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Apple Makes the Case for the App Store

In response to criticism from competitors (see “Spotify Asks the European Commission to Make Apple Play Fair,” 13 March 2019) and attention from politicians (see “Big Tech Attracts Antitrust Attention from Senator Elizabeth Warren,” 12 March 2019), Apple has created a PR page for the App Store about how the company protects users, encourages developers, and promotes competition. Michael Tsai did a good job of rounding up skeptical responses, which point out how App Review misses scams, note that developers have to pay $99 per year, and discuss the special privileges Apple’s apps have over competitors. (Those would include being default apps, not paying 30% fees, getting to use private APIs, not following Apple’s own policies, and more.) The question is, would Apple change some of these App Store policies if it helped avoid antitrust action (see “Supreme Court Rules Apple Antitrust Case Can Continue,” 13 May 2019)? What’s your take on how the App Store fits into the bigger picture?

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Comments About Apple Makes the Case for the App Store

Notable Replies

  1. So how is Apple promoting competition by preventing somebody like Netflix from linking to an outside payment page so they don’t have to use Apple’s payment system?

  2. I can see a nuanced argument about payments in the App Store. Sure, we can trust Netflix, Hulu, Amazon, Microsoft, and other large companies. But knowing that this App Store is filled with games that are free with in-app purchases, can we really trust that small, individual developers will have secure payment systems just because they are included in the app? I personally prefer Apple’s stewardship of the App Store, with the possible exception of the dumb restrictions against payment processing by trustworthy companies like Netflix and the Kindle book store, but I think I’m not all that bothered by there being no free for all for in app purchases.

    So maybe what’s needed is for Apple to certify other in app payment services and require that developers use one of them in order to be in the App Store. But I can also see that being extremely complicated, since these would probably have to be established country by country.

  3. I think that’s a very reasonable point. But as you say, it’s not really an issue in the case of companies like Netflix, Amazon, Spotify, etc.

    One way would be for Apple to simply pull apps in cases where external payment systems end up defrauding people. Just like they do nowadays when they discover nefarious apps. That threat should get service providers to fall in line.

    Now maybe that would still lead to too much fraud committed by one-offs. So how about a vetting of external payment systems? Apple can ensure that companies on their market process payments according to their security standards (like they set environmental and labor standards for their suppliers). Periodic audits would ensure they stay on point and there’s always the threat that screwing with people’s payments means your app gets kicked from the store.

    I just think otherwise Apple will have an extremely difficult position trying to justify why they’re OK hosting Lyft for free and getting zero cut from their services, while at the same time telling Netflix they either have to cut Apple in or else cripple their app’s usability.

  4. ddmiller
    Doug Miller

        June 2
    

    I can see a nuanced argument about payments in the App Store. Sure, we can trust Netflix, Hulu, Amazon, Microsoft, and other large companies. But knowing that this App Store is filled with games that are free with in-app purchases, can we really trust that small, individual developers will have secure payment systems just because they are included in the app? I personally prefer Apple’s stewardship of the App Store,

    I agree about the safety and security of the App Store. Though I haven’t read about any big Android app security issues recently, they have been legion on the past.

    with the possible exception of the dumb restrictions against payment processing by trustworthy companies like Netflix and the Kindle book store, but I think I’m not all that bothered by there being no free for all for in app purchases.

    Netflix, Amazon, etc. are not objecting to Apple’s payment processing or the fact that Apple won’t give them access to its source code; they don’t want to fork over 30%/15%. Netflix stopped shelling out commissions to Google for subscriptions about a year before they did with Apple. And if I remember correctly, Amazon never let you buy stuff in the Kindle in the iOS or Android apps for this reason also.

  5. Fully aware of that. What I am saying (and I believe that Simon agrees) is that a trustworthy company like Netflix and Amazon should be able to sell subscriptions and ebooks using their own payment systems within their apps, just as they do when you open a web page to their services. And Apple should only get a commission for sales that use their payment processing service.

  6. Apple is a for profit corporation and they make a nice profit in commissions from in-app purchases. Netflix dropped Google Play for its Android apps about a year before it dropped The App Store. Netflix probably dropped Google Play first to test the waters. Netflix is profitable, but barely.

    I love Netflix dearly and the big majority of video I watch is on this platform. Netflix will have more completion when Apple and Disney debut new streaming services in the coming months. Here’s what Netflix was shelling out to Apple via the App Store:

    “To date, the Netflix iOS app has generated more than $1.5 billion through its in-app subscriptions, with Apple’s cut coming in around $450 million-plus, Sensor Tower estimated.”

    https://techcrunch.com/2018/12/31/netflix-stops-paying-the-apple-tax-on-its-853m-in-annual-ios-revenue/

    For the first quarter of this year, Netflix once again had a negative cash flow:

    "Netflix reported net cash flow for the quarter of negative $380 million compared to negative $287 million during the same period last year. The company said it now expects its 2019 free cash flow deficit to be greater than the negative $3 billion previously expected, coming in at negative $3.5 billion. Netflix said the larger deficit was due to a change in corporate structure and investments in real estate and infrastructure.

    The company previously said cash flow would remain consistent in 2019 compared with last year’s total of negative $3 billion. Netflix said it still expects free cash flow to improve next year and the years after. The company previously said 2019 will be its peak for cash burn, after which it expects it to fall."

    https://www.cnbc.com/2019/04/16/netflix-earnings-q1-2019.html

    Netflix needs every penny it can get as it continues to raise the annual amount it spends on content production. Eliminating Apple’s cut of $450 million would make a dent Netflix’s projected $3 negative cash deficit. But $450 million this year means diddly squat compared to the $350+ billions in cash Apple is sitting on, nor would it mean much to the billions it earns in annual profits. It’s even possible that Apple can make up for the lost revenue from its new and existing streaming services.

  7. As Adam’s article says, they are also being accused of anti-trust violations in both Europe and the US specifically for their App Store policies. So, to quote Adam,

    The question is, would Apple change some of these App Store policies if it helped avoid antitrust action

    And that’s why I wonder if Apple will either chose to or be forced by regulators to relax some of their App Store policies at the possible expense of revenues. (Though in the specific cases of Netflix and the Kindle app, Apple makes no revenue at all from these apps in the App Store right now). However, llowing users to sign up for a Netflix subscription within the app or purchase Kindle ebooks from within their app without taking a commission would certainly increase the usability of these apps.

    If Apple’s Books app and its bookstore or the TV+ service coming later this year are good enough, let them compete on a even playing field rather than making it easier for Apple’s own apps to procure subscriptions or sell ebooks compared with competing apps and services. As an Apple stockholder I would rather see them satisfy regulators than fight them and lose.

  8. This essentially goes too far.

    Apple also forbids developers from alerting users that they can sign up for a subscription or complete a purchase outside of an app, which would bypass Apple's commission on in-app purchases tied to digital goods.
  9. ddmiller
    Doug Miller

        June 3
    

    MMTalker:
    Apple is a for profit corporation and they make a nice profit in commissions from in-app purchases.

    As Adam’s article says, they are also being accused of anti-trust violations in both Europe and the US specifically for their App Store policies. So, to quote Adam,

    The question is, would Apple change some of these App Store policies if it helped avoid antitrust action

    I doubt that they will. They didn’t change their ebook pricing policies in the past and fought it all the way to the US Supreme Court and ultimately lost the case. But the App Store issues is different. There’s Google Play, Amazon sells apps, LG and Samsung Have app stores that distribute in the US and other markets. Huawei has the biggest in China and plans to expand. Spotify brought their case to the EU, neither Netflix or any other company joined them.

    And that’s why I wonder if Apple will either chose to or be forced by regulators to relax some of their App Store policies at the possible expense of revenues. (Though in the specific cases of Netflix and the Kindle app, Apple makes no revenue at all from these apps in the App Store right now).

    I’m not anything resembling an attorney, but Apple did not force them out of the App Store and they are not even trying to force them to sell any services on the App Store. But if they do want to sell via the App Store they have to pay the same commissions just like every other company does.

    However, llowing users to sign up for a Netflix subscription within the app or purchase Kindle ebooks from within their app without taking a commission would certainly increase the usability of these apps.

    Apple did NOT choose to make it more difficult for iOS users to subscribe to Netflix. Netflix made the decision to exit the Apple Store without any pressure from Apple to do so. Netflix chose to make the process more difficult for their customers.

    Personally, we signed up for Netflix directly from their site decades ago just a little while after the streaming service announced. We were longtime customers of the DVD service and still are. It is absolutely no big deal to set up an account via the Netflix web site. And it is certainly isn’t like waiting on the big line to get to the summit of Mount Everest. It’s just a few steps and no biggie at all.

    If Apple’s Books app and its bookstore or the TV+ service coming later this year are good enough, let them compete on a even playing field rather than making it easier for Apple’s own apps to procure subscriptions or sell ebooks compared with competing apps and services.

    There has been absolutely no indication that Netflix, Spotify, etc. are unwelcome to return to the App Store at any time, and they can do so at the same rates that every other app in the store are charged. They also have the option to charge on a per view or listen basis and pay Apple on a different commission basis.

    If Apple and Google have the same commission structure in their app stores. And Apple’s App Store has more privacy and security features that are constantly monitored and updated. Neither Store is inexpensive for either company to run, maintain and continue to develop.

  10. I am referring to the App Store rule that prevents apps like the Netflix app or the Kindle App from even displaying a notice that users can sign up for a subscription or purchase an eBook from a web page external to the app. If Amazon, for example, put a notice in the Kindle app that shows when a user first installs the app that says that there is no eBook store within the app but that eBooks can be purchased from a web page, the app will be rejected by Apple. They are allowed by current rules to have no way to direct or inform users that there is a sign-up page. This is not the most user-friendly policy from a company like Apple, which I think we all agree normally prides itself on being a user-friendly device and OS. A valid case could be made that they are trying to force app developers to either user their own payment processing service (with its extremely high 30% commission, considering that the credit card companies charge closer to 3% for payment processing services) or hope that their users figure out how to purchase their services or products. Meanwhile, Apple’s own competing products pay no 30% commission to anyone. I can see the argument that these are the policies of a monopolist, attempting to use their App Store policies to further their own app and services revenue.

  11. ddmiller
    Doug Miller

        June 3
    

    MMTalker:
    Apple did NOT choose to make it more difficult for iOS users to subscribe to Netflix. Netflix made the decision to exit the Apple Store without any pressure from Apple to do so. Netflix chose to make the process more difficult for their customers.

    I am referring to the App Store rule that prevents apps like the Netflix app or the Kindle App from even displaying a notice that users can sign up for a subscription or purchase an eBook from a web page external to the app. If Amazon, for example, put a notice in the Kindle app that shows when a user first installs the app that says that there is no eBook store within the app but that eBooks can be purchased from a web page, the app will be rejected by Apple.

    Does Amazon include a notice in its app or its online store that someone can subscribe to and purchase audio books directly from Audible’s iOS or Android apps , or buy books, CDs, vinyl, DVDs, toys, accessories from Barnes & Noble’s apps? Does Netflix let people know they can subscribe to Hulu directly from the App Store and that it’s significantly cheaper?

    They are allowed by current rules to have no way to direct or inform users that there is a sign-up page.

    If someone who hasn’t been reading or hearing the humomgously big stink in the press about this, first about Google Play about a year ago and now about the App Store, they can very, very easily find out about beginning or renewing subscriptions from Netflix’s site. It’s truly a no brainer or biggie and just takes a very few clicks and a single credit card entry. For current subscribers, Netflix can flash alerts on screen and/or send them alerts. People who buy stuff from Amazon, whether they subscribe to Prime or not, already know what to do and new customers iOS or Android with Kindle apps have not seemed to have any problems over the years.

    This is not the most user-friendly policy from a company like Apple, which I think we all agree normally prides itself on being a user-friendly device and OS. A valid case could be made that they are trying to force app developers to either user their own payment processing service (with its extremely high 30% commission, considering that the credit card companies charge closer to 3% for payment processing services) or hope that their users figure out how to purchase their services or products.

    It’s 30% for the first year and 15% subsequently. Google, Samsung and others charge the same rates for subscriptions. These rates are ONLY for recurring subscription in-App services. Uber, Lyft, AirB&B and hundreds of millions other apps that charge for individual purchases that are delivered outside the app don’t pay a per purchase commission; they pay a developers’ rate:

    https://developer.apple.com/app-store/review/guidelines/

    Meanwhile, Apple’s own competing products pay no 30% commission to anyone. I can see the argument that these are the policies of a monopolist, attempting to use their App Store policies to further their own app and services revenue.

    That’s up to the courts to decide. This discussion is getting very repetitive and I’m giving up on it.

  12. This exactly.

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