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Antitrust, the App Store, and Apple (stratechery.com)
119 points by djug 15 days ago | hide | past | web | favorite | 159 comments



While I don’t care either way about the lawsuit, he did make one great point. Apple under Tim Cook is more concerned about being profitable through rent seeking than making products that people are willing to pay a premium for.

On an unrelated note, when people call Apple a monopoly because the only way that you can reach IOS users is via the App Store, I always say how is that different than the console makers[1]? But even more broadly, if you want to reach Facebook users you have to go through the Facebook and the same with Google and Amazon. How are any of the other platform providers any different?

[1] yes the physical media you buy for consoles still has to be approved by the console makers, they are cryptographically signed and they have to pay a license fee to the console makers.


> Apple under Tim Cook is more concerned about being profitable through rent seeking than making products that people are willing to pay a premium for.

This just does not match any available data. Look at where Apple gets the bulk of its revenue and profits: hardware products and optional services.

Look at their investment: the bulk of it goes toward developing new products and acquiring new technical capabilities.

Look at their pay services, none of which are required. You don't have to buy apps from the App Store; many apps are available for free, including almost all of Apple's own apps. You don't have to subscribe to Apple Music. You don't have to use iCloud for backups, for photo management, for anything, really. You don't have to use Apple Pay.

Look at their open access to the Internet. You can load any website you want in Safari... don't want the Facebook app? Just go to facebook.com, it works great.

Look at their most popular service, iMessage, which is still free.

Look at their required software updates, which are all free. New iOS? Install it for free. New version of Garage Band? Download it for free.

I think people are getting confused about what "rent seeking" actually means. Apple's paid services are upsells.

Rent payments are not optional (just like paying rent for real estate--you have to live somewhere). Microsoft made tens of $billions charging for non-optional OS updates and application updates... that was rent seeking. Again: note that Apple does not charge for their software updates!


You're misunderstanding what the phrase "rent seeking" means. It doesn't have to do with how essential a product or service is.

The point of a rent, in economic terms, is that the person who is selling it does not add substantial value to the product or service. They just leech value.

The analogy is to someone who holds ancestral lands and rents them out unimproved. They get some chunk of the economic value that the land produces, without ever having put their own labor or their own capital into the transaction.

The argument is that the 30% fee that Apple charges on the app store is a rent in the software produced by other parties, with Apple adding little to the transaction.


Besides the app store itself, and the process by which Apple grooms apps for suitability for that store, and the payment processing system that enables people to buy apps without busting out a credit card?


Yes, I agree that the argument is not watertight.

The counterargument is, "Okay, so let there be multiple app stores on iOS, that compete with each other, and let the market price that package of services."

But regardless, let's not talk about whether Apple is providing luxuries or necessities -- that's not what rents are about.


And besides all of the work Apple does to develop and maintain the APIs and frameworks that apps use?


What if I don't want these "services"?


Whether you want them or not has little to do with the question of whether the App Store is rent-seeking, which is the question I was addressing. Rent-seeking isn't another term for "I don't like it".


You may be strictly technically correct, but it doesn't reflect reality:

- iCloud free tier is 5gb -- not enough for even a casual phone user with 1 minute 4k 60fps video (option on iPhones for 2-3 years now) takes 400mb.

- The alternative to "paid" apps are ad-supported apps. You're paying either with your bank account or your data and attention. I don't think we should call this optional and otherwise encourage ad-based ecosystem. (And, side note, I argue Apple should also tax ad revenue to prevent the current artificial advantage ad revenue has over IAP.)

The rent seeking point from Stratechery is taken directly from Apple's own earnings calls where they are now measuring their success based on revenue from this rent-seeking instead of on devices sold.

Whatever is measured will drive the company focus. To sell more devices they have to innovate and increase excellence. To increase rents they have to wring more and more $$ from existing users (with a secondary focus on increasing the hassle of switching). Apple themselves explain that they have shifted their focus from the former to the latter.


> - iCloud free tier is 5gb -- not enough for even a casual phone user with 1 minute 4k 60fps video (option on iPhones for 2-3 years now) takes 400mb.

To note, there are a plethora of apps offering to backup users' photos and videos ... Google, Dropbox, OneDrive, etc.


And to add on, many of the “free apps” make money via in app consumables - mostly games. There is a reason why the top grossing apps are games like Candy Crush and Clash of Clans.


> The rent seeking point from Stratechery is taken directly from Apple's own earnings calls where they are now measuring their success based on revenue from this rent-seeking instead of on devices sold.

I challenge you to find one instance of Apple describing their own strategy as “rent seeking”.

Again: people are getting confused. Optional paid services are not the same thing as rent seeking.


Rent seeking is the amount that Apple charges for media it sells.


>The rent seeking point from Stratechery is taken directly from Apple's own earnings calls where they are now measuring their success based on revenue from this rent-seeking instead of on devices sold.

I don't follow how talking about it on earnings calls makes it "rent seeking". The App Store cut has only gone down since it was launched (for subscriptions after a year).


> "> Apple under Tim Cook is more concerned about being profitable through rent seeking than making products that people are willing to pay a premium for."

> "This just does not match any available data. Look at where Apple gets the bulk of its revenue and profits: hardware products and optional services."

you seem to be looking backwards but the statement you rebut is forward-looking.

yes, apple historically made its profits on hardware, but the point the parent and the article is making is that apple's business model is changing toward services and rent-seeking through its platforms like the app store.

> "Rent payments are not optional..."

the 30% apple charges for apps is not optional. as implied by the article, apple could charge 50% and developers would have no choice but to eat that cost.


Apple’s gross margin is typically around 37% or 38%. I don’t see how charging a 30% service fee is going to improve profitability.

Apple is trying to grow profits via paid services like Apple Music or Apple Pay, but those are optional upsells, not rent seeking.


Services are not rent seeking.


sure, but totally beside the point.


“the point the parent and the article is making is that apple's business model is changing toward services and rent-seeking through its platforms like the app store.”

If you take out the mention of services, this statement becomes false.


How much does it cost to run, from Programmers to Hardware infastructure for iMessages ( Free ), App Store ( Free ), iCloud 5GB per account ( Free )? I am betting less than $2B a year.

Apple gets $9 Billion from Google just for being default search engine.

And people continue to mix this "Services" Revenue from App Store as investment to Software, Garage Band, iWork, iOS Development etc.... They had been part of the product cost for YEARS before the 30% cut. Apple didn't need App Store revenue to continue developing OSX when iPhone didn't exist. It is what makes software as an industry so profitable in the first place, the cost of making the same software is the same regardless of 100 customer of 100 million customer. And now Apple has 800 million iPhone customers, or 250M customer every year.

I say this again, most developer aren't really concern with the 30% cut as it is, people not happy because they are not getting enough value from it. If Apple had offer additional developer services from that 30% cut it would have made them easier to swallow. Instead Apple is just happily collecting cash and do nothing.


It matches this available data: Apple sure as hell gets rent from their patents. And you don't even have to buy Apple to give them this rent.


I'd like to see any significant report indicating that Apple is making serious money off its patents and is trying to push more into that business. Besides, patent agreements aren't exclusive to Apple; I'm sure a portion of my iPhone purchase is going to Microsoft.


And Google bought Motorola basically for its parents and then sold all of it off but it’s patrntd.


Removing the 3.5mm headphone jack was pretty rent seeking-- they hoped you'd buy the AirPods instead. It wasn't deliberately stated, but it would be in poor taste for them to state it as such.

The headphone jack removal wasn't comparable to past deprecations, like removing the CD drive from laptops -- which provided a significant new amount of space in the chassis.


Or you could buy any other Bluetooth headphone, use the adapter they included for two years or use the included headphones.


The hope is that you'd buy the Apple-branded one. Obviously Bluetooth is an open standard -- but that was the business intent.

An adapter is less convenient to use than having the Headphone jack on the device.

Is it really that farfetched to think they removed the Headphone jack to increase profits? Clearly, I'm arguing for it, but if this absolutely out there, I'd like to be brought back more sensible thought processes.

Not even the included earbuds with an iPhone purchase come with a 3.5mm jack. It's Apple's proprietary port, so you can only use Apple's wired earbuds with Apple products.


You mean a company desires for you to buy more stuff from them...amazing.

But why would you think that removing the headphone jack, and including lightning headphones, including an adapter for two years, and supporting standard BT would entice someone to spend $150 when they go to the Apple Store instead of buying wireless headphones?


It actually has a different result, for someone like myself: it makes me not buy a new iPhone at all.

I like the ability to charge my phone and listen to music simultaneously, without having to worry about my headphones also dying. Usually this is in a travel scenario.


Have you been following Apple for the last 40 years? They have always been opinionated and willling to not serve every customer.


No need to be impolite. For one, no I haven't, since I'm not 40 years old. Second, they risk losing their core constituencies: the creative industry, and developers.


It’s not impolite or being insulting. When you try to make a product that is all things to all people, you end up with the HomerMobile.

Their “core constituency” haven’t been Mac buyers in years.


You can't sideload an app on an iOS device, you can't run unsigned apps, and there is no version of iOS you can run without the App Store. Unless you jailbreak.

You can still run Android without Google Play Services, even though it's not a great experience.

Granted, there are tradeoffs. iOS is more secure in this space than Android, but Android is far more open on what you can do.

For example, Amazon created an app called Amazon Underground that would let you purchase and sideload apps onto your Android device from Amazon. Some of these apps didn't exist in the Play Store, so you had a viable option to buy exclusive titles from someone else.

On iOS, there is zero opportunity for a situation like this to occur. Everything must go through the App Store, and that's why I view it as a monopoly.


And considering what we have seen in the last fourty years of the PC industry, it’s better to err on the side of security than openness for most consumers. The relatively few who care about openness are free to get an Android phone.


> You can't sideload an app on an iOS device, you can't run unsigned apps, and there is no version of iOS you can run without the App Store. Unless you jailbreak.

This is not quite true. If you write your own app you can install it on your iOS device. If someone put an iOS app on, say, Github, you could easily install it. No need for the App Store or Apple's review process. An app does not need to be signed unless you want to submit it to the App Store. Also, you can install iOS without using the App Store if you have a developer account.

I'm not disagreeing with you that iOS is far less open than Android.


> If you write your own app you can install it on your iOS device.

That's not quite true either. Because an app installed like this will only function for a very limited time (a few weeks i believe) and then it expires and you can no longer start it. This means it is not practical and NOBODY will use this: which explains why there are none/hardly any of such apps available on Github, etc.

I did this with the f.lux app in the past and it was very annoying/not usable because of the necessary "recompile frequency".


My wife doesn't seem to mind doing this with gba4ios every week; she just plugs in her phone, opens xcode, toggles her phone as the target and presses play, takes less than a couple of min, and she is no dev by any means. Granted, I had to help her get it up and debug somethings before hand, but in the process, she has become more informed of what all the crap in the background more than she was before.

Though I guess most people may just want to throw their arms up and force the government to write a law to make such easier for free?


You need a Mac for that.


Technically, you don’t. There are ways of doing this on platforms other than macOS; the process is just more complicated.


For a free account, the time limit is 7 days.

> you could easily install it

Haha, no. Last I did this, you must have a Macbook, you must configure Xcode, generate new certificates, sign the entire application bundle, and then you get to sideload it - and never get an update ever unless you repeat the entire process.

In contrast on Android: "This application is from an unknown source. Would you like to still install it?"


You are not required to use macOS to do this. There are third party solutions, such as Cydia Impactor, that are cross platform and do this for you.


Right, I can pay someone else with a macbook...


>you must have a Macbook

Technically you just need macOS, I don't think there's anything stopping you from doing iOS development on a hackintosh.

I'll agree that the process is pretty ridiculous in comparison to Android though.


You must sign apps if you want them to run on nonjaibroken devices. What you are doing in this case is signing it with your development certificate.


I think you missed the point. You can't sideload games on a PlayStation either.


I was about to make this comment as well. The only way to sideload games on any game console is to essentially "jail break" it as well.

Which automatically voids any and all warranties on the product.

Like it was mentioned above, if you want to reach Playstation's, Nintendo's, or Microsoft Xbox's regular warranty abiding customers, you HAVE to go through their marketplaces and gain their approvals and pay their license fees first


Right, but nobody is using their Playstation to do their banking, nor is Playstation in control of 40% of the world's app share.


Right, due to Sony's, Nintendo's, and Microsoft's complete lockdown of their app ecosystems.


If I sell you a video poker machine, I'm not obligated to allow you to install your banking app across my video poker machines.

If I sell you a general desktop computer and refuse to let you install any banking app aside from Bank of Evil, then I'm probably breaking antitrust statutes.

Playstations and Nintendos are more like video poker machines. Sure, they could theoretically run a bank app, but they're sold as locked down gaming only consoles.


Google Play Services and the App Store are fundamentally different, since on iOS the equivalent functionality is part of the operating system. The App Store is nothing more than a wrapper around the system installation service: there’s no APIs it provides to developers.


"On an unrelated note, when people call Apple a monopoly because the only way that you can reach IOS users is via the App Store, I always say how is that different than the console makers[1]? "

Phones have become more than just an electronic device, just like the internet, water, power, in a way. Now I'm not saying you can't live without a phone, just that it's difficult and the general feel is that you must have a cell phone to function in society. So with that mindset not being able to install any app does have some merit.

Everyone "needs" a phone, not everyone "needs" an xbox.

Taking my comment with a grain of salt though, I think that's a generalization but I think that might be why people want iPhones more open over xbox's.


>> Everyone "needs" a phone, not everyone "needs" an xbox.

I would add "not everyone 'needs' an iPhone" to this.

iOS is not the only major OS in the phone market. And like Macs, a significant chunk of people (including normals) choose iOS, knowing that they're participating in Apple's walled garden.

I'm not a huge fan of Apple's rent-seeking behaviour (which is why I left Apple), but because Android exists and is flourishing, I don't think you can necessarily call Apple a monopoly. They only have a monopoly on their own customers, which isn't very different from a lot of businesses who have created their own platform.


So if Android would be similar to iOS, no side loading, and we have only 2 bad choices each with 50% market share we are still in a shit situation but no monopoly.

What we need is laws for ownership of the hardware, I should be able to ask Apple or Sony to unlock my hardware because it is mine, the warranty is debatable but ownership should not be debatable.


My belief is even more draconian: I believe you shouldn't be able to cross "industries" like that. If you are hardware, you don't do software, and vice-versa. If you deliver content (cable companies) then you don't make content. It's like we're now back to the Andrew Carnegie days.


Right because having hardware and software separate has done amazing things for the usability of Android devices and Windows PCs....


I don't know about android, but I can put virtualbox and a dev stack on windows and do all kinds of stuff. I have a broken terminal emulator on my iphone. So, to your point, yeah.

Edit: I'll add to this point. A couple of nights ago my son accidentally (? i dunno how) a crapload of text messages from his iphone. There's no "eco-friendly" way to get them back. This is a disasterous situation for a teenage boy who struggles socially. They are still on his phone, but he can't get to them because Apple won't let me get to them. There are some sketchy third-party apps that claim for a king's ransom to be able to do it (they showed him a preview then asked him to pay up- that's how he knows they were still there). But I can't get to it at all from linux. Apple deliberately blocks me from accessing my own file system.

That's just mean.


Yes because it makes total sense for an app to be able to access another apps private storage. What could possibly go wrong....

If the messages are deleted and still accessible, that’s an even bigger problem. I would hope if I delete s message there would be no way for anyone to retrieve them.


But what if Apple delete function does not really deletes things you would need to run a better deleting application like you can on other OSs to be sure a delete is unrecoverable.

The point is about freedom to do what you want with your hardware, give the people a way to remove the restrictions, put a huge warning but let me do what I want with a physical object I own.


Gee, Mr. Sarcastic, aren't we now?

"Delete" has always been separate from "purge" since the beginning of PCs.


> They are still on his phone, but he can't get to them because Apple won't let me get to them.

What makes you think this is true? iOS clears up space on your disk when you delete messages, so presumably it’s actually clearing them out?


As I mentioned, but didn't explain: There is online software that you can download to your computer to "rescue" them. Apparently it accesses the file system to get them. He said he knew it had them because the software showed him some of the messages and demanded a fee to restore them. He recognized them.

Mostly, clearing space simply amounts to setting a flag that space is available and it doesn't actually clear stuff. That's what 'shredders' do (as well as overwrite, etc.).


I say it was great for PC, I can build a desktop with CPU from AMD or Intel, I can add if I want a GPU from AMD or NVIDIA, I have a lot of choices for motherboards, power supply, harddrives,optical drives, sound cards or other components. Then I can run Windows,Linux, BSD, ReactOS , toy kernels or OSs . If I want I can create a hardware project ad I do not need to pay someone to let me connect it with my computer.

Though DRM and IntelME is a major step backwards.


Most people are buying laptops and every time that Microsoft tries to bring anything new to market with their OS, the race to the bottom OEMs won’t have the hardwarecto support it. Can you imagine Windows PCs having the right integration between the OS and something like the T2 chip?

Even worse is Android. Google releases a new OS and may see low double digit adoption after a year. OEMs have no incentive to push upgrades to their users. iOS’d ArKit can only work as well it does (not saying much bet still better than what Google could muster) because of tight integration between a known subset of hardware and software.

This isn’t even to mention all of the bespoke custom interfaces on Android and all of the adware on consumer PCs and Android Phones.


[flagged]


Please don't post any more flamewar comments to Hacker News. They're what we're trying to avoid here.

https://news.ycombinator.com/newsguidelines.html


I have no idea what you are getting at, but I can say both when it comes to phones and computers, the integrated offerings from Google is better than any other Android phone and being able to get an update for iOS the day it comes out instead of waiting for the carrier and OEM are much better experiences.


The question is In your opinion we should only have integrated "experiences"? aka should MS and Google pull an Apple and not sell the software to the customers , but sell you the hardware with the software included ?


Seconded.

I do not use a smartphone (my last one broke and the RMA process was too much trouble on top of moving and doing my job, and now I'm used to not having it), and while it seems that some people assume you have one, you can generally get by without one just fine.

Now, I will say: given that Microsoft was charged for bundling IE with Windows in a highly integrated way which competing browsers could not replicate; it seems that some case can be made. Granted, I'd sooner make the case that Paypal is enforcing the anti-competitive desires of their neighbours against those neighbours' competitors.


Not everyone “needs” any apps on their phone though. A mobile phone is necessary because we need to make calls, send texts, and receive voicemail. We don’t really need much beyond that. You could make the case for email being a need on the phone, but you don’t need a Facebook app, or Shazaam, or Angry Birds.


...and I use Fastmail’s web interface on my iPhone rather than configuring an IMAP service.


How are you deciding what people “need”?


For many people, their phones are synonymous with the internet. That’s why the App Store being a closed ecosystem is much more troubling than the XBox.


Luckily there is that little app on iPhones called Safari....


iPhones have direct access to the Internet and to the power infrastructure. Apple does not limit which websites can be loaded in Safari, or which emails get delivered, or which electric sockets can charge an iPhone. Anyone in the world can reach an iPhone user by standing up a website and sending some emails.

The issue is the App Store, not the phone. And it's a lot harder to argue that the App Store is public infrastructure, in part because of the open access to the Internet that comes with every iPhone.

Reminder that Apple launched the iPhone with an app concept based only on open Internet access (web apps, no approval needed). They only added an app SDK and the App Store because of public outcry demanding it. Now we want to be mad at them for doing it?


> "iPhones have direct access to the Internet and to the power infrastructure. Apple does not limit which websites can be loaded in Safari, or which emails get delivered, or which electric sockets can charge an iPhone"... yet


>On an unrelated note, when people call Apple a monopoly because the only way that you can reach IOS users is via the App Store, I always say how is that different than the console makers[1]

It's not really different at all as business models go. In both cases, the value addition of the "shopkeeper" (i.e. Apple or the console maker) is to certify that the product meets certain quality and security standards. Functionally, they're staking their reputation on the apps you buy through them not bricking your device, exfiltrating your data, exposing you to content that is different from what was advertised, or helping you commit crimes. In the app store's case they're also doing some payment processing, customer service, subscription management, etc.

Where it becomes different is a matter of scale and use value. Game consoles are basically toys, so pernicious economic effects on the Playstation store doesn't impact peoples' ability to participate in society the same way those dynamics would on your phone.

>How are any of the other platform providers any different?

This is just the first lawsuit because it has the most direct parallels to existing caselaw. As this gets fleshed out people are going to come for the other digital services too.

Honestly we need to update our anti-trust laws to account for this sort of thing. Many of these functions should be regulated like public utilities rather than as services they way they are now. Vendor lock-in and prohibitive switching costs create lots of room for fleecing customers and consumer protection laws should take that into account.


Now you want to regulate private companies like public utilities?

The switching cost in the US of changing phones is going to your provider and trading your phone in every six months to a year.

When did not having an app stop people from participating in society? The average iPhone cost well over $600. People buying iPhones aren’t exactly underprivileged.


>Now you want to regulate private companies like public utilities?

Most public utilities are private companies. That's why it's called regulation and not nationalization.

>The switching cost in the US of changing phones is going to your provider and trading your phone in every six months to a year.

No, most of the switching costs are the costs (monetary and in unpaid labor of learning new tools and workflows) to users of switching from one platform to another. This empowers the gatekeepers to extract higher rents which, by definition, add no value to society.

>When did not having an app stop people from participating in society?

When people start building transportation access into them or make it contingent to being able to do some jobs it becomes a necessary tool for participating in society. The average car costs over $30k, that doesn't mean we would have put up with things like proprietary gas stations either.


Most public utilities are private companies. That's why it's called regulation and not nationalization.

Public utilities are regulated as such because of the high capital costs to deliver to everyone and the need to gain the right of way to serve people. Last time I checked, Apple didn’t need to dig up roads to connect users. Most people think of utilities as being a public necessity. The right for Pornhub to put an app on the store. Not so much.

When people start building transportation access into them or make it contingent to being able to do some jobs it becomes a necessary tool for participating in society. The average car costs over $30k, that doesn't mean we would have put up with things like proprietary gas stations either.

So now an iPhone is a “necessary tool”?


>Public utilities are regulated as such because of the high capital costs to deliver to everyone and the need to gain the right of way to serve people.

In other words, they're natural monopolies which we regulate because market dynamics don't work when you have a natural monopoly. The same reason we highly regulated and then broke up Bell Telephone and Standard Oil before it.

App stores and online infrastructure are also natural monopolies, but they become so due to agglomeration and network effects. Regardless of the route, the end result is the same.

>So now an iPhone is a “necessary tool”?

A smartphone and its associated app ecosystem is, yes. Google's system isn't much better. And there doesn't seem to be much room for many other players.

Again, regular home telephones were deemed necessary enough to regulate and break up. So was oil refining and finance.


> ... how is that different than the console makers[1]?

the differences are subtle, and indicate more of a degree of monopolization than a binary determination (as is always the case).

the console market differs in at least these ways: (1) console makers don't set the prices for games, (2) console makers can't charge any amount of markup on the games, (3) gamers have more mobility among platforms (can switch to PC gaming, for example).

overall, apple has much more control of the producer-to-consumer value chain, and they extract all the excess value in the value chain, which is why it's considered a monopoly even though technically there is competition via android and the play store. for example, and as noted in the article, producers absorb the cost of apple's markup, rather than passing it on to consumers, which indicates apple has all the pricing power in the relationship.

this 30% markup is the rent-seeking behavior of concern in the article. apple's growth is no longer built on innovation, but rather on its market posiiton and ability to extract these rents without providing further, direct value. for investors this is a clear concern (but not necessarily a reason to dump the stock). for consumers, it's a clear concern--we've seen this movie before with the likes of ibm, at&t, microsoft, sony, etc.


> (1) console makers don't set the prices for games

Apple doesn't set the prices for apps.

> (2) console makers can't charge any amount of markup on the games

Apple charges a flat percentage; console makers charge a unit cost. I don't know what it is but it's likely in the order of $5-10 per unit. This is likely much higher for digital game sales, and probably includes a percentage component.

> (3) gamers have more mobility among platforms (can switch to PC gaming, for example).

Apple device users have comparable mobility among platforms.


https://www.ign.com/articles/2006/05/06/the-economics-of-gam...

The final cost of publishing a game that we'll delve into is the distribution of the game, and that's the process of getting the game sold to wholesalers and then to retailers where you'll then have a chance to buy it. Wholesalers typically pay around $30 per game and with the costs of getting the goods to the wholesalers, any co-op advertising or marketing, and return of good contingencies being roughly $14 per game, the publisher is going to typically get $16 for every unit sold.

This doesn’t include the $3 - $10 per unit that the game maker pays the console manufacturer.

So the typical game maker gets less than 25% of the purchase price of a game. Compared to 70% on the App Store.


1) console makers don't set the prices for games, (2) console makers can't charge any amount of markup on the games, (3) gamers have more mobility among platforms (can switch to PC gaming, for example).

Apple doesn’t set the prices on games. In fact, they got sued for illegally collaborating with book publishers for trying to allow publishers to set their own prices - unlike Amazon.

Apple doesn’t “charge a markup” they take a fee for selling games just like the console makers do for both their online games and physical disc. Back in the day, you had to get your media manufactured by the console maker. If it were truly a markup, Netflix and Hulu would charge more for subscriptions via iTunes than on their website.

Users can change phones anytime they want to. In the US, you can switch phones every year or in some cases every 6 months.


I find this comparison to be very peculiar.

Modern "smartphones" are marketed and function as general purpose devices that can also make phone calls. These pocket computers have more in common with laptops with integrated wireless radios and have been positioned to be or become a users primary general purpose computing device.

In contrast, game consoles are designed to be appliances with a limited set of features that serve a specific set of functions. While it is true modern consoles devices are built with mainstream general purpose hardware the intended purpose of these devices is still limited even if it is possible to do more with them.


Because there is an immense amount of technical and marketing support from Console makers, who provide the core hardware to the masses below-cost (or with very low margins).

To get onto Consoles in the first place, your product needs to be high enough quality, whereas iOS accepts basically any ol' junk.

The economics are so poor on iOS that it is basically impossible to survive (in games for example) without relying on exploitative free-to-play mechanics. This isn't helped by the fact that iOS lacks a comprehensive and easy to use refund feature that encourages people to try apps for a short time, like Steam offers.

If Apple reduced their commission to 10%, I think this would be of long-term benefit, since it would give them a a direct point of advantage over Android, and we could expect more premium apps and games to be released that actually take advantage of iOS hardware.

Speaking of Steam and Valve, they are the biggest monopolists - selling games for a 30% commission on an open platform - PC! At least Apple still make some great hardware.


To get onto Consoles in the first place, your product needs to be high enough quality, whereas iOS accepts basically any ol' junk. The economics are so poor on iOS that it is basically impossible to survive (in games for example) without relying on exploitative free-to-play mechanics.

So it sounds like you’re arguing that Apple should have stricter controls...

I can tell you that AppleTV streaming apps were a lot better and more consistent on the 3rd generation AppleTV where Apple did have stricter controls than on the 4th Gen AppleTV.


Marketplaces like Apple (and Steam) open themselves up to almost any content in a deliberate attempt to assuage concerns about their monopoly position and practices.

Which is unfortunate for developers, since it means they must stand out from all the other junk (ie. by using expensive and time-consuming advertising and PR) and then pay 30% commissions to the monopolist platform holder if they are successful. Its the worst of both worlds.

I think the solution is simply to uniformly increase the barriers to entry, and the simplest way to do that is monetary. Require $500 for every app or game published, which will quickly increase average quality, but is still a very low barrier for a legitimate creation.


> I always say how is that different than the console makers

A smart phone is a general purpose computer, a console is an appliance. When the iPhone first came out many people argued that it was a feature phone for this reason.


There is nothing inherent about the smartphone that makes it a general purpose computer more than the console. Do you remember the big brouhaha when Sony stoped supporting Linux for the PlayStation?


I strongly recommend everybody to read "The Age Of Access: The New Culture of Hypercapitalism, Where All of Life is a Paid-For Experience" written by Jeremy Rifkin in the year 2000 (!) when his theory was looking like a sci-fi plot or an ante litteram Black Mirror episode.


«The door refused to open. It said, “Five cents, please.” He searched his pockets. No more coins; nothing. “I’ll pay you tomorrow,” he told the door. Again he tried the knob. Again it remained locked tight.»

Philip K Dick, Ubik, 1969.


> How are any of the other platform providers any different?

One thing that comes to mind is that a phone is much more personal, carries much more personal data (health data, banking, etc.), and it's something you often interact with the entire day, every day.

So, with Apple closing down the iOS system (for example you cannot inspect/debug ios apps like you can do with apps on a laptop), you end up having less transparency and less control over what apps do with your personal data.


Your control over which apps have your personal data is far greater on iOS than Windows. You’re not going to inspect every app that you run on your computer, but an app on an iOS device is very limited by both the sandbox that they are in and the granular permissions that iOS provides.


Coincidentally i just see this tweeted by Objective-see...

https://twitter.com/thomasareed/status/1067527911798919172

...which sums up the issue i meant.


So there is malware on the app that can’t be detected but they know it’s there?

What is this malware able to do? Intercept network traffic? Read other apps data? Surreptitiously record your screen? Turn on your camera? Turn on your Mic? Get to the Secure Enclave?

And then he said.

“Sounds reasonable, but how are you going to determine that when there’s no way to examine the app on the device? Forensic extraction of the app and analysis on a different platform is never going to be a mainstream solution for that.”

Like there ever is a “mainstream solution” to doing forensics.

And guess what? He works for malwarebytes. Anti virus companies have been trying to sell bogus “virus protection” for iOS for a decade.


UWP on Windows has a comparable sandbox and permissions system, although your post still probably describes the practical reality for most Windows users at the moment unfortunately.


> iOS than Windows

Unless you mean Windows on a phone that is completely irrelevant. Unless (when) Apple starts putting only iOS on PC's.


Then what was the original poster comparing it to? People don’t inspect binary compiled apps on any device.


I agree with most of the article, but don't really like how it just breezes through this part:

[Apple] can leverage its smartphone share into monopoly profits on digital goods and services that are on iOS not because iOS is anything special, but because that is the only possible way to reach nearly 50% of the U.S. population.

But it is something special precisely because Apple has enforced such strict quality control measures for its apps. It has refused lots of apps because allowing them would damage users' trust of its store. So just having an app show up in the store is a signal of quality. This is precisely why the store can reach 50% of the market. This is significant because without those standards from day one, I don't think Apple would have achieved its reputation as best in class which allowed it to gain the leadership position it has. So its a symbiotic relationship and you can't just focus on one side of the equation.

There probably aren't a lot of people who remember the Palm app experience which was way before the App Store. Apps were horribly unreliable and one had to rely on outside reviewers to determine which if any should be installed. Granted technology has changed drastically since then so its not an entirely fair comparison, but still I believe that you can't simply look at the App Store as a provider that could be replicated by anyone in the exact same manner as Apple if only they were allowed to. I do agree that users shouldn't be restricted from visiting other sites from within apps or even download from outside sources if a particular developer chooses to release its apps through an outside distributor.


You nailed it on the head in your last sentence. Consumers can enjoy all of the benefits you mentioned with the App Store but should still have the ability to side load apps from Safari with a big "Warning - this app is not approved by Apple and may harm your device" popup. The fact that it's not even remotely an option like it is on Android devices is the issue. As a developer I want to be able to provide my customers with my iOS software without going through the app store, and if they don't want to load it that's up to them. But we should all have a choice.


Part of the reason Android has a reputation as a malware-ridden platform is due to that freedom of choice.


I'm pretty sure most android crap is delivered through Google Play


I think what bothers me most about Apple's behaviour with the App Store is this:

> Apple does nothing to increase the value of Netflix shows or Spotify music or Amazon books or any number of digital services from any number of app providers; they simply skim off 30% because they can.

30% is a huge cut for what amounts to hosting, payment processing, and basic QA. Despite taking this big chunk, quality control in the App Store feels like it's on the decline - with a bunch of malware and scams slipping through in recent years. And of course, charging 30% for non-app content distributed through the App Store is completely insane.


I think what bugs me most about this situation is that Apple develops an innovative product and an ecosystem for it yet people outside that ecosystem or even those who voluntarily enter it want to use the power of the government to force Apple to bend to their wishes, in effect to take Apple's work and investment and decide how Apple is allowed to use and profit from it.

Nothing forces me or anyone else to buy an Apple product. Why not complain about any similar system them, from consoles to even Steam. Or is the threshold that there are billions of dollars at stake and therefor lawyers can profit from it, state AGs can make a name for themselves, and such?

Too many people feel entitled to tell others what to do even when the association is purely voluntary and this is just wrong


How does Apple get a 30% cut out of me using Netflix? If I want Netflix, I go to netflix.com, sign up and give them payment information, and then use my browser, or Netflix apps on phones, TVs, etc. The Netflix iOS app is listed as free to download. Where is Apple's 30% cut of my Netflix subscription coming from?

Same for Amazon's Kindle and video apps. Same for Spotify's app. The trend there seems to be they make the app free, and let you sign up and pay for their service on their own website (which you can do in Safari on iOS, if you want to). So I don't understand how Apple's "skimming" anything out of those apps -- 30% of $0 is $0.


Here are the rules: you can offer subscription on your site, but you can't link to it in the app. If you want to buy a subscription for Netflix/Spotify in the app, then Apple will take 30% cut. Some sites give this option with increased price by 30% to move payments to their sites, some don't.


I know you can offer subscriptions and purchases in the app. I just don't understand how anyone thinks Netflix, Amazon, etc are forced to, because they aren't.


They're not forced to, no, but they are forced to keep the price in the app the same as elsewhere if they choose to offer in-app purchase subscriptions in their apps; to be on the App Store, you're not allowed to offer a discount to the same subscription cheaper outside the App Store. If there is a generally-available discount (say, for a promotion), that discounted price must also be reflected in the in-app purchase cost.

The net effect is that sellers lose 30% of the potential earnings from the in-app purchases compared to getting subscriptions from elsewhere, and they're not allowed to increase in-app purchase prices by 30% to compensate.

Because Apple disallows sellers from having messages or buttons in their apps that take users to the sellers' websites in order to make the subscription, users who don't know better than to use the in-app purchase system wind up making the sellers less money — in theory. I say "in theory" since, after all, the sellers don't have to deal with payment systems, credit card processing, the sorts of hosting costs associated with popular app downloads, and so on.

On the one hand, it's clearly unfair and heavy handed for Apple to disallow those messages enticing users to the websites so sellers can take the full price. On the other hand, with apps moving to free-to-download but requiring subscriptions to function, especially big ones like Netflix and so on, it mightn't be that surprising: a 30% cut of the subscriptions might turn out to be rather reasonable given that Apple's hosting the App Store, addressing and directing complaints, handling payments, and more.

On yet a third hand, companies don't need to provide in-app purchases for subscriptions at all, mandating that users go to their websites. It's up to the sellers to decide what provides users with the least friction, though.


> they're not allowed to increase in-app purchase prices by 30% to compensate.

This sounds like it would seriously undercut plaintiffs argument that the 30% they're paying is on top of the correct price.


handling payments

FWIW this is the main thing I like about the App Store rules. There are some sites and services I'll trust with payment information, but there are many, many more I won't. Being able to buy/subscribe to things anyway, with Apple as the trusted intermediary handling the payment, is pretty convenient.


I don't think people give enough credit to how expensive it can be to pay the payment processors, given enough transactions. Maybe not so cost-effective for smaller businesses, but excellent for the bigger ones or when there are heavy spikes in payments.

Not only that, but letting your users not need to deal with credit card details or remembering their PayPal logins, whatever, is very frictionless and thus an attractive proposition for regular, non-technical users.


Ok, how about they are forced to if it was signup within the App Does that sit well with you now?


You can buy a Netflix subscription through the App Store but you don’t have to. Netflix must have decided it was worth it.


As opposed to the 45% it takes to sells video game in retail.

https://kotaku.com/5479698/what-your-60-really-buys


Apples & oranges. That's physical retail, not digital distribution, and in this case Apple's 30% tax would be comparable to only the $7 platform fee, not the entire 45%, which would be 11%.

The other costs from that article, like returns & any publisher cuts, you still need to handle yourself when publishing on the app store. Apple doesn't replace the role of the publisher in this case. They don't pay for marketing or put up-front money towards development, which is what a game publisher's role actually is these days.


There is the retailers margins and the licensing cost. That’s 25%. That’s not including the infrastructure costs, or credit card fees.

The publisher, in the case of music, charges the artist “return fees” for digital and streaming music.


> There is the retailers margins

And if you bought iOS apps at Walmart you'd have those same retailer margins. You're restricting yourself to digital distribution here, which don't have retailers or retailer margins. So you can't count those against games when they don't have them in the same circumstances either.


I love the analysis that Ben does on so many pressing tech related issues.

I agree with the majority of what he said but I disagree that it is that clear cut that Apple’s rent seeking isn’t hurting costumers. While I’m no lawyer either, the Supreme Court case that is relevant here was dealing with the state of Illinois as a customer and the mass consumer markets are two different things and I believe the Supreme Court will deal with this in a separate lens.

Could be very well that Apple does win but the fact that a product like Spotify, to name one, is cheaper when bought through the Spotify website and more expensive on the App Store shows clearly that in fact this does harm customers. I think the Supreme Court could rule in a whole other direction on this because of that fact coupled with Apple allowing no other competition on the platform, meaning no way to download a second App Store or even link to purchasing the product on a website especially for digital goods.


In your own example, you have the option to buy Spotify through other, readily-available distribution channels. That’s evidence against a claim that Apple is abusing its position in an anticompetitive manner. The test for monopoly isn’t what’s best for consumers; it’s whether a dominant player is abusing its position to restrain competition.


I think what you're saying is true for probably 99% of apps on the App Store.

In Spotify's particular case, however, Apple owns the marketplace (App Store) as well as a giant competitor in iTunes/Apple Music (and if I'm not mistaken - I'm not an iOS user- Apple Music is pre-installed on every iOS device).


A key element in proving anticompetitive claims is defining the market. Even If the market is defined narrowly as “music on ios”, alternatives to Apple Music exist. But that’s not taking into account the option to buy a non-iOS device. If you expand the market to include other os’s, Apple isn’t even dominant. Back when MS got dinged for bundling Explorer, they were dominant in the broadly-drawn PC os market, across all devices and os’s.


The music app is preinstalled. It happens to be the method you use to access the Apple Music service (and yes, Apple has been pushing that service increasingly, to my mild personal irritation).

However, it's also the method you use to access music you own that is on the iPhone, whether you've synced it from your computer or purchased it through the iTunes Store.

Now, maybe I'm just a dinosaur for wanting mainly to listen to music I own rather than streaming services all the time, but I don't think you can just claim that use case doesn't exist or matter.


I'm not saying that use case doesn't matter, but one could make the argument that the deep integration between Apple Music/iTunes into the Music app combined with a 30% premium on competitors selling music subscriptions in an app could be a non-level playing field.

Having said all of that, I think that because iOS is Apple's platform, and they should basically be able to do whatever they want with it.


> a product like Spotify, to name one, is cheaper when bought through the Spotify website and more expensive on the App Store

That's Spotify's choice though, right? They could charge iOS IAP subscribers the exact same price as non-IAP subscribers and absorb the 30% loss in much the same way a bunch of supermarkets absorb various unpopular taxes.


Not really. Spotify and Apple Music both have to pay record labels and other rights holders. Spotify’s profits on a subscription are likely much less than 30%. They would go bankrupt if they tried to match Apple Music’s App Store price.


> Spotify and Apple Music both have to pay record labels and other rights holders.

Whereas the products in a supermarket appear from nowhere without any money changing hands?


I've been thinking about this case a lot as it compares to the investment industry and it's troubling. Apple is the "market maker" here, not unlike the NYSE or NASDAQ and they certainly add value to the consumer and the developer by facilitating sales for devs and offering some level of protection for the customer. Apple of course deserves to be compensated for that value-add. On the other hand, Apple has built this "walled garden", which is another way of saying monopoly, and that comes at a cost to both the consumer (higher prices) and innovation (devs spend time/effort/energy complying with Apple's app store policies).

I'm not terribly familiar with the case law but I do know that NYSE has had at least a handful of similar antitrust cases in the past. I'm not sure if the cases were getting at transaction costs but the crux of every antitrust suit is generally that XYZ action by a monopoly leads to unjustifiably higher prices. It occurred to me that as a result of this case Apple might change their pricing structure to align with the pricing strategy stock exchanges typically use. That is, a nominal transaction fee that covers only the cost of the transaction but then charges the companies an annual "listing fee." That would be awful for innovation, small developers, and by extensions, consumers who would then having fewer apps to choose from.

I suppose thats just a long way of me saying that I fear the Plaintiffs may actually hurt consumers more in the long run.


> It occurred to me that as a result of this case Apple might change their pricing structure to align with the pricing strategy stock exchanges typically use. That is, a nominal transaction fee that covers only the cost of the transaction but then charges the companies an annual "listing fee."

FWIW, Apple already charges an annual fee of $99 to enroll in their Developer Program, which is required to list apps on the App Store: https://developer.apple.com/support/compare-memberships/


Plus the mandatory cost of an Apple computer.


devs spend time/effort/energy complying with Apple's app store policies).

And that’s a good thing. Nintendo figured out in the 80s that crap devalues your platform and they had to approve what games were allowed to run on it. They saw what happened to Atari.

I’ll download basically anything on my iPhone because I know an app can’t do much damage - unlike a Windows computer or a Mac.


The App store is completely full of crap. It's easily 99% crap. 20000 new game apps come out a month. 19900 of them are crap. 90 are mildly interesting, 10 are maybe ok at most. Apple is in no way copying Nintendo here. There are 2 million apps. There were less than 1000 apps for Atari.

Not being able to do damage as nothing to do with the store. It has to do with whether or not iOS's sandbox is secure.


I absolutely agree from a consumer perspective. From the developer side though I'm certain that there are some app store policies dev's have to comply with that benefit neither consumer nor developer and are solely in Apple's interest.

I guess it's just interesting to me because Apple is both the market and the market regulator here. Continuing with my stock exchange analogy Apple plays the role of NYSE and the SEC. The nature of wearing both hats means there are going to be conflicts of interest and Apple has a fiduciary duty to their shareholders, not to their consumers. I see both sides but struggle to see a solution that doesn't leave app store customers worse off.


Macs are much less so these days. The numerous security constraints that have evolved over time make running insecure software, or even a lot of third party software, a bit of a pain in the arse.


And that’s a good thing. The average user is more secure and the advanced user can jump through a few hoops.



A functional anti-trust would have blasted Apple a long time ago for banning competing browsers on iOS. And I mean really competing ones, that aren't using Apple's browser engine.


Browsers are huge attack vectors as they allow you to run arbitrary code. I wouldn't say there isn't a case to not allow third parties to run a platform in your platform.


Nonsense. If Apple was worried about arbitrary code they wouldn't have allowed apps in the first place. Browsers are restricted to the same security context that Apple trusts anyone who pays them $99 with.

They just don't want competition on their platform, and Apple is typically remain small enough to get away with that position. Particularly in stronger pro-anti-trust places like the EU, where iOS is less than 30% market share.


Either you don't understand what arbitrary code is or you're just too angry with Apple to want to understand it. But apps either run static code or use the Safari JS engine to run code. That's all the flavors you have. Statically compiled Swift code is much easier to deal with than whatever creative things somebody can come up with with JS.


Static code IS arbitrary code. Apple didn't author it and didn't vet it. They ran a static analyzer over it (not remotely foolproof) and then trusted the actual security to the process sandbox.

Besides, nothing stops you from still running arbitrary code in iOS downloaded from the web. You're simply restricted to doing that either interpreted or via Apple's JIT. In either case you're still getting arbitrary execution that Apple never statically analyzed, interacting with any APIs that the app wants that code to have access to (intentionally or not).


All browsers should care about security. All browsers can have vulnerabilities. It's not an excuse to ban competing browsers if users want to install them. That's the essence of the matter. Apple's behavior is anti-competitive in doing it.

In fact, I'd argue that it reduces security, since users can't install more secure browsers than Apple's own one (and no one would care to even make one since it won't be usable).


It's not an excuse to violate anti-trust. MS were blasted for this, but Apple got away with this foul behavior.


Microsoft got hit for using their monopoly in one market (the market for operating systems) illegally to try to obtain better/monopoly status in another market (the market for web browsers.

If you have an evidence-based argument to make that Apple has a monopoly in the market for mobile operating systems and has illegally used it to try to obtain a monopoly in the market for web browsers, I would be intrigued to hear it.

(in other words, not every bundled web browser is automatically a violation of antitrust law; nor is every attempt to forbid something on iOS automatically a violation)


In other words, you are giving an excuse to Apple, based on the current handicapped anti-trust practice by the courts.

I don't see it as a valid excuse. Apple are clearly damaging the industry and market with their behavior. By blocking major features in their browser and banning all other browsers, they are forcing others into supporting their specific requirements, because otherwise they won't be able to reach iOS users. Examples like trying to sabotage DASH for video streaming by not supporting MSE on iOS are quite obvious.

Anti-trust was intended to prevent such kind of outcomes. But it was diluted to the point of being practically useless, allowing the likes of Apple to run amok with their monopolistic garbage.


Your argument is based on what you personally think the law should be, and that's not the same as what the law is.

Microsoft did things that actually broke the law. Nobody's yet convinced a court that Apple has done things that broke the law. And Apple is demonstrably not doing the thing Microsoft got in trouble for.

So you're free to argue that in your ideal world, if you made all the laws, Apple would be put out of business. But you're not free to argue that that's what the actual laws in the real world say to do.


So you are saying "since the law is full of holes, don't blame Apple for being crooks". I disagree. Whitewashing monopolistic abuse based on how neutered by years of lobbying by monopolists anti-trust laws are, is quite bad in itself.

> in your ideal world, if you made all the laws, Apple would be put out of business.

In the ideal world with functional anti-trust, they'd be held accountable for their disgusting anti-competitive behavior and they'd fix it. In the current world their monopolistic abuse runs unchecked, causing damage to the industry and progress.


Are you okay with Microsoft doing the same thing then or do other rules apply for non-Apple?


The same arguments hold for the entire platform-economy.

See also: Uber, AirBnb, Amazon, UberEats, ...

We need some new laws, fast.


Yup. Anti-trust legislation has lost its teeth.

Analyzing monopolies based on whether there is harm for the individual consumer is completely insufficient for determining whether a company is a monopoly. From "Amazon's Antitrust Paradox", in the Yale Law Journal:

>This Note argues that the current framework in antitrust—specifically its pegging competition to “consumer welfare,” defined as short-term price effects—is unequipped to capture the architecture of market power in the modern economy. We cannot cognize the potential harms to competition posed by Amazon’s dominance if we measure competition primarily through price and output. Specifically, current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive. These concerns are heightened in the context of online platforms for two reasons. First, the economics of platform markets create incentives for a company to pursue growth over profits, a strategy that investors have rewarded. Under these conditions, predatory pricing becomes highly rational—even as existing doctrine treats it as irrational and therefore implausible. Second, because online platforms serve as critical intermediaries, integrating across business lines positions these platforms to control the essential infrastructure on which their rivals depend. This dual role also enables a platform to exploit information collected on companies using its services to undermine them as competitors.

https://www.yalelawjournal.org/note/amazons-antitrust-parado...


If a monopoly exists, and doesn't harm the consumer, what's the issue?


Two points:

• You don't know if it doesn't harm the consumer, because if there were more players on the market, the consumer could (possibly) have more choice and access to better products.

• The monopoly could harm the consumer in the future. At that point it may be more difficult for the market to bootstrap competing products (especially if the monopoly controls the entire supply chain). This is a bad situation, even if it doesn't harm consumers now.


You can know if consumers are dissatisfied, which is a sign of market failure. It's impossible to prove that harm doesn't exist, because you can't prove a negative.

If the monopoly does start substantially harming consumers, then I'd say that's when action should be taken, not before the market has a chance to respond.


Like any monoculture, markets based on a monopoly are brittle.

It takes time for courts to process complaints or for new companies to get started; if the only entity serving a market changes its behavior for any reason, it can shock the entire system and do great harm while our correction mechanisms work to alleviate the problem.

You see this in the job market all the time: a local factory closes and puts everyone in town out of work.


Tracking users and showing ads is blatant harm.

Controlling the market and raising costs for sellers results in those costs being passed on to the buyer, causing indirect harm.


Yes, a monopoly which harms consumers is bad.

You didn't at all answer my question.


I would add to this that there is no way for developers to actually know what their sales are without depending on Apple APIs, there is no way to even communicate with customers without Apple APIs, etc. Furthermore, Apple forces you to take out a short-term loan with them because they won’t pay you until some threshold is met every month or so (great, let me tell my web host to not charge fees this month). Sometimes they will not show you any numbers at all, even for history that you know is nonzero, if your app falls below threshold for awhile.

And these are completely unnecessary Apple dependencies.


What would you suggest for knowing sales of apps without Apple's APIs? Basically all of these issues come from Apple requiring all apps to be sold through their store. For the end-user experience this has proved very good.


This should be looking at allowing users porting capabilities for their Apps from iOS to Android (or others). That’s the real monopoly across all platforms and devices, not the App Store.


It is a counter-attack by Adtech industry. They were not amused by Safari ITP 2.0 and other Apple privacy features.

iPhone market share in US is ~50%.




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