at the
> front page of HN

it depends on your reliance on that kind of services and varies greatly among
the userbase. I'm using Apple since 2014, I've never needed to use any of
these services, and I would prefer to have a device that is hard to
disassemble and is cheaper to produce without a loss in quality.

~~~
sjy
It’s true that we can’t know how much cheaper Apple products would be if the
antitrust laws didn’t exist, and that some people (and not only shareholders)
benefit from or prefer a less competitive market. But conversely, we don’t
know how much worse things might be if there were no laws to keep “bigness” in
check. I am convinced by the history of antitrust that competition regulators
do more good than harm.

~~~
ghostwriter
> But conversely, we don’t know how much worse things might be if there were
> no laws to keep “bigness” in check.

We know it from history for sure, that "bigness" of an economic player is not
a problem. There was no anti-trust legislation prior 1913, and Standard Oil
was lowering prices for their oil and kerosine every year in order to compete
with emerging oil wells developers, which kept popping up dispite Standard's
dominance. [1] Customers, large and small, were benefiting along the way. But
notice how governments-coordinated OPEC influences the prices and ability to
enter the market:

[1] [https://www.winton.com/longer-view/price-history-
oil](https://www.winton.com/longer-view/price-history-oil)

------
orliesaurus
Okay this is going to sound stupid but maybe someone else feels like me about
it: I don't understand why Apple has to take such a big chunk from
transactions of in-app purchases? Similarly Google. Why 30%? Why not 5%? That
feels like it would be more honest.

Is it just because "they can"?

~~~
nemothekid
I assume their costs are just, Credit Card Fees, Infrastructure Fees
(Bandwidth, Storage), Reviewers Salary. Not sure this adds up to 30%.

I think the real reason is that when the Apple store was started, they looked
around at the current prices for "software distribution". Retail was like 70%,
and other app stores; for example the Danger Hiptop / T-mobile Sidekick
charged 60% for their apps store, and the carriers were worse. At the time,
30% was actually a lot cheaper than everyone else. Then I assume Google just
copied Apple.

~~~
wrkronmiller
Maintaining XCode, running iCloud app-facing services, building/maintaining
SDKs, etc...

Apple has to pay for these somehow. They can either get the money by charging
more for each iPhone or they can get the money from the real end-users of
these products: Developers.

~~~
dzader
Or you know, they could get the money from the yearly fee they charge
developers for exactly these reasons

~~~
scarface74
$100?

~~~
ranbumo
20 Billion in 2018, but I read that in a similar thread here and sadly can't
remember the source anymore

~~~
scarface74
Apple has 200 million paying developers?

------
fierarul
Fundamentally, scale does matter.

If you have a small pub in the middle of nowhere you can be a selective as you
want. If your pub chain feeds 50% of the people in the country you damn right
will have to be heavily restricted in what you can do.

It doesn't matter if it's monopoly or not. After you cross a threshold the
rules should be different and it's just amazing Apple has been allowed to grow
so big with basically no oversight.

~~~
kartayyar
Fully agree with this sentiment - if there is anything which becomes so common
place like say a road, then I think there should be some kind of oversight.

Apple saying no to people being able to bring their own payment provider feels
akin to saying the road provider only allows cars they vet, and then charge
30% car manufacturers 30% of the price of the car.

------
modeless
It's a common meme that "With a free service you're not the customer, you're
the product." Well, you may be Apple's customer at the beginning when you pay
for the phone, but immediately afterward you become their product. You're
being sold for the 30% tax. And to enforce that tax Apple maintains ultimate
control over the hardware you supposedly bought, blocking you from doing
things that would threaten Apple's revenue streams.

~~~
jagged-chisel
> "...immediately afterward you become their product. You're being sold for
> the 30% tax."

I don't understand the argument you're attempting. Apple doesn't sell my info
"for the 30% tax." In fact, they charge app developers that 30% and then _keep
my data away from those same developers._

~~~
unchar1
The same way that GMail isn't really "free", that 30% tax doesn't come from
Apple or the Developer's pocket, it ultimately comes out of your pocket.

~~~
colejohnson66
But I don’t pay for any Google product, so the comparison isn’t apt.

------
ntsplnkv2
A pretty well-thought out article, given the inflammatory nature of the
subject matter.

I think Apple is right on the line. But I don't see a good argument as to what
their doing is being anti-competitive. ~2 million apps are on the app store.
Charging a fee for giving developers a huge market that spends money is not
exactly unfair. And the rules of engagement are generally applied equally to
everyone - the exceptions are noted by the guidelines.

What would make it fair? Lowering the fee? If that were the case, then the
problem isn't anti-competitive behavior. If it's the rules, what would fair
rules look like that don't harm the end user or the product?

What actual harm is Apple inflicting on the market by their behavior?
Developers make less money? That isn't good enough.

~~~
bluedevil2k
actual harm => consumers end up paying more for the apps because the app
developers have to increase their price to cover Apple's cut (which is more
like a shakedown).

I don't see any reason why a company needs to pay _any_ percent of their
revenue instead of a flat fee. You pay a % of revenue when someone is your
partner or an investor in your company. Apple is neither. In fact, they've
shown to be the opposite of a trusted investor/partner as they've copied
successful apps and integrated them into their own platform.

The App Store should be a fixed fee, something like $19/month, for your app to
be on sale there.

On another note, regarding your first comments, in the late 90's Microsoft
went through DOJ depositions and demands for breaking up simply because they
bundled Internet Explorer with their operating system. It didn't charge
Netscape money for access to Windows and IE wasn't generating any income. But
the furor at the time was huge and the anti-MSFT attitude has prevailed to
this day. Why not the same feelings for Apple who's made this far more extreme
and far more anti-competitive.

~~~
giantrobot
I'm super amused by people bemoaning Apple's cut of sales on the App Store. I
remember mobile software before the App Store. Buying software for a Palm or
PocketPC device was a fucking shit show.

There were multiple competing stores and sometimes even the developer's own
site. The prices were ridiculous, partly because everyone had to implement
their own payment and distribution systems. If the software didn't work or
there was a problem it was rare to get a refund. Most of the time your contact
info was readily sold to "partners".

Apple's cut of sales for the service they provide is pretty small compared to
the costs of doing it yourself. There's many of thousands of developers that
are enabled by the fact they don't need to host their apps, handle billing, or
handle user accounts and PII.

If you seriously think prices to end users would decrease if Apple took a
smaller cut you're deluding yourself. If developers are making sales at
current prices there's zero reason for them to drop prices even if their
overhead drops. Prices are set by what the market will bear and only have
their lower bound set by the developer's overhead.

~~~
dangoor
2020 is very different from 2008. Palm and PocketPC devices were "organizers"
and not primary computing devices (as smartphones are today, for some users),
so there was a lot less at stake back then.

Additionally, companies like Stripe have made integrating payments _way_
easier than it was back then. Hosting downloads is not difficult either. As
noted in the Stratechery article, developers not only give up 30%, but give up
a customer relationship and can't even issue refunds! They can't do upgrades,
either. It's not just the 30%, it's the flexibility in payment models as well.

I don't know that prices would drop, but more developers would have a
sustainable business.

~~~
giantrobot
Late model PDAs and early smartphones (Treo, Blackjack, N95, etc) were capable
devices. The paid software for these you'd see were office suites, PIMs,
e-mail clients, and games. Of course these weren't as capable as 2020 devices
but we're not talking early Palm Pilots.

Payment processors like Stripe aren't new, there was PayPal, Kagi, and others
before 2008. Handling payments is a non-trivial task for a small developer,
the same goes for handling user accounts/data. They're not insurmountable
problems but they're a lot more effort than Apple or Google just sending you
money when people buy your app.

Hosting is worse than payments as it _costs_ the developer money and keeps
costing money. If your app gets a popularity spike instead of getting a
revenue spike you get a huge hosting bill.

I think you've got it entirely backwards, more developers have sustainable
businesses _because_ of the App Store than without. Payment processing,
hosting, managing user data? That shit is easy for big companies or it's an
extant expense so mobile app sales aren't adding real overhead. So for
Microsoft, Adobe, and Epic those aren't problems. They could easily sell their
stuff without the App Store/Play Store and in fact currently do so. For the
many thousands of small developers that _aren 't_ Epic payment processing and
hosting are big costs as is advertising they need to even be found. Before the
App Store mobile app aggregators charged money to get listed and wanted bribes
to be featured.

Epic et all might see their overhead drop from Apple's 30% to maybe 10%. They
pocket the extra revenue and prices don't change for consumers. For many
thousands of developers their overhead goes from Apple's 30% to 50-60% doing
it in house. So Epic rakes in even more money and small developers get the
shaft.

------
jasode
In the spirit of this particular story, I'd like to ask HN the following
question: Should closed hardware (that owns its entire stack) even be legal to
sell?

Yes, it's legal today but _should_ we make it illegal?

To try another example besides Apple iPhone, consider the $35000 Prima Cinema
movie server to play 1st run movies at home on day of release:
[https://www.google.com/search?q=%22prima+cinema%22&source=ln...](https://www.google.com/search?q=%22prima+cinema%22&source=lnms&tbm=isch)

In many iPhone debates, we throw around phrases such as, _" unlike a game
console, it's a general computer"_ and _" I own the device so I should be able
to put any software I want on it"_.

Understandable sentiments. So the question is, should consumers be able to
_knowingly_ buy restricted hardware such as Prima Cinema? They pay $35000 and
own the computer but they _know_ they _can 't sideload their own movies_. They
_know_ can't pick another "movie store", or watch Youtube/Netflix on it, etc.
The hardware has _anti-tampering_ sensors so that it bricks itself if the
owner tries to open it. The hardware is a "general pc". It runs Wind River
Linux. I think the cpu is x86 but it might be ARM or something else.

You can't argue that Prima Cinema should not be locked down (claiming anti-
competitive behavior) because the paranoid film studios wouldn't even license
their content if it wasn't. If a buyer wants to have 1st run movies at home,
all those restrictions in place is they only way to get it. It's more
restrictive than iPhone in that sense.

~~~
ericmay
> Should closed hardware even be legal to sell?

I don't see why not. If it's a problem, then either a competitor will emerge,
or people won't purchase the product.

If it's truly a bad business practice, it'll lose out in the end. Besides that
I actually love the closed system of the iPhone + App Store, we can't just go
around banning things anytime we think we might not like them. Every time I
see this story it just annoys me. I want the iPhone and App Store to be a
closed system. Opening it up is the bad idea here.

Philosophically, amazon.com and Facebook are closed systems too. As is Wal-
Mart and UPS. I'm not sure why we're only focused on hardware systems here,
what's the meaningful distinction?

~~~
diffeomorphism
> I don't see why not. If it's a problem, then either a competitor will
> emerge, or people won't purchase the product.

Aka "the invisible hand will fix it". We have been waiting quite a few years
for this and it did not happen. Instead we got the complete opposite: a
duopoly of android and iOS which nobody, not even Microsoft, can compete
against. At this point, we have to acknowledge that simply waiting is not
going to fix anything.

~~~
johncolanduoni
But Android in general doesn’t have these restrictions. Plenty of phones
(including Google’s flagships!) support rooting, and you can install a third-
party App Store like F-droid even when they only support sideloading. So
that’s not really a good example of market forces failing to solve the
unlocked hardware availability problem.

------
ryantgtg
> Moreover, Amazon couldn’t even tell users to visit Amazon.com, much less
> offer a link or, as Android allows, a webview of the store.

I was recently baffled by this on the Bandcamp app. You can't purchase music
through their iOS app, and there isn't even a link to the website where you
can purchase it. Instead there's just a "purchasing music is not supported on
this device" message.

Likewise, on my own app, I had a blog post (webview) about our patreon (with a
link, of course). And Apple flagged it during a random bug fix app update. So
I had to edit the blog post and remove the link to our Patreon. And from what
I could tell, there isn't even a way to use the proper Apple Pay/whatever
system with Patreon subscriptions.

------
kanobo
"This case asks us to draw the line between anticompetitive behavior, which is
illegal under federal antitrust law, and hypercompetitive behavior, which is
not."

I feel this contradiction within me when I find myself promoting and praising
the growth hacks and 'doing whatever it takes' mentality startups employ and
then subsequently realizing that at the same time I would probably shame and
criticize the same tactics if the same company got large.

~~~
jtokoph
Uber is the prime example of this. They broke many laws and regulations in
order to provide a better product/user experience without much punishment to
get to where they are today. If Uber started breaking more laws today they
would be shot down very quick.

~~~
save_ferris
> If Uber started breaking more laws today they would be shot down very quick.

Unfortunately, I don’t see this as being true. I’d be willing to bet they’re
still breaking laws and ordinances today and we’re just not aware of it.

Part of it is the news cycle today, we’d never see a story about Uber breaking
some municipal laws with the state of the world as it is. And after all, they
have tons of cash, which is what breaking laws requires.

Until they suffer material operational pain from doing wrong, they’re not
going to change.

------
PaulDavisThe1st
>This is not a console you play to entertain yourself, or even a PC for work:
it is the foundation of modern life

OMFG. Is it just because I'm 56? Is it just because I've spent my entire adult
life connected to the internet (barring a few early years where it was just
Bitnet)? Is it because I helped start the biggest e-commerce company in the
anglo/eurosphere? Is it that I spend all day in front of screens, connected to
the entire goddam planet? Is it that I'm a grumpy old curmudgeon ?

The idea that the iPhone (or any network-connected portabl computing device)
is the _center of modern life_ just needs to die already.

If this pandemic didn't provide it already, just these few things are far more
"central to modern life" than your goddam smartphone:

    
    
       * a stable, diverse healthy food supply
       * trash pickup
       * a functioning, non-overloaded, sensibly priced and paid for healthcare system
       * a mail/package distribution system
       * fuel stations for your vehicle, if you have one
       * investigative, non-suck-up journalism
       * electricity (to charge your smartphone, naturally)
    

I could go on.

Your smartphone is not the center of your life. You have a variety of options
for contemporary communication, and the fact that a bunch of you have decided
that the most important one is the one that fits in your pocket and works
anywhere there's a cell tower within range doesn't change the fact that it's
the icing on top of the cake that is the rest of your life. It is totally
amazing to be able to do what you can do with a contemporary smartphone, and
no doubt they will get even more amazing.

But they are NOT the center of modern life, they are the black mirror-
becoming-black hole sucking so many other components of human existence into
their mundane, pedestrian and constrained vision of life.

~~~
user5994461
It is honestly the center of modern life to many young people.

Half the things you mention are oblivious to the younger population. They
don't have a vehicle, don't use physical mail (paper letters), and couldn't
care less about journalism.

Consider somebody trying to get a job in modern society. The phone is needed
to apply. The phone is needed to do the interview. The phone is needed to take
a picture of your id and receive the contract when you're hired.

~~~
PaulDavisThe1st
>Consider somebody trying to get a job in modern society. The phone is needed
to apply. The phone is needed to do the interview. The phone is needed to take
a picture of your id and receive the contract when you're hired.

That makes it a very useful tool in modern life. Not the center of modern
life.

>They don't have a vehicle

Fuel for the bus or subway, then.

>don't use physical mail (paper letters)

and they don't vote? or participate in the census?

>couldn't care less about journalism.

doesn't match the young people I know.

------
quijoteuniv
Closed hardware should be opened when unsupported... meaning if apple cannot
support old hardware anymore they should open it by law. There are so many
ipads and phones that could still be in use but arent because you need to run
their software. We need to stop the planet to be an electronics garbage bin.
Same when they start with the new chip on apple computers.

~~~
colejohnson66
They’re discontinued, but they don’t prevent you from doing what you want to
those old devices. Sure, a first generation iPhone/iPod touch only runs iPhone
OS 3.1.3, but you can still jailbreak it and do what you want.

------
haunter
People don't get the console difference

I have a PS4

I can buy the game digitally from Sony

I can buy the digital code which activates on PS4 from Amazon or sometimes
even straight from the publisher

I can buy a physical copy from countless retail stores both off and online
from Walmart to BestBuy to Amazon to Gamestop

I can sell my used physical copy on Facebook Marketplace, Ebay, or Craigslist

This is the difference. And it's much bigger than people realize.

~~~
lowbloodsugar
I have a PS4

I can pay Sony to take a cut from the developer.

I can pay Amazon _and_ Sony to take a cut from the developer.

I can pay retail stores to take a 50% or more cut, and then Sony takes a cut.

I can regain some of the cut that I paid to a retail store, so that the
developer gets _nothing_ , by selling it on Ebay or craigslist.

You are always buying the game from Sony, and Sony is always getting their
cut. Your options are whether to involve other rent seekers or to just fuck
over the developers completely.

------
paulmd
all this because Epic didn't want to pay apple's app store cut and thought
they could bully their way through blatant ToS violations. Move fast and ask
forgiveness later, the Silicon Valley way!

It's pretty funny to look back and read the "whether or not apple backs down,
Epic will have won a victory!" thinkpieces from last week.

Epic thought they could leverage their IPs into forcing Apple to play ball.
Surely Apple wouldn't dare let _Fortnite_ get deplatformed (as the game
updates on without iOS). Surely Apple wouldn't dare let Unreal Engine get
deplatformed as the OS updates onwards without it.

Turns out Apple does dare, and now third party developers are going to pay the
price for Epic's arrogance. To be very clear: nothing is going to piss Apple
off quicker than fucking with their cut of the revenue, this was eminently
foreseeable and a blatant violation of ToS and there was no way Apple wasn't
going to react. You should be mad at Epic here for trying to play silicon
valley games with your products, not Apple.

The fact that Epic would then take cuts from third party developers in this
app store is just the icing on this cake. They want to be the ones running the
walled garden, nothing more.

Steam manages to get along with Apple just fine - they went ahead and made a
revenue sharing agreement, and they haven't had a problem. Epic wanted to keep
it all themselves, be the ones running the walled garden.

This is Epic trying to run the playbook that _many of you_ have normalized, no
different from Uber trying to bully their way out of background checks by
threatening to pull out of Dallas, or threatening to pull out of California to
bully their way out of paying for their employees' healthcare. Then cue the
waterworks about _those heartless regulators putting all those innocent
employees at risk_.

Only this time - it’s Epic who’s using your livelihoods as leverage for their
power play. Very ironic!

All so that they can make $1 off a llama skin for bideo james instead of
$0.92. Just like the Uber thing is so Uber doesn’t have to pay 20 bucks to run
a background check. Playing games with people's lives so you can run a little
fatter profit margin, that's the silicon valley way.

------
dubious_one
It seems like Epic is engaged in some hypocrisy here. From what i can tell, if
I want to generate content for Fortnite (skins, mods, etc) I can do so, but
their terms are that I give it to them and they can turn around and
commercialize it for their benefit. I do not see a way that I could monetize
my creation. So in the platform that is Fortnite, they do not even allow me to
make 70%, instead taking any contribution as their property without
remuneration. I prefer Apple's model to this by far.

------
LockAndLol
Honestly, I don't see the big deal. You pay for vendor lock-in, you get vendor
lock-in. Apple doesn't have a "monopoly" on smartphones. If anybody wants
variety, they can get an android or invest in a PinePhone or Librem5.

Epic complaining about being shut out of the App store is like Dominoes
complaining about being shut out of that private university where all the rich
kids go. They should just go over to Android where, if they want to, they can
make their own app store.

> My preferred outcome would see Apple maintaining its control of app
> installation. I treasure and depend on the openness of PCs and Macs, but I
> am also relieved that the iPhone is so dependable for those less technically
> savvy than me.

This, I certainly don't agree with. Android has more app stores and is still
quite easy to use and dependable for the less technically savvy. Apple getting
more App stores won't change how "easy" the iPhone is to use.

------
turtlesdown11
It's weird how Epic has no problem with closed hardware consoles...

~~~
sdsvsdgggggg
How big of a cut do they have to pay on closed hardware consoles?

~~~
pwinnski
30%, amazingly enough.

------
lowbloodsugar
A lot of the posts here are making points that I don't think a judge or jury
will care for. This is clearly a case of two companies trying to commoditize
their complements. End of story.

Epic doesn't have a problem with Apple running an app store, despite what
their marketing on this legal issue makes out. Epic has an app store and they
charge ~12%. Given my experience with Epic, I am certain that if they had
gotten here first, they would be charging the same 30% that Valve charges.
Epic's problem is that Apple wont let them run their app store on Apple's
stack. Epic wants to run their software everywhere, and commoditize the
platforms/OS/hardware.

Apple wants to do the opposite.

IANAL, but I haven't seen any evidence that Apple should not be allowed to do
so.

If Apple were the only mobile device available, then we might have a monopoly
conversation. But it isn't, so we wont. It isn't even the majority platform in
the US.

Where are these points coming from? They aren't from the perspective of a
customer.

I am a customer, and I will continue to buy iPhone _because_ of their total
integration. Android is a shitshow and you are welcome to it. "Well, I want
iOS, except for..." yeah that is Android.

So what is really underneath all this? The money. Epic wants to make more
money from Apple's customers. And it wants to do so by destroying the value
that Apple customers like me choose over Android.

Samsung makes phones that are at least as good as iPhone.

Android is an OS that lets owners do all of the things that people here are
demanding Apple allow them to do.

Yet, strangely, rather than everyone here advocating that we all move to
Android, instead, we are demanding that Apple become like Android.

Because nobody here is actually interested in what Apple customers want. They
just want access to those customers, even if it means fucking those customers
over.

------
lajawfe
Here I give my analysis of what the best solution could be. Would like to know
your thoughts too.

0\. Lower rate from 30% to 15% -Apple still has monopoly, nothing changes.

1\. Side loading apps: Not good! malicious apps can run amok, eg. $BIG_CORP$
will say - you will get 20$ credits if you sideload our app, and then surveil
everything that is possible on the device. Here, we expect an average user to
give all the permission that the app requests for.

2\. allow secondary app stores: -not good as it depends on the quality of
enforcement in secondary app store. For Apple, it is in their interest to
maintain app quality in their appstore to maintain overall good user
experience in their device, but motivations are not same for secondary app
store. May allow malicious apps which deteriorate the user experience/privacy
similar to 1. And there will be a state where you will have to install 10s of
app store just to install specific programs which is also not ideal.

3\. Allow secondary payment methods: -Average user will have to give up their
payment info to everyone who asks for it. Most of them will not be trustworthy
nor we can expect all of them to maintain good security standards for saving
payment info.

The biggest culprit of all this drama is Apple does not allow secondary
payment inside apps AND also, if you have secondary payment outside of app,
they do not allow that price to be lower. There is no competition, thus Apple
can get away with whatever it chooses to. Thus the monopoly.

4\. SOLUTION:

a) charge a flat fee for reviewing/serving apps. If necessary, linearly
increase it based on daily active users if they need more resource to support
that app.

b) allow secondary payment providers (whitelisted only).

c) allow secondary payment price to be lower than Apple.

With this solution, there will be competition between payment providers which
will drive the price down. Only whitelisting few payment methods which are
trustable eg applepay, googlepay, paypal, stripe, etc will maintain security
of payment data.

~~~
CMGPwned
Allow side loading of apps. But broadcast that this device has sideloaded apps
via an API. So banking apps can be disabled themselves if there are sideloaded
apps. Block iOS updates. Also voids warranty.

Secondary payment method can be implemented along with apple's own payment
system just like how it is for `Sign in with Apple` . If you have `Login with
Facebook`, then there should be `Sign in with Apple`. The alternative payment
option can be turned on and off in settings. If it is turned on, then no more
Support from Apple

------
ngngngng
> but the benefit [the App Store arrangement gave] to developers was much less
> clear cut.

I disagree, I think the fact that so many developers built apps for iPhone
supports my point. Apple gave developers everything they needed, users with
dollars to spend.

~~~
johnnyfaehell
Those users would always be there. If there was another App Store instead they
would be there. If there were app stores competing there would be users with
dollars to spend on both. The App Store doesn't provide users because it does
something special, it provides them because there is no other option to
install apps on your expensive smart phone/tablet without using it.

------
627467
> My preferred outcome would see Apple maintaining its control of app
> installation. I treasure and depend on the openness of PCs and Macs, but I
> am also relieved that the iPhone is so dependable for those less technically
> savvy than me.

I think people overestimate the importance/benefit of such level of control
over instalation of apps. Yes, Wintel was plagued by malware viruses but
Mac/Linux/Unix wasn't. I don't think the benefit (protecting users from
threats) outweighs the drawbacks (not having control of device, not allowing
ecosystem of paid thinkerers to help Muggles personalize their devices) of
having such closed approach.

------
txr
I find the comparison that many people make to game consoles very short
minded.

It should be clear to everyone that the smartphone will become more and more
integrated into our lives to a point where at some point you cannot
participate in society without a phone. Sure, many things have alternative
options or are limited to tech enthusiasts but other options become less
favorable more and more.

The alarm clock in the morning, communicating with friends and family, paying
for things, doing your taxes, unlocking your door. Also unlocking your car is
coming and there is even early talk of putting your driver’s license in your
phone. Getting driving directions, some people use their phone as an
artificial pancreas system.
([https://androidaps.readthedocs.io/en/latest/](https://androidaps.readthedocs.io/en/latest/))

The smartphone has become the personal computing device.

A gaming console is something completely different, there I'm perfectly fine
if a company wants to control the environment. I would prefer an open system
but Sony, Nintendo or Microsoft controlling the games I can play is not even
close to the limitations apple creates with their ecosystems on society.
Google allows for third-party stores on their Android system, I would be
doable for Apple to allow the same.

------
zepto
Epic has billions of dollars and a lot of customers. Microsoft has billions of
dollars.

There are a wide range of other parties that dislike Apple’s policies.

Why don’t they build their own platform with their own exclusive and
attractive content?

I can see two options:

1\. A full blown phone. Hard to do? Perhaps, but if Apple and a Google really
aren’t competitive, then it should be possible to take customers away from
Apple over the next few years, especially if your device has the games that
teens want and can’t get from Apple.

2\. Don’t start when a phone. Make a gaming handheld with exclusive content -
Epic’s super popular titles, plus XBox streaming. Sell it for $200. Basically
an iPod for games, done right. If Nintendo can sell handheld consoles it’s
obvious Epic and Microsoft can.

Then just build this out with phone functions, and a great browser for SPA’s
etc, leveraging flutter, and eat Apple’s lunch from the bottom up in classic
low-end disruption style.

Bonus: have an open bootloader - bootcamp style so that enthusiasts can hack
the thing.

#2 seems like they could have a product on the market next year if they
wanted.

I could see this strategy easily forking the market into iPhones for
productivity and Epic devices for fun, and causing both segments to improve at
a greater pace.

Apple simply isn’t unassailable if people are willing to put in the sustained
effort needed to compete with them, but to do so will take a similar sustained
effort over a similar time period to what it took them to obtain their
position.

~~~
lotsofpulp
>Why don’t they build their own platform with their own exclusive and
attractive content?

They don't want to spend their cash to do the R&D, and build up the network of
stores and customer support required to be able to compete with Apple.

------
AcerbicZero
Apple has a monopoly on making apple products to sell in apple stores? Quick
call the feds!

Seriously, the game Apple/Google/etc have been playing has been pretty anti-
consumer at times, and downright unjust at other times. That said, Epic's
(cough cough tencent's) only move here is to turn this dumpster into a
dumpster fire and I don't see that as a particularly helpful direction to go
in.

~~~
Synaesthesia
Int the US, I believe it accounts for about 70% of ponds, which is a lot.
Globally not so much but still the biggest by revenue, and has all the elites.

------
cwyers
Part of the problem I have with the notion that Apple (and Google) need such
tight control over their app stores is that they do such a bad job of it.

[https://www.nytimes.com/2016/11/07/technology/more-iphone-
fa...](https://www.nytimes.com/2016/11/07/technology/more-iphone-fake-retail-
apps-before-holidays.html) [https://blog.trendmicro.com/trendlabs-security-
intelligence/...](https://blog.trendmicro.com/trendlabs-security-
intelligence/gambling-apps-sneak-top-100-hundreds-fake-apps-spread-app-store-
google-play/) [https://www.wired.com/story/apple-app-store-malware-click-
fr...](https://www.wired.com/story/apple-app-store-malware-click-fraud/)
[https://crappygames.miraheze.org/wiki/Category:IOS_Games](https://crappygames.miraheze.org/wiki/Category:IOS_Games)

------
Kocrachon
How is this any different from PlayStation, Nintendo, and Xbox services? Not
only do they get a cut of all of that revenue from those services and DLC, but
the companies have to even pay for the right to make software for these
devices. so are we going to start attacking Nintendo now? At some point I
think a manufacturer should be allowed to manage this kind of stuff.

~~~
ThatPlayer
Those aren't general purpose devices, but also they've got a smaller userbase.
iPhones and iPads have sold more than two billion devices. All the consoles
combined probably do not come close. Especially in an anti-trust lawsuit, a
bigger target is easier.

------
asiachick
Software is speech

[https://www.eff.org/deeplinks/2015/04/remembering-case-
estab...](https://www.eff.org/deeplinks/2015/04/remembering-case-established-
code-
speech#:~:text=One%20of%20EFF's%20first%20major,way%20for%20international%20e%2Dcommerce).

You can read any book, watch any movie, listen to any music, but not run any
code. That limits expression. Plenty of topics are off limits because the only
way to run them is as apps and apple doesn't allow them.

Some of you would apparently be okay of Apple restricted movies, music, and
books to only movies, music, and books apple sells and made it impossible to
view/read/listen otherwise including removing the browser? Because that's
effectively what they've done for apps.

There should be no distinction. Either the platform is open to all media or
the platform is a form of suppression and control of ideas those in control
don't approve of.

------
jarvar
I think apple's 30% cut of app purchases is too much and I think they know
this. With that being said I think this is part of apple for a long-term plan.

iPhones are getting more expensive to build considering all the tech their
cramming into each iPhone and other products. eventually they might get so
expensive that Apple would be forced to sell them at a price that will not
work well wih consumers. If you think about how much apple has invested in
services that only function on their devices, I think apple will start selling
products at a loss, with the plan to make that money back and more through
services they offer on devices. In the same way that Sony and Microsoft lose
money with every console sold, but recoup those loses many times over with
games purchase fees.

------
baby
A 30% just seems wrong to me. It just screams: we have a monopoly, if you want
to build something that everybody around can you use, if you want to be a
successful startup, you’ll have to give us a third of what you charge. There’s
no other way: we’ll be your middle man forever.

------
ecocentrik
Apple lost track of their value exchange proposition and has now resorted to
extortion. Yay 2020.

------
tomcam
IANAL, but I think the strategy epic will use is called tying in anti-trust
law. That means obtaining an unfair advantage for one line of business by
requiring its use in another line of business. The android app market is big
in numbers, even bigger than the number of iPhones, and therefore it may be
difficult to call the App Store a monopoly. In Epic’s case, while the App
Store may or may not be a monopoly, forcing anyone who uses the App Store to
use Apple’s payment services as well may be the illegal part in the eyes of
the court.

------
annexrichmond
I see streaming video games as simply videos that the user is able to interact
with. Perhaps this is a false comparison, but does Apple collection commission
on ad revenue from YouTube ads?

------
caiobegotti
Unfortunately the App Store 30% cut is Apple's revenue cocaine and it will be
really hard for the rest of us to stop such addiction without multi-national
governments help.

------
aaanotherhnfolk
Simplest compromise I've heard so far is for Apple's cut to scale with size of
IAP/subscription.

30% cut starting at $0.99 purchases. As mentioned this barely covers
processing fees.

20% cut starting at $9.99.

10% cut starting at $49.99.

Not only does this fix the Epic, Netflix, Hey, etc issue where high value or
high volume txns get unfairly middlemanned by Apple. It also incentivizes
developers away from the "race to the bottom" effect that made everything a
crummy $0.99 microtransaction in the first place.

~~~
huhtenberg
The simplest compromise is to let me easily install what I need from whatever
source I want on the goddamn hardware that I own. The rest will follow from
that.

------
noncoml
Not versed enough in law to argue about this, but from a customer point of
view, I hope that Apple wins as I would hate the iOS ecosystem to end up being
a Wild West like the Android.

I am happy to pay for a premium to have peace of mind. To give an analogy it’s
kind of like gaming console vs PC gaming where I am happy to sacrifice a bit
of performance in exchange of getting rid of all shady game-specific launchers

~~~
bluedevil2k
You're not addressing the real issue here though - should Apple get a cut of
the revenue from in game purchases? Once you download the game and are looking
to purchase more of the game you've already let the app pass your "shady wild
west" internal warning system.

~~~
noncoml
Yes, for the simple reason that if they don’t, it opens a loophole for
everyone to avoid the 30% cut altogether.

Also from customer prospective, I feel more comfortable knowing the payment
will go through Apple.

~~~
stale2002
> , it opens a loophole for everyone to avoid the 30% cut altogether.

But this is a good thing, not a bad thing. Literally the purpose of all this,
is to get around this cut. It is better for developers and consumers, to take
whatever actions possible, to support loopholes, that get around this 30% cut.

This is the explicit goal here, and the reasons why it is good. The loophole
would be a good thing.

------
somethoughts
Its interesting if Epic's and Xbox's long term plan should be to enable cloud
gaming support via the browser. Basically the Google Stadia approach (cloud
based rendering and only controls/decompression of the rendering down on the
device).

Basically figure out how to make mobile gaming available via Mobile Safari,
Mobile Edge or Mobile Chrome browsers.

------
josteink
> But Apple needs to fund the App Store. XCode, payment processing, reviewers,
> it all costs money

This is the investment Apple has to put in to make sure there are apps on
their platform.

Their "funding" for this is iPhone and iPad sales.

------
RyanShook
The entire way Epic went about this has me scratching my head. Just looks like
a lose-lose situation to me. They lose out on 70% of their revenue on iOS now
and likely lose a lawsuit later.

~~~
nmfisher
I’m guessing they are very confident in their legal position.

Just think how much it would be worth to Epic to run their own Games store on
iOS - literally billions.

This is big brain thinking from Tim Sweeney.

~~~
RyanShook
They’re definitely taking a gamble, rooting for them but I wouldn’t bet
against Apple on this one. Also seems like you would have better odds if you
took on only Apple or Google instead of both at the same time.

~~~
nmfisher
Oh, I completely agree, and I really can't see a solid foundation for Epic's
claims at all.

But, on the other hand, anti-trust was never my area of legal practice, it's a
highly specialized area of US law (something I'm not familiar with in the
slightest), and thousands of (billable!) man-hours would have already been
spent researching, crafting and refining their argument.

In other words, my legal opinion is meaningless here. I'm interested to see
how it plays out.

------
Razengan
Does Epic allow players to buy Fortnite content from outside of Fortnite,
without giving Epic any money?

Do Microsoft, Sony or Nintendo allow other stores on their consoles?

How much % do they take from console game sales?

------
greyhair
I really love all the financial experts on this thread, both pro, and con.

------
nodamage
Most of the discussion on this topic has been around who is _morally_ right,
but I've been curious to find out how strong Epic's _legal_ case is.

Epic's lawsuit alleges antitrust violations in two different markets: 1) the
"iOS App Distribution Market" and 2) the "iOS In-App Payment Processing
Market". Proving a violation in one of these markets may be a lot more
challenging than the other.

A. Monopoly Power

The first step in proving a monopolization offense under the Sherman Act is
proving the company possesses "monopoly power in the relevant market". In
determining monopoly power, the courts start by examining market share, but
"but typically do not find monopoly power if the firm (or a group of firms
acting in concert) has less than 50 percent of the sales of a particular
product or service within a certain geographic area." [1]

Obviously, with Apple's current market share of 46% [2] in the United States,
they are unlikely to be considered possessing monopoly power in the smartphone
market.

B. The "iOS App Distribution" Market and Aftermarkets

Since proving Apple's monopoly power in the smartphone market seems unlikely,
Epic instead alleges Apple has monopoly power over a different market: "iOS
App Distribution". Since Apple has complete control over iOS App Distribution,
problem solved, right? Not so fast.

Much like razor blades and razors or printers and ink, "app distribution"
would be considered an aftermarket of the smartphone market. Aftermarkets are
very common in antitrust cases, and in general, the US legal system does not
allow you to define an aftermarket in the context of a single brand's product
unless very specific rules are met:

> _Because it would be inappropriate to punish a firm for its natural monopoly
> in its own products, courts embraced a sweeping prohibition against
> analyzing alleged anticompetitive activity by focusing on single-brand
> relevant markets: "[A]bsent exceptional market conditions, one brand in a
> market of competing brands cannot constitute a relevant product market."_
> [3]

A good summary on antitrust issues in aftermarkets can be found here. [4] Of
particular relevance is that an aftermarket monopoly based on a customer's
voluntary agreement to a contract is not considered a "relevant market" for
antitrust purposes.

In _Blizzard Entertainment Inc. v. Ceiling Fan Software LLC_ [5], Ceiling Fan
Software attempted to argue that Blizzard held monopoly power in the market of
"add-on software for WoW", and preventing them from releasing their own WoW
add-on was a violation of antitrust law. Blizzard argued (successfully) that
the "WoW add-on" market was not the relevant market because WoW users
voluntarily agreed to a EULA stipulating they would only used Blizzard
authorized add-ons when they initially purchased the game, and if they wanted
to use third-party add-ons they could have purchased another game instead.

In _Apple Inc. v. Psystar Corp._ [6], Psystar Corp attempted to argue that
Apple held monopoly power in the "Mac OS" market and used it to unfairly block
competition in the "hardware that runs Mac OS" aftermarket. The court ruled
that Apple's monopoly power in the "hardware that runs Mac OS" aftermarket was
based on the EULA that customers of Mac OS agreed when they purchased Mac OS,
and was again not a relevant market for antitrust purposes, because _"
customers knowingly agree to the challenged restraint"_. In other words, if
they didn't like the restriction of not being able to install Mac OS on non-
Apple hardware, they could have purchased an alternative operating system
instead.

Circling back to the iPhone and its app distribution aftermarket, it seems the
same reasoning would apply here. If the iPhone EULA specifically states that
customers can only install apps via the App Store, and the customer knowingly
purchases the product knowing such limitations are in place, it seems very
unlikely that a court would agree that "iOS App Distribution" is actually a
relevant market for antitrust purposes.

C. The "iOS In-App Payment Processing Market"

On the other hand, the antitrust claims Epic makes regarding this market are
much more compelling because unlike the app distribution market, customers
have no information about the restrictions in the relationship between the
developer and Apple, and they certainly did not agree to any such restrictions
when they purchased their phones. Without a contractual restriction in place,
the determination of whether the "iOS In-App Payment Processing Market" is a
relevant market depends on multiple factors which I won't go into too much
detail here or this post will be even longer than it already is, but suffice
to say they have a much higher chance of successfully making this argument.

Epic also has a strong argument here that Apple requiring in-app payments to
go through the App Store and taking a 30% cut of each payment directly harms
consumers by increasing prices, and lacks any justification other than to hurt
competition. And the rebuttal that you can buy a different product without
this restriction falls flat because the other major product on the market also
charges the same cut.

The upshot of all of this is it seems unlikely that Epic will be able to
compel Apple to permit third-party app installation on the iPhone, but they
may be able to successfully argue against the restriction that all in-app
purchasing must go through the App Store.

[1] [https://www.ftc.gov/tips-advice/competition-
guidance/guide-a...](https://www.ftc.gov/tips-advice/competition-
guidance/guide-antitrust-laws/single-firm-conduct/monopolization-defined)

[2] [https://www.counterpointresearch.com/us-market-smartphone-
sh...](https://www.counterpointresearch.com/us-market-smartphone-share/)

[3] [https://casetext.com/case/metzler-v-bear-automotive-
service-...](https://casetext.com/case/metzler-v-bear-automotive-service-
equipment-co)

[4] [https://www.ftc.gov/system/files/attachments/us-
submissions-...](https://www.ftc.gov/system/files/attachments/us-submissions-
oecd-2010-present-other-international-competition-fora/aftermarkets.pdf)

[5] [https://casetext.com/case/blizzard-entmt-inc-v-ceiling-
fan-s...](https://casetext.com/case/blizzard-entmt-inc-v-ceiling-fan-software-
llc)

[6] [https://casetext.com/case/apple-2](https://casetext.com/case/apple-2)

------
pier25
Essentially, it's a win-win for Epic.

If they win the lawsuit they will (probably) be able to have more control over
how they want to distribute their iOS apps.

If they lose, they won't have to deal with iOS anymore. Free players cost
money too, and it's possible iOS is not so interesting to Epic with the %30
Apple cut.

Also, since their business model is based on microtransactions, most of their
revenue must come from whales. These are committed players who will most
likely go get their Fornite fix somewhere else. Specially if Apple wins. Most
gamers will always side with Epic here.

~~~
emsy
They made several million dollars daily. I think you severely underestimate
the gaming market.

~~~
pier25
Yes, but those millions come from whales which will most likely follow
Fortnite to other platforms.

You think Epic would start a lawsuit without having done their math and
willingly decide to lose millions daily plus the legal fees?

------
maxdo
This particular company decided to grow financially by cutting apple from a
revenue stream. Apple invested billions of dollars in rnd, PR , legal
protection, security, servers etc... Behemoth like Epic decided to ignore
that, at the same time still using apple services and platforms. Such a simple
case to me. The funny part is I never heard from small company that gain
traction from apple store that it's bad. It's a social lift for them. But once
you grow , you forget about it... and start complaining...

~~~
cmiller1
And they didn't even start with the lawsuit, they just broke the terms of
service explicitly and then surprise pikachu faced when Apple slapped them
down.

~~~
bluedevil2k
They weren't surprised at all by the lawsuit. They wanted a lawsuit. The only
person who could change the TOS was a judge and Epic could only sue if Apple
enforced the TOS on them.

Plus, if you don't think Epic had already talked to lawyers and lobbyists in
Washington DC and already been given a heads-up that they might win, then you
don't know business that well.

------
antaviana
I think I am with Apple for this one.

It has always been a 30% cut, even when it launched.

Apple did not raise the cut when the iOS app market got bigger.

Apple pricing is not cost-based, it is value-based.

Why should their pricing be cost-based? Why should they try to do an Amazon by
sucking all the air in the room?

If that value-based pricing strategy translates into billions earned, great
for Apple.

It could also have translated into billions lost, if their app store had
turned into a ghost town. I’m sure it happened to other platforms.

I can care less if Apple has high or low costs to maintain their platform.
That’s their problem, not mine. If I buy something it is because I want it at
that price. If the price point is above my perceived value, I will not buy and
both Apple and Epic will lose revenue but again, that’s their problem.

Epic has the option not to use IAPs if that sales model is not profitable for
them at any price point.

------
Despegar
>That means, for example, allowing purchases via webviews, particularly for
products and experiences that are not zero marginal costs. Sure, that could
mean less App Store revenue in the short run, but Apple would be well-served
having to build more and better products to win developers over. At the end of
the day, squeezing businesses that can stomach the cost of Apple development,
both in terms of implementing in-app purchase and that 30%, by definition has
less ultimate upside than growing the pie for everyone.

Apple shouldn't have to enable you to undermine their business with their own
property. And no court would ever require them to.

The fact is that Apple hasn't changed the terms. It's been the same since the
App Store began (technically it's become more generous to developers with the
reduction in the fee for subscriptions after the first year). Meanwhile the
iPhone installed base is magnitudes larger than it was in 2008, making it more
lucrative for developers than ever. Apple would be well within their right to
_raise_ the fee, but the fee has only ever gone down.

That's addressing the moral argument of their business model. Legally, Epic
has no case.

