The fact that Apple takes a 30% cut of subscriptions purchased via the App Store isn’t news. But since the company threatened to boot email app Hey from the platform last week unless its developers paid the customary tribute, the tech world and lawmakers are giving Apple’s revenue share a harder look.
Although Apple’s Senior Vice President of worldwide marketing Phil Schiller denied the company was making any changes, a new policy will let developers challenge the very rules by which they were rejected from the platform, which suggests that change is in the air.
According to its own numbers, the App Store facilitated more than $500 billion in e-commerce transactions in 2019. For reference, the federal government has given out about $529 billion in loans to U.S. businesses as part of the Paycheck Protection Program.
Given its massive reach, is it time for Apple to change its terms? Will it allow its revenue share to go gently into that good night, or does it have enough resources to keep new legislation at bay and mollify an increasingly vocal community of software developers? To examine these questions, four TechCrunch staffers weighed in:
Devin Coldewey: The App Store fee structure “seems positively extortionate”
Apple is starting to see that its simplistic and paternalistic approach to cultivating the app economy may be doing more harm than good. That wasn’t always the case: In earlier days it was worth paying Apple simply for the privilege of taking part in its fast-expanding marketplace.
But the digital economy has moved on from the conditions that drove growth before: Novelty at first, then a burgeoning ad market supercharged by social media. The pendulum is swinging back to more traditional modes of payment: one-time and subscription payments for no-nonsense services. Imagine that!
Combined with the emergence of mobile platforms not just as tools for simple consumption and communication but for serious work and productivity, the stakes have risen. People have started asking, what value is Apple really providing in return for the rent it seeks from anyone who wants to use its platform?
Surely Apple is due something for its troubles, but just over a quarter of a company’s revenue? What seemed merely excessive for a 99-cent app that a pair of developers were just happy to sell a few thousand copies of now seems positively extortionate.
Apple is in a position of strength and could continue shaking down the industry, but it is wary of losing partners in the effort to make its platform truly conducive to productivity. The market is larger and more complicated, with cross-platform and cross-device complications of which the App Store and iOS may only be a small part — but demanding an incredibly outsized share.
It will loosen the grip, but there’s no hurry. It would be a costly indignity to be too permissive and have its new rules be gamed and hastily revised. Allowing developers to push back on rules they don’t like gives Apple a lot to work with but no commitment. Big players will get a big voice, no doubt, and the new normal for the App Store will reflect a detente between moneyed interests, not a generous change of heart by Apple.
Apple doubles down on its right to profit from other businesses
Lucas Matney: “Apple is teetering on the edge of a PR disaster”
Whether Apple’s current rates are fair given their platform investments, one thing is increasingly clear, Apple is teetering on the edge of a PR disaster and they’re doing a really bad job of containing it.
Approving Basecamp’s Hey email app with some concessions allowed Apple to squash an outsized voice, but if one developer with a healthy Twitter presence can lead a multiday news cycle about the need for antitrust action — with other developers piling on angst in public or private — it’s clear there’s a storm brewing.
The question is, will Apple be better off proactively adjusting rates when developers are griping in private or should they risk the brand damage that comes from developers piling on in support of legislative action? Apple’s App Store revenues fall in the billions (A CNBC estimate clocked Apple’s 2019 App Store revenue at $15 billion) so it’s an open question whether the potential for lasting damage is actually worth reversing something here. I’m sure they have consultants crunching those numbers.
The big risk is that Apple has let things get so bad where they’re going to have a tough time acting like any action they take isn’t reactive. Apple would — I’m sure — love to treat this situation like a MacBook keyboard problem where people complain angrily and openly, but in the end, Apple acts like the fix is merely another improvement. Less savory is an outright apology a la Apple Maps and an admission of guilt because the backlash was so uniform.
Apple has always done a solid job of leaving themselves in a position where they can argue moral authority by virtue of their scale. It’s never satisfied detractors but it makes for great sound bites. Dodging taxes? We pay more taxes than anyone! Overcharging developers? We paid out $X billion to developers last quarter!
Apple always has an answer, but it’s clear they’ve nearly lost control of this conversation. They wield outsized power and developers are afraid of them but once that fear subsides, the company doesn’t have much to protect it.
https://techcrunch.com/2020/06/19/its-not-just-about-e-mail-stupid/
Sarah Perez: “Most developers today would agree that the App Store is both a blessing and a curse”
Basecamp was just the right squeaky wheel at the right time.
Developer resentment over the way Apple manages its App Store has been bubbling for years. Now, amid EU and U.S. anti-trust investigations into possible abuses of Apple’s power, developers have finally been emboldened to speak up. Including, at last, the small ones.
Basecamp, after all, isn’t Spotify. It’s a brand-new email app that isn’t pulling in $2 billion in quarterly sales, nor is a direct rival to one of Apple’s key services. Basecamp doesn’t want to create its own App Store inside the App Store like Epic Games wants in order to keep its massive Fortnite revenues. And it’s not one of the top-grossing apps in the world, like Tinder is.
Instead, Basecamp became a placeholder for any indie developer that’s ever clashed with App Store rules that don’t make sense. Its story became a representative example of the complaints developers have quietly voiced amongst themselves for years — too afraid to run to the press, for fear of Apple’s power to crush their businesses.
It’s not as if developers can forgo the App Store. There are only two main mobile platforms, iOS and Android, in addition to the mobile web. Today’s users demand native experiences. Failure to address the iOS market would limit a business’s growth.
But most developers today would agree that the App Store is both a blessing and a curse.
The carefully vetted and editorially curated storefront gives developers access to a sizable customer base who trust the App Store as a resource for discovering new apps. Today, that marketplace is visited by half a billion people every week across 175 countries. Many of those users may have never otherwise encountered a developer’s application if not for their App Store listing.
Yet the rules for participation have become muddled and, for some, the cost of doing business, too steep. For a single-person developer just starting out, Apple’s 30% commission feels like a barrier to entry. For businesses that don’t need the user acquisition channel the App Store provides, 30% feels too pricey. And for those businesses where Apple offers its own direct rival, 30% seems downright anti-completive.
Apple’s only capitulation to date was to drop to 15% for year two of subscription services.
Meanwhile, Apple’s rulebook for its App Store has become bogged down with specific distinctions and other carve-outs, which appear to be inconsistently enforced.
When Apple needed to further its own interests, it pressed down its thumb on one section of its App Store Review Guidelines or another — and wiped out entire categories of apps in the process. When questioned, Apple would just quietly point to the existing rule its enforcing — the one it had ignored for years while developers built their companies outside of Apple’s direct gaze.
In one example, Apple decided the entire third-party screen time app market was now, all of a sudden, filled with overly risky applications that should now be rejected. This was shortly after Apple’s own iOS Screen Time solution debuted. Apple’s move may have been a fair decision from a security standpoint, when examined from that angle alone. But Apple didn’t offer the developers losing their businesses any reasonable alternative — like access to an official Screen Time API, for instance — that would allow them to comply and remain in the App Store.
Another time, Apple decided the App Store had become too cluttered with low-quality applications. This was after Apple, for years, had pushed everyone to build “an app for that.” Too many took that advice to heart, when really they should have just built websites, Apple suggested. These “apps for that” were now what it considered spam. The cleanup immediately blocked a number of small businesses — and the development firms that served them — from access to the App Store in one fell blow. It wasn’t until Congress caught wind that Apple backed down. (Well, a bit.)
Basecamp and these are only a few examples that made the headlines. Small developers faced confusing and inconsistent rejections throughout the years and had no power to fight back.
Developers fuel the App Store — and Apple needs them to sell its iPhones just as much as developers need Apple to distribute their apps. These developers deserve to have their voices heard on matters of App Store approvals.
Ultimately, Apple agreed.
After the Basecamp debacle, Apple announced at WWDC that developers would be able to dispute their rejections through a new process. But this improvement — one that’s well overdue — may have come too late to save Apple and its App Store from regulation.
Darrell Etherington: A walled garden helps “maintain a high level of quality and protection for consumers”
First, let me say that I’m in favor of Apple’s approach to maintaining a cultivated, “walled garden”-style software store in general. I think it’s the right approach to maintain a high level of quality and protection for consumers. I’m not overly moved by arguments that suggest Apple should allow other software stores and open distribution channels for iOS applications for the same reason — that would fundamentally change the experience and open the floodgates for bad actors and just subpar products that would greatly degrade the user experience, especially for individuals who aren’t spending a significant amount of time thinking about the software on their phones and where it comes from — which is almost certainly everyone.
That said, Apple’s revenue split has always seemed a somewhat arbitrary system, mostly a legacy of how the company did business with its digital music business in the iPod and iTunes era. Like Devin said, it’s likely that Apple charged developers the cut it did simply because they could — the iPhone’s stunning early success and the exclusivity of the App Store as its sole distribution platform, paired with immature web-based application tech, meant that paying a 30% cut just to get access was a reasonable proposition for early iPhone devs.
You could argue that little has changed, in terms of Apple’s ability to ask for that cut. Yes, it has made some concessions around recurring subscribers, lowering the percentage paid after the first year once people come back (I guess with the assumed logic being that Apple gets them in the door, but your app/service’s quality keeps them around). But the iPhone, while not a growth machine like it was in the old days, still represents a massive, stable and spendy customer base — and Apple still controls the only way to distribute software to them (barring jailbreaks and other tomfoolery).
Apple’s App Store success has ironically helped generate the power that some players now wield to counter its “only game in town” negotiating position, however. There’s Spotify, the perennial fly in the ointment. There’s also Netflix, which took out the in-app subscription option after it rightly felt it has enough gravity to draw in customers outside of Apple’s platform, even if that involves a bit more friction for some. Most recently, there’s Hey, which itself isn’t a heavyweight by any means, but which has Basecamp’s very vocal, and developer-loved, co-founder DHH behind it.
I don’t think Apple’s in a position where it has to fully cede its revenue cut, or finally change its frustrating and user-hostile digital goods in-app purchase policy. But I do think that continuing to cling to its standard cut, in this changed and changing app economy, will only serve to further erode developer trust in the company and its platforms. Apple hasn’t faced a significant challenge to its platform dominance (the struck and solidified balance between itself and Android doesn’t count), but one day it will, and if you arbitrarily extract everything you can from third-party developers every chance you get, they’ll be happy to leave the first chance they get.
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