Apple v/s Epic, App Store policies, and regulation
A look at the issues with Apple's App Store plus Clubhouse, Ethereum, Status anxiety as a service, Internet's finest moments, LinkRot, App Store/Creators, Newsletters ...
Hi All,
I hope you all are doing well and welcome to Dozen Worthy Reads. A newsletter where I talk about the most interesting things about tech that I read the past couple of weeks or write about tech happenings. You can sign up here or just read on …
I know that I did not write last week! Things have been extremely busy and I will have an announcement coming up in the next couple of weeks… Stay tuned and as always thank you for reading!
This week I dug into Apple’s App store policy and the fascinating issues that arise from these policies and the likely outcome of this (and potentially other trials)
I’m sure all of you are well aware of the Apple v/s Epic trial in which the closing arguments were heard a little over a week ago. The final ruling on the trial is expected to continue well into the summer but I found the trial fascinating -- especially with all the Apple exec testimony.
I will not go too much into the line of questioning during trial with both sides seemingly trying to make the case why there was an antitrust issue. You might have also noticed an uncanny transparency from Apple on various App Store stats, timed with the trial of course:
Apple says it rejected almost 1 million new apps in 2020 and explains common reasons why
App Store stopped over $1.5 billion in suspect transactions in 2020
The review process while not perfect is definitely useful to weed out the bad apps and the app store doesn’t always do a great job of weeding out bad or scam apps as pointed out by Kosta Eleftheriou. There are definitely exploitative apps and such but these are two different issues. Locked-down and sandboxed software is a huge win for both users and developers. Developers came to the app store because Apple created trust in the market and also created a channel for distribution. When I was growing up I had a Windows machine and first off finding apps to download was a lot harder (and a lot creepier). The argument you can make is “hey there was no Google” back then. True. But even with Google how would you trust an app that came up in a search? Apple solved both these problems very well such that downloading an app was a no-brainer. Frictionless download, simple installs and what did we end up with? A HUGE market for developers, amazing apps for customers, and a brilliant payday for Apple. Also people think the same model works on Mac’s but just last week Craig Federighi, Apple’s senior vice president of software engineering, admitted that Macs had a serious malware problem
“Today we have a level of malware on the Mac that we don’t find acceptable”
Lo and behold a week later … a hack that can take sneaky photos! Federighi said the ability to install software on Macs that isn’t vetted by Apple meant more malware was hitting its desktops than its phones and he has a very valid point; it wasn’t something that was a huge issue in the past primarily because Mac’s were a smaller platform
From 9to5Mac:
Compared to Windows:
You can see the difference and why there is a point there. Like I said earlier there are two types of malware -- ones that steal your money, the other your data!
Now you’re probably thinking where has that surly guy with almost no kind statements towards tech gone. Uh no, I promise that I am still here and that might be the last of my kind statements.
Now let's look at this practically:
Epic (and Tim Sweeney’s, the Epic CEO’s) argument has been why make Epic use your app store for iPhones. Let people sideload the app directly from my website. In other words Epic would like Apple to open up their platform and allow apps to be installed from elsewhere and not the app store. This of course is to bypass the payment that Apple charges on paid apps (that sweet 30% cut!)
Epic’s argument that Apple “holds a monopoly” on app distribution. Epic wants the “market” to be “the distribution of apps on the App Store” while Apple is arguing that the market consists of mobile devices or gaming platforms, and that it competes with tech companies like Huawei, Oppo, Vivo and gaming consoles like the Nintendo Switch, Xbox Series X and the PlayStation 5. Of course Epic also has a Game store where the cut is a fairer 88%/12%. Having a store within a store is not permitted on the App store (Stadia, if you recall launched a mobile web “app” to counter this problem) Of course this came up during trial with Roblox being allowed to do that (anyone can create a “game”, now called “experience” on Roblox. Apple executive Trystan Kosmynka responded in testimony by calling “Roblox” an experience. Soon after, “Roblox” changed language on its website to call itself an experience and not a game. Lol, is this for real, right? (I always wondered how they got away with it and this link has a good explainer)
With that context, the key things I want to look at today are :
What is the market that we are talking about in which there is an antitrust concern?
Are the anti-steering provisions logical/do they help “protect” customers?
My final take on what the outcome of this trial is going to be
What is the market that we are talking about in which there is an antitrust concern?
There are many ways to slice and dice this, right?
Are Apple iPhones the “market”?
In other words can you separate the iPhone from the App Store and will people still buy an iPhone. Hmm, interesting question. I know that I will likely care about the App Store in conjunction with the iPhone and Tim Cook deftly argued that Apple has no way to break this down. I’m not sure I fully buy that …
From Tim Cook’s testimony, coverage courtesy of Techcrunch:
The façade of innocent ignorance began when he was asked about Apple’s R&D numbers — $15-20 billion annually for the last three years. Specifically, he said that Apple couldn’t estimate how much of that money was directed toward the App Store, because “we don’t allocate like that,” i.e. research budgets for individual products aren’t broken out from the rest.
Now, that doesn’t sound right, does it? A company like Apple knows down to the penny how much it spends on its products and research. Even if it can’t be perfectly broken down — an advance in MacOS code may play into a feature on the App Store — the company must know to some extent how its resources are being deployed and to what effect. The differences between a conservative and liberal estimation of the App Store’s R&D allocation might be large, in the hundreds of millions perhaps, but make no mistake, those estimations are almost certainly being made internally. To do otherwise would be folly.
But because the numbers are not publicly declared and broken down, and because they are likely to be somewhat fuzzy, Cook can say truthfully that there’s no single number like (to invent an amount) “App Store R&D was $500 million in 2019.”
Are games the market? Or any software type for that matter?
If games are the market then Apple is in the clear because for all practical purposes the gaming market is large -- and you can play a game in a browser, on a gaming console, on your android tablet etc!
If it's any other software that is available on the App Store this opens up some interesting questions. In fact this weakens Epic’s case badly because there are many ways to access a specific market -- bear with me here -- Take for example the “dating market”. Does Apple control access to the “dating market” either online or offline and the answer is an emphatic NO! You can still meet someone in a bar (though they might decide they don’t like you because you’re a douche or .. uh.. Use an Android ;0)
This is a really hard one but my take is that Epic will not win on the market argument though the EU has charged Apple with antitrust breach. Now here is the interesting thing. From Techcrunch:
The European Commission has issued a formal ‘statement of objections’ against Apple, saying today that its preliminary view is Apple’s app store rules distort competition in the market for music streaming services by raising the costs of competing music streaming app developers.
The EU has decided to focus the market to music streaming apps and the role that the App Store plays as a gatekeeper for such apps. Um, good argument but not entirely accurate. You can still “access” the customer but you can’t tell people how to pay on the App Store. Apple is self promoting their own music app (literally when you open it) but not allowing Spotify to do the same thing. Spotify disallowed payment for premium from iOS in August 2018. It seems a bit unfair that Spotify can’t even tell customers how to pay for Spotify and/or redirect them. These are the anti-steering provisions that Judge Gonzales Rogers seemed the most interested in pursuing. These provisions prevent an app from telling a customer that they can go elsewhere to make a purchase.
Apple of course argues that allowing for 3rd party payments will “make the store less secure” and cause issues with “refunds” etc, which are all good points but I think this is likely not gonna fly:
So there are several layers to this onion:
Does the “App store” itself have an antitrust issue?
In favor of : Apple
That depends on how you define the market and it's almost impossible to define the market so I think that Epic loses on “market definition”. It was a good try and this is what they were aiming for so that they could have their own “gaming app store” on iOS. Their gaming “app store” doesn’t do too badly
Does allowing for 3rd party app stores reduce security
In favor of : Apple
Hell yes! Epic is unlikely to win on this. This is Apple’s brand and their brand reputation could suffer in addition to it just being a bad idea and I would - Epic or not - NOT be willing to sideload apps. No sir!
Should Apple allow 3rd party (not Apple IAP but lets say Spotify’s own IAP) IAP
In favor of : Apple for now
Remember Uber does this, Lyft does this, Macy’s does this. Hell every physical product does this; so why exclude apps? Epic has a case to be made here and there is really no good reason to not allow it -- at least for larger companies that have a strong brand reputation
Are the anti-steering provisions logical/do they help “protect” customers? Should Apple be allowed to prevent anti-steering for all apps?
In favor of : Epic
The ant-steering provisions do not make any sense at ALL! I mean why the hell can't you just tell your users that you can go to epic.com and pay! In fact they should allow a link so that you don’t get redirected to a fake store when you search.
Should Apple be prevented from competing with Apps that use the store as a gateway to access customers (and are paid, Spotify for example) and/or be required to offer more favorable terms
In favor of : Apple or Epic (in EU)
This is hypothetical and not part of the Apple/Epic trial but could be for the Spotify/Apple (EU trial) The EU court will not rule in favor of killing Apple Music, as an example, just because Spotify has to pay the 30% commission though a fair approach would be to reduce the commission if Apple also competes in the same “market” (Music streaming services, in this case)
Should Apple be prevented from pre-loading Apple Music on their iPhones?
In favor of : Apple
This is hypothetical and not part of the Apple/Epic trial but could be for the Spotify/Apple (EU trial). If the argument is that Apple Music comes pre-installed (or any such app that Apple also offers) I don’t think the EU court will rule in Spotify’s favor. This is a baseless argument and Apple is leveraging their innovation as they should.
The end result of all this is that if the entire App store is not a “market” we’ll see more antitrust law suits, probably in different countries to rule on a specific competitive market, be it, Music or Games, or Streaming, or e-books! I think this is the start of Apple’s App Store woes. Sweeney though is not commenting on the trial except to say that he enjoyed his meal at Popeye’s
Excited to see how this plays out! Judge Gonzales Rogers however has her work cut out and a not so fun summer ahead!
Great reads from around the web
As I wrote in Clubhouse : The newest (audio) unicorn kid on the block and Is audio a feature or a full product? I didn’t see how Clubhouse would win. It looks like my favorite tech analyst, Ben Thompson, is reaching the same conclusion : Market Making and Time Horizons, Clubhouse Struggling, What Did I Get Wrong?
From Packy McCormick a great read on Ethereum. If you were confused about how Web3.0 is structured this read is for you : Own the Internet
Noah Smith has a great piece on Status Anxiety on Twitter : Status Anxiety as a Service - Noahpinion
A good list of the internet’s most popular moments including a lot of pop culture!
Best Moments in Internet History | The Dress | Yanny and Laurel
CJR on Link Rot and web ephemerality : What the ephemerality of the Web means for your hyperlinks
Li Jin on how Apple’s IAP is holding back the creator economy with baseless limitations: Apple is Holding Back the Creator Economy
Matt Taylor does a retro on newsletters and editions. So much rings true : I feel like there is an endless ocean of content, lots poorly written, mostly repeating the same thing. 1000+ words with the most important nugget hidden inside of maybe 100 words. That's all I wanted to know! Furthermore, curation, a key aspect when it comes to in-print media of pretty much any sort, is becoming more and more important for media. This is why I keep saying that it's important to pay for good content, similar to how we paid for newspapers and magazines back in the day! : A retrospective on five years of digital editions
More reading on the recent Epic/Apple lawsuit and testimony
Techcrunch - Europe charges Apple with antitrust breach, citing Spotify App Store complaint
Tim Sweeney concludes Epic v. Apple trial by repping fried chicken
Roblox goes public on New York Stock Exchange with $41 billion valuation
Apple says it rejected almost 1 million new apps in 2020 and explains common reasons why
Update Your Mac Now: Nasty Hack Breaks Apple Security To Take Sneaky Photos
Report: macOS malware boomed in 2020, but still a fraction of Windows threats
Tim Cook plays innocent in Epic v Apple's culminating testimony
Epic will lose over $300M on Epic Games Store exclusives, is fine with that
Epic v Apple: Tim Cook testifies as star witness in high-stakes trial
Florida, in a First, Will Fine Social Media Companies That Bar Candidates
Thank you for reading. Stay safe, be well! If you enjoyed reading this please consider sharing with a friend or two (or sign up here if you came across this or were forwarded this)