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!
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.
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.
- 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.
To note, there are a plethora of apps offering to backup users' photos and videos ... Google, Dropbox, OneDrive, etc.
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.
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).
> "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 is trying to grow profits via paid services like Apple Music or Apple Pay, but those are optional upsells, not rent seeking.
If you take out the mention of services, this statement becomes false.
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.
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.
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.
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?
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.
Their “core constituency” haven’t been Mac buyers in years.
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.
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.
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".
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?
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?"
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.
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
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.
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.
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.
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.
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.
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.
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.
"Delete" has always been separate from "purge" since the beginning of PCs.
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?
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.).
Though DRM and IntelME is a major step backwards.
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.
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.
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?
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.
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.
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.
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”?
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Philip K Dick, Ubik, 1969.
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.
https://twitter.com/thomasareed/status/1067527911798919172
...which sums up the issue i meant.
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.
Unless you mean Windows on a phone that is completely irrelevant. Unless (when) Apple starts putting only iOS on PC's.
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.