This was always what the outcome was going to look like. People have been talking ever since the ruling as though dodging Apple as a payment processor was going to magically exempt developers from the full 30% fee, but that was never going to happen and it was never the intention of the ruling.
Apple argued from the very beginning that the 30% was its fee for running the App Store, marketing the apps, and storing and delivering the app bundles. The in-app payment system was a convenient way for Apple to collect its commission and a way for Apple to create a unified payment experience for its customers, but it was never the Achilles heel for Apple's business model.
The best case scenario here is that Apple is forced to walk back some of the more onerous requirements they've imposed for whether and how links may be shown. Them putting a price on the payment processor portion of the fee and discounting developers for that portion was inevitable and isn't even malicious compliance, the judge explicitly called this out as a likely outcome in the original ruling:
> First, and most significant, as discussed in the findings of facts, IAP is the method by which Apple collects its licensing fee from developers for the use of Apple’s intellectual property. Even in the absence of IAP, Apple could still charge a commission on developers. It would simply be more difficult for Apple to collect that commission.
> In such a hypothetical world, developers could potentially avoid the commission while benefitting from Apple's innovation and intellectual property free of charge. The Court presumes that in such circumstances that Apple may rely on imposing and utilizing a contractual right to audit developers annual accounting to ensure compliance with its commissions, among other methods. Of course, any alternatives to IAP (including the foregoing) would seemingly impose both increased monetary and time costs to both Apple and the developers.
Yeah, the amazement amongst people here on HN amazes me.
The district court was crystal clear about this in their judgment, which at the time caused quite some consternation.
The appellate court then affirmed the same and even clarified more clearly that it’s completely fine because it primarily is the mechanic Apple gets payment for the use of their IP and, secondly, their services that encompass more than just payment processing.
In fact, if you read the appellate judgment, the annoyance towards the district court is palpable.
The annoyance stems from the fact that the district court states in their judgment that alternative ways of collecting the commission aren’t worth considering and expanding on because of how onerous they are (retroactive audit, collection efforts, etc.) while at the same time causing exactly that by striking the anti-steering provision and opening the door to third-party payment providers.
The appellate court doesn’t go further than expressing annoyance between the lines because, ultimately, the district court didn’t err substantially enough for the appellate court to step in, which is ultimately the bar that needs to be met.
Appellate courts aren’t meant to relitigate cases, after all.
> The appellate court then affirmed the same and even clarified more clearly that it’s completely fine because it primarily is the mechanic Apple gets payment for the use of their IP and, secondly, their services that encompass more than just payment processing.
This completely ignores Apple's market power though. Because what stops Apple from making this 40% or 50%? 30% is a fair price? Look what they did to Spotify with Apple Music. They absolutely abused their ownership of the platform to stifle a competitor.
Also, things change when you effectively become a utility. Apple shouldn't be able to hide behind their "aww shucks, we need the 30% to keep the lights on" routine.
> Because what stops Apple from making this 40% or 50%? 30% is a fair price?
Competitive pressure. 30% is pretty in line with what other platforms charge.
Apple has had the same 30% ever since it launched the App Store, back when it was much less dominant. They presumably picked it as a level that would make revenue but also not deter developers.
Collusion is the ugly cousin of monopoly. If you can't get a monopoly, work with your few competitors to set an industry standard fee in which you all make a killing and can claim the plausible deniability of "fair market value".
> There’s no world in which Nintendo and apple are colluding to set rates.
What makes you say that? And short of direct collusion, is it fair game if Apple sets the precedent and Nintendo follows suit without direct coordination? If the agreement is only alluded to without being directly stated, are we okay with the ethical precedent regardless of legal standing?
> Apple has had the same 30% ever since it launched the App Store, back when it was much less dominant. They presumably picked it as a level that would make revenue but also not deter developers.
They picked 30% because that was the iTunes Music Store cut. The iOS App Store was a direct clone of the iTunes Music Store in almost every way. It even existed inside iTunes for years. As a developer, I can still see "iTunes Connect" in some obscure areas of App Store Connect.
The documents from the Epic trial showed that the App Store was thrown together very quickly. Initially, Steve Jobs didn't even want third-party apps on iPhone and had to be convinced to add them.
> That doesn’t seem relevant to the question of whether Apple’s fees are in line with fees on other platforms such as on video game consoles.
I've never understood why video game consoles are the relevant platform. iOS is a general-purpose computing platform more akin to Mac and Windows. Indeed, iOS was based on Mac OS X. As an Apple user, I don't even play video games, on either iPhone or Mac. And as an Apple developer, I don't write video games either. Games are 100% irrelevant to my computing life.
> Plausibly iTunes 30% was chosen because it met the same goal: high enough to earn a good amount, low enough music companies found it compelling.
The problem is that the iTunes Music Store was based on selling 99 cent songs. 30% of that is just 30 cents. Before the App Store, computer software was almost never in the 99 cent price range.
> I've never understood why video game consoles are the relevant platform.
From the courts’ perspective, it isn’t. The relevant market definition, as established by the courts, is digital mobile gaming transactions.
I’ve called into the District Court’s hearings almost every day, and many days were spent on determining the relevant market, but the long and short of it is that this definition was chosen because:
- The impetus of the case was Fortnite
- Epic was unconvincing in establishing their EGS was more than just a gaming storefront, which limited the scope of the case to gaming
- the court established that free-to-play games generated the vast majority of the App Store revenue
You also have to remember that the court can’t just hand out judgments that affect things beyond the case in front of it.
This case was Epic v Apple and not, say, a class action by multiple app developers, so the court's conclusions will be limited to the facts that pertain to those two parties.
In other words, other markets might exist, but they might not be relevant to the case at hand.
Additionally, civil courts prefer to split the baby; in this case, this seems to be a middle ground between Apple’s proposed relevant market (games in general) and Epic’s (Apple’s App Store).
An interesting tidbit is that Nintendo’s Switch made a minor cameo of sorts because you can make transactions on it on the go (i.e., it's mobile). Still, the main competitor, according to the court, was Google, leading the court to conclude that Apple is primarily in a duopoly with Google.
Personally, I think video game consoles would be part of the relevant market because of the similarities in market dynamics. The way the payment for IP is structured (commission), the way entry to the market is managed (certifications, similar to app review), the way there’s a single brand market (i.e., monopoly by manufacturers), etc.
While the purpose of the devices might be different, the underlying products are the same (software), and the market mechanics are nearly identical.
Even the platform limitations are artificially created by the platform holder (i.e., what you can and can’t do on iOS is artificially limited, just like what you can and can’t do on consoles is artificially limited by Sony and Microsoft).
Drilling it down further, you’ll find that on Xbox, you have access to non-gaming apps, and plenty of people use their iPads as a game device for their kids. Further blurring these lines of purpose.
> As an Apple user, I don't even play video games, on either iPhone or Mac
You might not, but it wouldn’t come as a surprise to you that others might.
I, for example, play games on my Apple devices, as do others in my household.
> And as an Apple developer, I don't write video games either.
Same here. I mainly write apps, but I dabble in games and know plenty of other devs who make games.
> Games are 100% irrelevant to my computing life.
What I’m trying to say is that anecdotal arguments aren’t solid. This is not a dig at you; mine aren’t either.
> The problem is that the iTunes Music Store was based on selling 99 cent songs. 30% of that is just 30 cents.
I don’t follow this logic.
Does it matter if $300,000 is extracted via a million $1 transactions or 10,000 $100 transactions?
Ultimately, you end up paying $300,000 in commissions.
> Before the App Store, computer software was almost never in the 99 cent price range.
There’s a lot to unpack with this simple statement.
First is, of course, that the race to the bottom is a pro-competitive symptom.
If we, as devs, didn’t have to compete so hard, we wouldn’t have to sell our software at low prices.
Ironically, this is good for consumers, but the devaluation of software isn’t so great for us developers.
Secondly, this, of course, undermines your iTunes $0.99 argument. Whatever it used to be, it’s now the same as with songs via iTunes.
Does this mean you’re ok with the 30% commission or 15%, whichever applies to you?
This is why I’m saying I have a hard time following your logic because I guess I don’t know exactly what you’re trying to say.
Lastly, before the App Store, the revenue cut developers got was abysmal. I don’t know if you’re old enough to recall any of this. I barely am, but it wasn’t pretty.
In brick-and-mortar times, you would have a good deal if 40% made its way to you, but more often than not, it was a 70/30 split, with only 30% making it to you, with outliers as low as 10%.
Specifically for “smartphone” software, this continued for a while, with carriers being cutthroat regarding revenue split.
In the years before the App Store, things got better with Nokia and BlackBerry, who adopted a revenue split closer to 50/50, and Qualcomm’s BREW actually was “good” at times with an 80/20 split in favor of developers.
The problem with those, however, was that the barrier to entry was relatively high and costly.
Then Apple came along with their 70/30 split, which, as you said, was a copy-paste from the iTunes Store. Still, because both an all-encompassing commission (payment processing wasn’t a separate charge as was typical before then) and because of the abysmal revenue splits in the decades before while also having a comparatively low barrier of entry, it was received with literal cheers.
Although I think people were also happy not to have to deal with carriers anymore, that was a huge pain.
Sure, App Review can be a pain for some, but it’s a utopian publishing pipeline compared to the hoops one had to jump through and the negations you’d have to go through every time before the App Store came along.
Does that mean that Apple is perfect?
By no means, there’s plenty they can improve on, but within the historical context of the time, it was like offering someone a glass of ice water to someone who was stuck in hell (to paraphrase a quote from Jobs on iTunes on Windows that didn’t age well).
I couldn’t care less about the commission. I was content with 30%, and I knew what I eagerly signed up for. The 15% discount was a nice bonus, and I think I got, and still get, my money’s worth and then some.
While my experience is overwhelmingly positive, I think there are other, more pressing matters for me as a developer that Apple can improve on.
> Does this mean you’re ok with the 30% commission or 15%, whichever applies to you? This is why I’m saying I have a hard time following your logic because I guess I don’t know exactly what you’re trying to say.
Let me start with this, because it may clarify a lot. I qualify for the Small Business Program 15%, and while I think that Apple's developer services are totally crappy and not even worth 15%, from my perspective the cut is not among the App Store's biggest problems, and I would happily pay an even larger cut if I actually got a good return for the investment.
My goal was merely to highlight the historical origin of the App Store, which is important in understanding how we got to this point today.
> The relevant market definition, as established by the courts, is digital mobile gaming transactions.
As invented out of thin air by Yvonne Gonzalez Rogers. But I'm not really interested in arguing the legalisms. I think the decision was bad, but that's par for the course in our legal system. I'm more interested in the public debate over the issue, here on Hacker News, on social media, in the news media, etc. Regardless of what the judge decided, the people in the public who defend Apple often point to gaming consoles and consider them to be the relevant platform.
> What I’m trying to say is that anecdotal arguments aren’t solid. This is not a dig at you; mine aren’t either.
I'm not sure what you think I was arguing, but it was simply that iPhone is a general-purpose computing device. Of course gaming is one of those purposes but definitely not the only purpose. Indeed I would argue that gaming is not even the main purpose, because after all, iPhone shipped in 2007 with zero games, and while Apple has created a lot of apps for iPhone, Apple has created almost no games for iPhone. (I think they had a Texas Hold'em game way back in the day, and they also made Warren Buffett's Paper Wizard.) I wasn't trying to deny that people use iPhone for gaming; that would be a silly argument.
You can argue that gaming consoles have some additional capabilities besides games, but does anyone ever buy a gaming console who doesn't play games at all? That would be silly and pointless. Yet huge numbers of people buy iPhones and iPads and Macs with no desire to game on them. Thus, I argue that those are general-purpose computing devices, unlike gaming consoles.
> Does it matter if $300,000 is extracted via a million $1 transactions or 10,000 $100 transactions?
Yes. 30 cents is actually a very good deal for a 99 cent transaction. I don't think you'll find a better one, and many payment processors would charge 30 cents plus a percentage. At least as far as payment processing is concerned, though, 30% is a crappy deal for a $100 transaction. So the question is, how much does the App Store add to the value above and beyond payment processing? I would argue, not much in most cases.
> Ironically, this is good for consumers, but the devaluation of software isn’t so great for us developers.
I dispute that it's good for consumers. You get a different type of software in a race-to-the-bottom market. When the platform makes it difficult for developers to produce quality, well-crafted, sustainable software, you get exploitative crap instead, and I think the epithet "crap store" is richly deserved.
You can really see the difference in the Mac App Store, because on the Mac, developers don't have to be in the App Store, and quite a few important apps are missing entirely.
It didn't have to be that way. The iTunes Music Store model was a very poor fit for software. For example, the "top charts", based on unit sales, was one of the main ways to get noticed in the App Store and was a big reason for the race to the bottom. The top charts are tolerable for music, where every song and album is more or less the same price, but it doesn't work well for software, the price of which varies greatly, so unit sales are not a good representation of the quality of the software.
> In brick-and-mortar times, you would have a good deal if 40% made its way to you, but more often than not, it was a 70/30 split, with only 30% making it to you, with outliers as low as 10%.
30% of $100 is $30. 70% of $0.99 is $0.69. I'll happily take the 30% cut of the much higher price.
> Sure, App Review can be a pain for some, but it’s a utopian publishing pipeline compared to the hoops one had to jump through and the negations you’d have to go through every time before the App Store came along.
This was not my experience. Before the iPhone came along, I was a Mac developer. We sold our software on the web directly to customers, bypassing all middlemen except for payment processors. Apple got a 0% cut. What happened in your comment was the same as I've heard in most arguments defending the App Store: the "history" goes directly from brick-and-mortar times to the App Store, completely ignoring the golden age of indie developers selling software on the web.
iOS was based on Mac OS X, UIKit was based on AppKit, and of course they both used Objective-C as the programming language at the time. The App Store was practically an invitation for Mac developers to jump in right away, and many did. But the business model of the App Store was atrocious compared to the Mac. (The Mac App Store, a clone of the iOS App Store, didn't open until 2011). From my perspective, the App Store experience was nearly infinitely worse than the Mac developer experience. It was not like "offering someone a glass of ice water to someone who was stuck in hell". Rather, it was more like kidnapping someone already in heaven and sending them down to hell.
This is why I make so much of iOS being a general-purpose computing platform. It's very much like the Mac, except for the form factor, and it could have been much more like the Mac in terms of third-party software. And at least in Europe, perhaps it will be soon.
I appreciate your clarifications, in some cases it seems I misunderstood what you were saying.
> I qualify for the Small Business Program 15%, and while I think that Apple's developer services are totally crappy and not even worth 15%, from my perspective the cut is not among the App Store's biggest problems, and I would happily pay an even larger cut if I actually got a good return for the investment.
I’m sorry you’re unhappy with the services and tools offered in exchange for the commission.
As I stated before, I was already happy with what I got for 30%, the 15% is a cherry on top for me.
I’m one of the few (it seems) that’s very happy with Xcode and its improvements, I’m also very happy with the advancements made on frameworks and SDKs over the last decade or so.
It has made my work so much easier and without many of the latest improvements much of what I currently do wouldn’t be possible.
Code level DST support has also proven to be invaluable to me.
> As invented out of thin air by Yvonne Gonzalez Rogers. But I'm not really interested in arguing the legalisms. I think the decision was bad, but that's par for the course in our legal system. I'm more interested in the public debate over the issue, here on Hacker News, on social media, in the news media, etc. Regardless of what the judge decided, the people in the public who defend Apple often point to gaming consoles and consider them to be the relevant platform.
It’s not invented out of thin air, but based on well established case law and legal principles.
I used to practice law between my original stint in software and my current career in software and based on my legal knowledge I’d say that both the original judgment as well as the affirmation by the appellate court is a logical and sound legal conclusion.
But I understand that you’re mainly interested in the “every man’s discussion”, that’s fine.
> I'm not sure what you think I was arguing, but it was simply that iPhone is a general-purpose computing device.
I’ve addressed this both from a legal perspective as well as my personal perspective.
I think it’s safe to say that no new insights can be gleaned from a back and forth and we just fundamentally differ in our views on this.
> Yes. 30 cents is actually a very good deal for a 99 cent transaction. I don't think you'll find a better one, and many payment processors would charge 30 cents plus a percentage. At least as far as payment processing is concerned, though, 30% is a crappy deal for a $100 transaction.
I don’t think it makes much of a difference when taking volume into account. The “pain” is the same, it’s only a matter of difference to how it feels.
> So the question is, how much does the App Store add to the value above and beyond payment processing? I would argue, not much in most cases.
Perhaps not with that framing, I’d argue the question is really how much does Apple as a company add to the value as the commission structure first and foremost serves as payment for being able to use their IP.
The answer is easily found I’d say, try and reinvent the wheel for yourself, leave as many frameworks to the side and let me know how it goes.
For me SwiftUI alone is worth its weight in gold given how much time it has saved me.
> I dispute that it's good for consumers. You get a different type of software in a race-to-the-bottom market. When the platform makes it difficult for developers to produce quality, well-crafted, sustainable software, you get exploitative crap instead, and I think the epithet "crap store" is richly deserved.
I don’t agree with you on this either. I’d argue that the golden age of apps is here, if only because of the many high quality indie apps.
Something that would’ve been impossible without the available tools and frameworks, something that was completely absent in the software market decades ago.
> 30% of $100 is $30. 70% of $0.99 is $0.69. I'll happily take the 30% cut of the much higher price.
This seems rather shortsighted. $30 > $0.69 sure, everyone can see that.
But pushing 100 units at $100, leaving you with $300 is less than pushing 1000 units at $0.99 leaving you with $690 and that’s a conservative estimate.
I could’ve never dreamt of having as many sales as I have now and that’s not even opening the can of worms of recurring subscriptions.
Do I wish software was valued more these days? Definitely. Does the sheer volume make up for the loss in headline price? Also definitely.
> What happened in your comment was the same as I've heard in most arguments defending the App Store: the "history" goes directly from brick-and-mortar times to the App Store, completely ignoring the golden age of indie developers selling software on the web.
Great and you can still have that golden age. macOS is open enough to sustain that after all.
I didn’t skip from brick-and-mortar to the App Store, instead I highlighted the abysmal environment of the faux smartphone era. Why? Because a) we’re mainly talking about iOS and b) macOS is open.
You can choose to ignore that part, but that doesn't change the fact that everyone and their mom was cheering for a 30% haircut and a simple publishing process after having gone through hell with carriers.
> I’m one of the few (it seems) that’s very happy with Xcode and its improvements, I’m also very happy with the advancements made on frameworks and SDKs over the last decade or so. It has made my work so much easier and without many of the latest improvements much of what I currently do wouldn’t be possible.
> Code level DST support has also proven to be invaluable to me.
You're talking about things that have nothing to do with the App Store. These same tools are used by Apple to make their built-in software. They're also used by Mac developers outside the Mac App Store.
I'm talking about the App Store itself, as well as tools and services directly related to the App Store, such as App Store Connect.
> The answer is easily found I’d say, try and reinvent the wheel for yourself, leave as many frameworks to the side and let me know how it goes.
> For me SwiftUI alone is worth its weight in gold given how much time it has saved me.
Again, you're talking about things that have nothing directly to do with the App Store. The iOS and macOS system frameworks are not the App Store and would exist even if the App Store were eliminated.
> Something that would’ve been impossible without the available tools and frameworks, something that was completely absent in the software market decades ago.
Same thing here. Nothing to do with the App Store. And in any case, they were available decades ago. Xcode is 20 years old. UIKit is based on AppKit, which itself originally came from NeXTSTEP over 30 years ago.
> But pushing 100 units at $100, leaving you with $300 is less than pushing 1000 units at $0.99 leaving you with $690 and that’s a conservative estimate.
Your math is wrong. 100 x $30 = $3000, not $300.
Anyway, indie developers can't "make it up in volume". One of the most difficult things for an indie developer is marketing and getting discovered by customers. That's why we need sustainable prices. Not to mention paid upgrades.
> You can choose to ignore that part, but that doesn't change the fact that everyone and their mom was cheering for a 30% haircut and a simple publishing process after having gone through hell with carriers.
Was the pre-iPhone mobile software market even as big as the Mac software market? I'm skeptical. It certainly wasn't as big as the Windows software market, which is also open. Open platforms were the norm.
> Because what stops Apple from making this 40% or 50%? 30% is a fair price?
Market. It's capitalism, you know.
They provide users to devs (e.g. in case of Epic most people played Fortnite from iOS) and they provide apps to users. If they jack up the price and devs quit, the deal stops being attractive to users because there's not enough apps so Apple risks losing users unless they make selling apps appealing to devs again.
> Look what they did to Spotify with Apple Music. They absolutely abused their ownership of the platform to stifle a competitor.
Everyone I know on iPhone is using Spotify except me so for me it is hard to see who is stifled exactly...
There is no current iOS version of Fortnite. The only way to do it is with Amazon Luna or Xbox Cloud Gaming, which is only "playing Fortnite from iOS" on the very surface.
> There is no current iOS version of Fortnite. The only way to do it is with Amazon Luna or Xbox Cloud Gaming, which is only "playing Fortnite from iOS" on the very surface.
It's not there anymore but it was there originally. (It'd be amazing if it still were. If you were allowing me to sell my game in your store for a fee, and I stopped paying the fee AND sued you, you'd remove me from the store first thing. First to avoid funding my legal expenses and second because I agreed to your ToS that allow you to do it literally for any reason you like.)
After it was removed, Epic found out that people who were casually playing Fortnite on iOS were not about to start buying PCs and gaming consoles. After all there are other games in the store, including tons of buy-once-play-forever games which don't leech money off you or your kids like Fortnite does.
> More than 116 million registered users have accessed Fortnite through iOS -- more than through any other platform, Epic said in the filing
Thats playing Fortnite! In what ways isn't that playing Fortnite? The GPU is in the cloud, but other than that, it's the full game, not some knock-off lite fake version.
> This completely ignores Apple's market power though.
Market power has little to do with the legality of a business model at first blush. Only in very narrow circumstances might it be a relevant factor.
In this case, market power doesn’t matter at all, no matter which angle you approach it with.
For starters, fundamentally, market power doesn’t preclude a company from extracting payment in exchange for their services and IP. This is what both courts explicitly (re)affirmed.
And that makes sense, of course; just because you’re big doesn’t mean you can be forced to give your stuff away for free.
From an antitrust angle, market power mainly starts to matter once you abuse that market power.
Here, all signs on the commission point the opposite way.
Apple introduced the 30% commission and the strict App Store rules around the same time the App Store was launched, at which point they had no relevant market power to speak of, so that was not an antitrust issue.
The parties quibbled a bit about at which point Apple gained market dominance because that’s a relevant measuring point to establish antitrust issues. Still, regardless of wherever you place that starting point, it is clear that Apple didn’t use that market power to turn on the screws.
They didn’t, say, increase the commission or impose more onerous restrictions.
The opposite happened.
They first introduced a commission discount of 15% for subscriptions after the first year, and later on, they introduced the small business program that provides a 15% reduction to developers with less than $1M in revenue, which, as I understand it to be, covers about 90% of the developers.
These moves, whether for altruistic reasons, goodwill reasons, or fear of regulatory action, are the opposite of abusing one’s market power.
I think that Apple is quite aware of this risk, which is why they always introduce things minimally and strictly, because that gives them the option to assess and decide to loosen up things, whereas the opposite isn’t possible; they can’t impose more restrictions due to the potential antitrust issues at their current size.
Moreover, courts aren’t eager to retroactively punish just based on success.
The way the courts see it, it’s almost self-evident that Apple wasn’t acting in an anti-competitive way with their commission.
From their perspective, if Apple was able to enter a market as a nobody (or create it even, if that’s how you want to look at it) with such restrictive rules and with a commission rate that is now considered high (even though it was a significantly lower commission than what was standard at the time) and still managed to capture a good chunk of the market as they did, then there must be pro-competitive forces at play, even when it’s hard to quantify them.
Again, the way they see it, if it all were so terrible, then nobody would’ve signed up for it in the first place. So, there had to be a pro-competitive benefit that outweighed all of those negatives.
> Because what stops Apple from making this 40% or 50%? 30% is a fair price?
Competition in the relevant markets as defined by the court? Antitrust violations? Pick your poison.
Courts generally don’t care much for hypotheticals because hypotheticals can’t be remedied, and it doesn’t feel good to dole out punishments for things that could be.
Courts tend to limit themselves to what has happened instead of what could happen.
That’s not to say they don’t look at it at all. In this specific case, they’ve looked at the competitive effects and what would stop Apple from doing X, Y, and Z in their test to establish how much competitive pressure Apple is under to understand the motivations behind some of Apple’s actions.
But ultimately, unless Apple does the thing you fear, they can’t punish it.
> Look what they did to Spotify with Apple Music. They absolutely abused their ownership of the platform to stifle a competitor.
I’m looking, but I don’t see much.
Of course, this is in part because Spotify wasn’t a party in this case, and so their arguments weren’t a part of the considerations, and the Spotify matter hasn’t been adjudicated.
Ultimately, what I see is that Apple has some benefits that Spotify doesn’t have.
Apple doesn’t have to pay itself a commission (although it might have some internal bookkeeping that accounts for its left hand paying its right hand, like how the Apple entities pay the Irish entity licensing fees for selling Apple products and IP).
Apple also has easier access to customers under their vertical integration.
Other than that, Spotify has near feature parity (or at least the option to offer feature parity) by the frameworks Apple offers third parties.
At face value, this isn’t enough for an antitrust case. Businesses can expand and offer customers services that compete with third-party services and leverage their existing customer relationships to try and sell those services.
There is no positive obligation to facilitate competition or even help competition.
There is, however, a prohibition to leverage your power to stifle your competition actively; an excellent example of this would be Apple banning Spotify from the App Store once they started Apple Music.
But again, the opposite is true; they created frameworks that can offer feature parity with Apple Music.
> Also, things change when you effectively become a utility. Apple shouldn't be able to hide behind their "aww shucks, we need the 30% to keep the lights on" routine.
Perhaps for you, but not necessarily for the courts.
Especially when they haven’t designated your service as a utility.
Again, just because you are successful (i.e., widely used, successful at selling your stuff) doesn’t mean you suddenly lose your rights.
What’s surprising to me is that everyone always goes, “Oooh, just wait until Apple gets sued and the court gets involved.” Then, when the courts decide differently than the desired outcome, people try to relitigate the matter.
Either people have a poor understanding of what matters legally, or people have expectations that don’t match the legal reality of standing law.
And it’s not like the 9th Circuit or the District Court for the Northern District of California are known to be “activist courts” or known to be corporate friendly. If anything, they’re known to be pretty strict on SV corporations.
You can read plenty of admonishments in the District Court’s judgment, but ultimately, they have to stick to the laws and case law at hand.
Now that the Supreme Court has put this issue to rest by refusing to weigh in, will the appellate court now take that until the district court to figure out those kind of details?
Or will everything stand as it is at the moment with figuring out specific details that Apple must abide by that haven’t already been listed up to future lawsuits to determine?
The appellate court affirmed the judgment by the district court, albeit while making some comments here and there.
So as it stands, the appellate court’s decision is the law of the land.
Technically, from a legal perspective, there is a small chance this changes if a case makes it way to an appellate court in a different circuit and they’re in the mood to come to a different conclusion, at which time SCOTUS might be inclined to take up that case to resolve the contradictory outcomes, but those are pretty slim for a couple of reasons.
One, it’s not likely a new case would play out outside of California, by virtue of Apple being located there.
Two, a court of appeals of a different circuit would need to be in the mood to completely disregard the 9th circuits conclusion. While technically an option, most appellate courts don’t want to contradict their sister circuit, but there are some “activist” courts out there.
Three, the outcome needs to be sufficiently different for it to cause a significant contradiction.
And lastly, the fact pattern of the new case would need to be extremely similar to the Epic v Apple case.
> Apple argued from the very beginning that the 30% was its fee for running the App Store, marketing the apps, and storing and delivering the app bundles.
The cost of operating an App Store and providing distribution is relatively negligible. Several Linux distros have app stores, and package management and distribution systems that are as good or superior than Apple’s.
The annual fee that Apple charges developers alone should more than cover the cost of App Store. It is not something that costs tens of billions of dollars.
That's odd. I would have presumed that there are non-negligible costs involved with hosting and pushing binaries and updates of hundreds of apps per phone, times 1.5 billion active iPhones.
Apple is sitting on a $150 billion warchest of cash. I'm guessing that some of that comes from what they're charging above these non-negligible costs. They don't have to run a charity, but they're making fucktons of money between all their products so it's hard to see their 30% cut as anything other than extortion.
That cost is negligible relative to the tens of billions they rake in via fees charged to iOS app developers. You could do the math, but I'd guess it most likely wouldn't even exceed $10 million a year.
The cost of a human working all day is negligible; they need a little bit of food. And yet they still expect to be paid - sometimes quite a lot.
Just based on your quote and without having much interest in the case... the fee isn't about covering costs. They have an app store, people want to be in the app store, and Apple is going to charge them a fee to be in the app store. Similar logic to drawing a wage.
This is bad analogy. A person who works provides services or labor worth a certain amount of value in exchange. Often that value exceeds the wage. For example, a software engineer $3000 "worth" of work in a day, but only gets paid around $1000 for that day. I understand the worth/value is a difficult thing to measure.
So Apple is more like the Mafia. The threaten negative/adverse action, if you don't pay them.
Also, historically, software could be installed on computers without the permission of an overlord. I'm aware iOS & game consoles are glaring exceptions.
I see the argument that people should be allowed to install whatever they like on their phones as very strong. However that has nothing to do with Apple's fees, costs or value add. It might seem pedantic, but the separation of value and cost is fundamental to how everyone improves their material wellbeing and needs to be protected.
And the argument that Apple is like the Mafia because they can exclude you from something would cast most businesses and all landlords as Mafia-like. That is a position some people hold, but if mafiadom is so embedded and accepted in society it undermines the idea that Apple's is a unique problem and that it will be acted on.
My main point is: on a desktop/laptop personal computer, you can install software without any overlord's permission. On iOS, you can't. That's seriously messed up, and wrong. And, yes, a lot of business (and landlords) are Mafia like. I'm hoping for a strong left-wing party to come into power in the future, and completely turn this upside down.
It's not about the cost of the App Store, it's about maximizing profits and generating shareholder value. How is Apple supposed to have the most valuable stock in the world without raking independent developers over the coals?
> Apple argued from the very beginning that the 30% was its fee for running the App Store, marketing the apps, and storing and delivering the app bundles. The in-app payment system was a convenient way for Apple to collect its commission and a way for Apple to create a unified payment experience for its customers, but it was never the Achilles heel for Apple's business model.
Is it just me or does this argument seem insanely flimsy? If Apple were serious about it then why aren't they charging free apps for downloads and approvals? Why doesn't the developer policy require Netflix to pay 30% of subscriptions for anyone who signs in on an Apple device? Why are the prices lower for "reader" apps who presumably cause Apple to incur similar costs?
Its like a toll road arguing "no, driving on the road is free of course, we just charge at the entrance and exit for the privilege of looking at the toll road".
What does it take for the legal system to be able to call BS on a claim like that?
I agree that it's an oddly-applied pricing system, but it's not unique. Apple's differential pricing functions similarly to student and senior discounts—it's an acknowledgment that some customers are harder to get than others and it's worth it to the company to meet those customers where they are.
Some apps don't make any money at all, and Apple wants to let those exist and so they get a free pass. For others, Apple is only providing a tiny portion of the value of the app, most of it comes from the content that the app licenses from other companies. Apple recognizes that they can't take 30% from those apps without them giving up on an app entirely, so they get a discount in order for them to stay on the platform.
Is it fair? Probably not. But I see no reason to believe it's illegal.
>Is it fair? Probably not. But I see no reason to believe it's illegal.
If they take it too far, that's how you get into antitrust territory. That's why Epic's court case against Google ruled in Epic's favor, as it was giving paying off devs to not make their own app stores and blocked OEMs from making deals with other studios.
So I'd say this puts apple on thin ground. I'm sure this won't be the last high profile lawsuit over the app store this decade.
The case against Google had a completely different fact pattern. One that resembles the US v MS more.
Google essentially pressured and bullied OEMs and other third parties into doing stuff that was beneficial to Google in exchange for licenses and special deals.
At that point, you’re throwing your weight around, something that Google “had” to do because they started with a relatively open platform.
Apple, on the other hand, preempted needing such tactics by making their ecosystem closed and heavily regulated from the onset when they were still nobodies within the market. That makes it extremely difficult to prove antitrust issues.
Had Apple, say, increased the commission from 30% to 33%, then it would’ve been pretty close to an open and shut case because then it’s easy to argue that Apple threw its weight around once everyone was inside the ecosystem.
But the opposite happened.
This is also one of the reasons why everything Apple does is restricted and limited from the onset. It’s always easy to loosen the reigns later, but at their size, you can never go the other way without risking antitrust liability.
FWIW, even MS, with their egregious behavior, got a lot thrown out on appeals and prevented being split up. The DOJ ended up settling instead.
This (a policy of charging some devs more/less than others) isn't Apple bribing devs to not compete with them, and it isn't a series of shady backroom deals. It's a relatively straightforward and transparent price discrimination scheme, and I have a hard time imagining why this would put Apple at risk of an unfavorable antitrust ruling if the complete lack of any alternate app stores didn't.
Where I imagine Apple could get into trouble is if they systematically turned a blind eye to commission-dodging by specific entities as part of a trade to ensure their market dominance. Unlike Google, though, I'm not even sure which entities Apple could bribe that would risk looking like a trust.
>'s a relatively straightforward and transparent price discrimination scheme, and I have a hard time imagining why this would put Apple at risk of an unfavorable antitrust ruling if the complete lack of any alternate app stores didn't.
Like any discrimination case, it depends on the subject of discrimination and potential victims. So I would say that discriminating with the largest streaming service can be a way to lock out the rest of that market from competing properly.
>Where I imagine Apple could get into trouble is if they systematically turned a blind eye to commission-dodging by specific entities as part of a trade to ensure their market dominance
Yeah, that's what I'm getting at. There's no hard evidence but that's what would be subpoena'd in court.
Ironically enough, Google is the biggest smoke signal here. Since court cases reveal they have some sort of deal with Apple to power search. That deal + potential discrimination with Google submitted apps can lead to those exact issues Google is under fire for.
>Its like a toll road arguing "no, driving on the road is free of course, we just charge at the entrance and exit for the privilege of looking at the toll road".
I mean, there's actually many toll roads/bridges that only charge for travel in one direction. The other is free, with the expectation that you'll need to make a return trip anyways.
Does Google Maps still assume that the toll applies in both directions? I used to live near a bridge like this and it was really annoying, because I had Google Maps set to avoid toll roads, but because of this it would refuse to plot a route over the bridge, even though there was no toll in that direction.
No, I'm really just asking what level of scrutiny can be applied to their claimed justification for the fees. I feel those examples are illustrative of how Apple's decisions aren't really aligned with their claimed justification. One could absolutely come up with a rational explanation (as some commenters have) even if it's not the actual explanation, I'm interested if that's all Apple needs to do to fend off claims of them exploiting their market power.
Obviously if they tried to charge 85% no one would actually be a developer and the App Store would crater. So they have a very strong incentive not to.
But from a legal point of view is there a reason why one number would be legal but another wouldn’t?
The only thing I can think of is a contract being determined to be unconscionable. Until they hit whatever threshold that is it seems like it’s completely up to them to set the terms at whatever they think enough developers will accept.
>Obviously if they tried to charge 85% no one would actually be a developer and the App Store would crater. So they have a very strong incentive not to.
That's not really true. If the iPhone became a real monopoly in the US, for instance, with perhaps 98% marketshare (similar to Windows before Macs started seriously challenging them), then Apple really could charge 85%. What is anyone going to do about it? They'd have a choice of paying 85% to Apple so they can sell apps to 98% smartphone users (basically everyone), or not selling smartphone apps altogether and finding a new business strategy that probably doesn't involve making software for consumers at all (which admittedly, many developers would probably choose).
What I can gather is that if Apple, from day one, had an 85% split, grew to 98% marketshare, then that would be ok. If apple started with 30%, then grew to 98% marketshare, then jacked up the price to 85% then they would have a problem.
I think the missing piece that most people miss is that it is not illegal to have a monopoly. It's illegal to use your monopoly to bully others. Apple did no such thing.
Perhaps, but I disagree about your supposition that "they would have a problem". I don't think they would. It may be technically illegal to use your monopoly to bully others, but enforcement in America these days is rare.
> Is it just me or does this argument seem insanely flimsy?
I'm not sure if it is just you, but both the district court and appellate court are on board with it. And honestly, I can see why.
Apple argued that they provide a bunch of services and access to their IP in exchange for $99/year and a commission over the sales.
The courts have deemed that an acceptable business model.
The district court was hemming and hawing a bit over the actual commission rate being set at 30% (15% for small devs) and at the fact that some developers essentially subsidize others but ultimately didn’t make a ruling on any of that in part because Epic didn’t bring it up as an argument.
The appellate court, however, went a step further and stated in no uncertain terms that it was kosher.
If you think about it, it makes sense. We see similar business models with differential pricing all over in commerce for various reasons.
Sometimes, it’s for goodwill, sometimes, to reach customers that would otherwise be harder to convert into a sale, sometimes, it’s based on usage and who puts the most strain on a system and sometimes, it’s for more egalitarian reasons.
Military discounts, student discounts or even free usage, senior discounts, teacher discounts, first responders, etc. These are all examples of differential pricing.
In particular, the student stuff is interesting because the philosophy there seems to be that as long as you don’t make revenue from it (commercial use), “we” don’t need to make a profit from you.
> It’s like a toll road arguing "no, driving on the road is free of course, we just charge at the entrance and exit for the privilege of looking at the toll road".
I don’t think the analogy is apt, but we see similar stuff on toll bridges.
I’ve got a bridge near me where toll rates are based on vehicle type and axles.
While the pricing is slightly higher for commercial vehicles (e.g., trucks), it’s not proportional to the increased cost of upkeep those vehicles cause.
Edit: Also realized that only one direction is burdened with tolls. The other way isn't.
> What does it take for the legal system to be able to call BS on a claim like that?
A very carefully crafted legislative change, I suppose, if possible at all.
Currently, with SCOTUS’ refusal to take up the case, this is standing law, and it’s challenging to craft legislation that wouldn’t have reverberating effects across all of commerce while simultaneously only hitting Apple.
Thanks for your reply, I definitely see what you mean with other pricing schemes and how there is pretty wide latitude for what type of price discrimination is justifiable.
I mostly just find it silly that at no point does anyone seem to address the elephant in the room that the only way to access some hundreds of millions of users is through Apple, and that almost certainly influences the fee in a way that can't be really be explained by the value of the IP.
Does the argument require us to believe the fee would still be 30% if iPhone had practically zero users? Or is that legally irrelevant assuming that they aren't found a monopoly?
> Does the argument require us to believe the fee would still be 30% if iPhone had practically zero users? Or is that legally irrelevant assuming that they aren't found a monopoly?
While not zero users, the default fee has been set at 30% since the beginning of the App Store, long before Apple had the level of market dominance it has today.
This argues in favor of it being acceptable: developers were willing to accept that fee without monopoly pressure being applied, since nobody has successfully argued that Apple held a monopoly in 2008.
> The Court presumes that in such circumstances that Apple may rely on imposing and utilizing a contractual right to audit developers annual accounting to ensure compliance with its commissions,
To this day it remains absolutely unbelievable to me that anyone would ever agree to this. I always have and always will tell Apple to shove their app store up their ass. Plenty of other ways to make a living in software.
One thing I haven't seen anyone mention which I think is the most obvious reason for commission on outside purchases: if Apple did not charge a commission on purchases made outside the app, it would leave a huge loophole - developers could just list their apps free on the App Store with limited functionality, with a link to an outside purchase to fully activate them.
If all the developers I assume you care about left the App Store, Apple wouldn’t care. The apps that make the majority of the money on the App Store are slimy pay to win games where “whales” buy coins and loot boxes.
The other popular apps are front end for services where Apple doesn’t collect a dime like Facebook, Instagram, Netflix, etc.
I'm on Android and get most of my apps through F-Droid. I don't have any stake in this fight at all, I'm just an observer who's been a bit baffled by the conclusions that people have jumped to.
Sure, in the same way every website has the option to make it's own social media website. The website is the "easy" part but not necessarily the most profitable point to pitch to companies like Apple.
What do you think is more likely? People wouldn’t buy iPhones or people would find an alternative to Instagram?
Especially in the US, how likely is it do you really think iPhone users are going to sully themselves and buy Android phones when many people think that “only poor people buy Android phones”. (Note sarcasm)
> What do you think is more likely? People wouldn’t buy iPhones or people would find an alternative to Instagram?
It is an interesting question that I would love an answer beyond a hunch.
I would think a larger percentage would stay on iPhone and look for an insta alternative, compared to the percentage who might move on to a different phone for insta.
But what would those numbers look like? Any case studies or similar changes? Maybe in game consoles?
The two classes of people who broadly buy Android phones are techies (“I want to root my phone”) / politicos (“software freedom! walled gardens! it’s GNU/Linux actually”) and committed cheapskates (“close enough to an iPhone for no bucks!”). There’s nothing wrong with that. But the actual working poor don’t have time for it, so they buy iPhones and just keep them as long as possible.
What marketing specifically? Last time I checked, I had to integrate third party ad experiences in order to market my app in their ecosystem.
> In such a hypothetical world, developers could potentially avoid the commission while benefitting from Apple's innovation and intellectual property free of charge.
> Apple argued from the very beginning that the 30% was its fee for running the App Store, marketing the apps, and storing and delivering the app bundles
With hindsight of the antitrust case in the EU this argument itself seems like it is in bad faith. Apples argument in the EU against antitrust was that there isn't one but five different app stores, conveniently for each device family.
So they are indeed aware that a commercial app developer would likely not be "benefitting from Apple's innovation and intellectual property free of charge", because they are likely not taking advantage of their entire catalogue of intellectual property (if there is five different app stores, for five different markets, as per Apples argument, surely there is different IP between those markets to run the app store in an effective manner).
In other words, as others have mentioned, Apple charges a 30% flat fee for "intellectual property" that developers may or may not take advantage of, as per their own argument overseas. I don't see how it's not antitrust when a company forces me to pay for services that I am not taking advantage off or ever had the intent of using, or can't use, due to technical limitations.
As a developer, to me it rather feels like Apple is trying to artificially bind me to invest into the app store as a platform due to this high fee, for example by developing an accompanying watch applet or a tablet version of my app, because the act of simply offering these on their devices seems to be part of their precious App Store IP. And you can't argue that pricing these add-on apps differently would make a difference for Apple, since they collect the 30% cut across income in their entire ecosystem either way.
It also doesn't make sense for Apple to tell me to go elsewhere (Android) to mitigate this, as I can't replicate the UX of their ecosystem on my own even if I tried (prime example would be the peripheral integration imo. You'll find creating a device that integrates as seamlessly as the Apple Watch fairly hard, not because Apple has some special proprietary integration IP secret sauce, but because they artificially lock down ways to interface with peripherals to secure market dominance).
Apple argued from the very beginning that the 30% was its fee for running the App Store, marketing the apps, and storing and delivering the app bundles. The in-app payment system was a convenient way for Apple to collect its commission and a way for Apple to create a unified payment experience for its customers, but it was never the Achilles heel for Apple's business model.
The best case scenario here is that Apple is forced to walk back some of the more onerous requirements they've imposed for whether and how links may be shown. Them putting a price on the payment processor portion of the fee and discounting developers for that portion was inevitable and isn't even malicious compliance, the judge explicitly called this out as a likely outcome in the original ruling:
> First, and most significant, as discussed in the findings of facts, IAP is the method by which Apple collects its licensing fee from developers for the use of Apple’s intellectual property. Even in the absence of IAP, Apple could still charge a commission on developers. It would simply be more difficult for Apple to collect that commission.
> In such a hypothetical world, developers could potentially avoid the commission while benefitting from Apple's innovation and intellectual property free of charge. The Court presumes that in such circumstances that Apple may rely on imposing and utilizing a contractual right to audit developers annual accounting to ensure compliance with its commissions, among other methods. Of course, any alternatives to IAP (including the foregoing) would seemingly impose both increased monetary and time costs to both Apple and the developers.
https://casetext.com/case/epic-games-inc-v-apple-inc-2