Ed Hardy, writes, in Congress, keep your mitts off the App Store. It’s fine. [Opinion]:
When Apple CEO Tim Cook takes questions from Congress on Wednesday, he’ll surely get an earful of software developers’ complaints about how the App Store operates. Chief among the criticisms will likely be the fact that Apple charges a percentage of revenue earned from in-app sales.
It’s not just a percentage of revenue from in-app purchases. It’s percentage of every paid upfront app, too. And the percentage is 30% for most cases.
There’s not a bit of justification for any of these highly publicized complaints. They come from companies that want to have their cake and eat it, too.
There’s plenty of justification. If you offer a Mac app outside of the Mac App Store, you can expect to pay about 5% to your payment processor. This option is not permitted for people writing iPhone and iPad apps.
It’s incredibly dismissive to accuse companies of wanting to “have their cake and eat it, too.” What companies want is to be able to pay their people and keep making the things they think are cool or good.
The next section of Hardy’s piece is called “The App Store does business like a grocery store.” But…
The App Store does not do business like a grocery store
…take a trip to your local grocery store. Suppose it’s a Kroger. You’ll find store brands — products made by Kroger — on the shelves next to products made by outside companies, like Procter & Gamble. I hope you’re not surprised that if you buy a Procter & Gamble product, Kroger takes a share of the revenue.
That’s exactly what Apple does with the App Store.
If I make and distribute toothpaste, I can offer the exact same product via Kroger, Safeway, and Albertson’s — and I could sell it from my own website and via Amazon.
That’s a lot of choices I have for selling my product.
But if I write an iOS app, I can sell it via the App Store and through no other method.
This is not at all how grocery stores work.
To be fair, it’s not just Spotify who’s complaining. The CEO of Epic Games (maker of Fortnite) whined about the App Store just last week. And the developers of premium email app Hey engaged in a very public spat with Apple in June, accusing Cupertino of acting like “gangsters.” But none of these companies’ criticisms hold up.
For whatever reason, developers are often accused of being whiny. Oh, those whiny developers who like to have their cake and eat it too. How dare they complain about Apple policies. Betcha I’m being a whiny developer right now.
No. Again: developers want to make great apps and be able to continue making great apps.
To demonstrate why, let’s continue with the grocery store analogy. Kroger built its store into a successful business. But suppose the companies who make the products sold in that store wanted to keep using it, without sharing any of the revenue with Kroger. That would be completely unfair. Kroger is paying upkeep on the store, but these other companies don’t want to contribute.
We’ve demonstrated that it’s not like a grocery store.
But let’s talk about fair share.
Apple — certainly among the wealthiest of companies in human history — is taking 30% of developers’ paychecks in order to show services growth. This is not about upkeep on the store: this is about profit for Apple. And not just profit but a specific category of profit.
And the rules aren’t remotely fair. Facebook — another fabulously wealthy company — certainly profits from its iPhone app. Does it share any of this with Apple? No. Instead, apps from smaller developers (because they are almost all smaller than Facebook) are subsidizing Facebook.
If there’s a fair share to be paid, the largest apps get away without paying it. Instead, companies like Omni subsidize Facebook. Fair?
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The next section is called “Selfish developers want to use the iPhone ecosystem without paying their share.”
This is total bullshit and insulting. (Developers are always whiny and selfish, of course.)
This isn’t about paying a share into some commons run for all of our benefit. Apple isn’t just asking for us to help cover costs.
This is the only game in town for iPhone and iPad developers, and we have no choice but to subsidize apps like Facebook. We have no choice but to contribute to Apple’s services growth.
Of course, the analogy isn’t perfect, because it underplays Apple’s role. It didn’t just build a grocery store — it built the entire town. There would be nowhere for Spotify and the rest to sell their products if the iPhone never existed.
This is kind of the thing with platforms. There would be nowhere for Spotify to sell their iPhone app if there were no such things as iPhones. True.
The major reason these software developers have a business is because Apple makes iPhones that people carry with them everywhere. Without them, there’d be no Spotify. Fortnite would be a PC-only game.
I think the argument here is that, without Apple, the smart phone revolution wouldn’t have happened so quickly. That may be true! But it’s not argument in favor of Apple’s 30% cut.
These companies love to play on the idea that a 30% share of revenue is an egregious price to pay to be on the App Store. However, a recent study found that Apple’s percentage falls in line with other software stores (.pdf). And Procter & Gamble wouldn’t blink to hear that Kroger charges 30% extra for one of its products.
All of the various app stores are charging too much. They all point to Apple as precedent.
* * *
The next section is called “Consumers benefit hugely from the App Store.”
In some ways, sure. It’s also worth remembering that the more money Apple takes from developers, the fewer resources developers have. When developers have to cut costs, they stop updating apps, skimp on customer support, put off hiring a graphic designer, etc. They decide not to make apps at all that they might have made were it easier to be profitable.
Suppose the House Judiciary antitrust subcommittee — where Apple CEO Cook will answer questions Wednesday (as will the leaders of Facebook, Amazon and Google) — mistakenly thinks there is some justification for these developers’ complaints. Regulations that forced Apple to change the way the App Store worked would benefit a few big-name software companies, but they would hurt hundreds of millions of Apple users.
We have no way to know that — we don’t know what that regulation would look like or who it would benefit.
I do not want to see Congress regulate app stores. I want Apple to make better choices here — better for Apple, Apple customers, and developers.
But if Congress lowers the cut to 10%, or says that App Stores must allow for side-loading, it’s hard to see how customers would be hurt.
(That said — again, I’d really prefer not to see federal legislation. It shouldn’t be needed.)
True, Apple rules the App Store with an iron fist. While it sometimes acts in opaque and arbitrary ways, firmness is absolutely necessary in a world full of unethical developers who’d happily flood the App Store with crapware designed to steal user information. No one wants that.
Developers: whiny, selfish, and unethical.
Any time I hear about iron fists and the necessity of firmness, in any context, I get pretty nervous. But let’s set that aside.
App Store review is not filtering out apps that steal user information. No. This is done by sandboxing and other technical restrictions. Apps can’t steal user information. Apple — to its immense credit (it’s one of the things I love about Apple) — continues to lock this down.
The App Store has nothing at all to do with it, though.
Letting companies avoid this process would release a wave of malware on iPhone users everywhere. In a world where everyone’s phones are networked together, introducing another way for criminals to spread nefarious software is a horrible idea.
This is horribly, terribly untrue. Again: the App Store doesn’t prevent malware. Other technical limitations, built in to the platform, prevent malware. Apple does a great job with this and deserves all kinds of credit.
The second sentence in Hardy’s paragraph is just pure scare-mongering with no grain of truth.
* * *
The next section is called “Cupertino deserves its fair share.”
Cupertino deserves a cut of the action for the hard work it does policing the App Store. (And don’t forget about the enormous cost of operating and maintaining the servers that power this $519-billion-a-year economic engine, to say nothing of building the software tools developers use to create apps for iOS and macOS.)
Again: Apple isn’t asking us to cover costs plus a little something extra — no. Apple considers revenue growth in services to be of paramount importance, and this is one if its favorite ways of making that services money.
This isn’t about fairness at all. If it were, you’d think Facebook might pay some share.
Apple doesn’t “police” the App Store for the benefit of customers. Submissions are checked to be sure they adhere to Apple guidelines — in other words, reviewers make sure that apps are making money in approved ways and giving Apple its cut.
It’s also understandable that software developers want customers to pay them directly, rather than sending payments through Apple. And admittedly the company does make exceptions for certain services, like Amazon Prime Video, that bring customers to Apple’s ecosystem.
However, Cupertino’s general policy on payments means customers can feel safe shelling out for software and services within the Apple ecosystem. We know some shady firm won’t steal our credit card info. Even the best-intentioned companies get hacked, and I trust Apple’s network security far more than I do some random developer’s.
Again: this article mentions fairness a few times, and I hope it’s clear by now that the App Store isn’t exactly fair.
That thing about security and credit cards is more scare-mongering. If side-loading were allowed, most developers would use reputable systems like Square and Stripe and so on, where the developers never actually see credit card info at all.
(Developers are, by the way, whiny, selfish, unethical, and random.)
Maybe Apple’s 30% cut seems steep for digital products. But, as Ben Bajarin, head of consumer technologies at Creative Strategies, points out, the App Store seemed like a bargain to developers when it launched in 2008. At that time, developers typically surrendered 50% of the retail prices on software sold through physical stores. And small devs couldn’t even gain a toehold.
This is enormously untrue. I know because I was one of many small developers who were there.
We used Kagi as our payment processor at the time, and I think we paid around 5% for our storefront and payment processing and everything. Completely reasonable, and we were perfectly happy with it.
We were also a two-person shop — my wife and I — and you can’t get much smaller than that. Did we gain a toehold? Hell yes! We did great!
There were a lot of small companies operating that way. Hardly any of us were selling boxes through retail stores in the 2000s — we were already selling over the web by the mid ’90s.
Nobody saw this as a bargain. The developers I knew — small developers with nice toeholds! — were shocked and astonished, because we were used to paying 5-10%.
Perhaps Apple should shave a few percentage points off its take from App Store revenues to keep everyone (including Congress) happy. But third-party developers absolutely should pay a share of their revenue to support the iPhone ecosystem. Everyone benefits from it, including the companies that are whining. They just don’t want to admit it.
The traditional way of supporting a platform is to write good apps for that platform. That’s it. A platform with more and better apps will attract more people to that platform. (It’s not the only thing, but it’s a real thing.)
But Hardy — and Apple, apparently — has forgotten that simple truth.
And they haven’t realized that current App Store policies actually hurt the situation: we don’t have the quantity and quality of apps we should have. Which hurts that very ecosystem.