47: Apple vs. Developers

Apple has traditionally put itself first, users second, and developers third, but some big names are going to bat for all developers in a fight against Apple’s commission rate. Tim and Rob discuss the ongoing controversies surrounding Apple and the App Store and their thoughts on how it might play out.

In this episode, you will learn:

• Why some companies make you subscribe or update payment methods through a browser vs. in-app
• What the gerrymandering of the App Store is
• Why Apple’s 30% cut might be fair, according to their study
• How the developer circle feels (and how we feel) about the situation
• What could possibly change as a result
• Whether sideloading is an option

This episode is brought to you by The Jed Mahonis Group, where we make sense of mobile app development with our non-technical approach to building custom mobile software solutions. Learn more at https://jmg.mn.

Recorded September 22, 2020 | Edited by Jordan Daoust | Produced by Jenny Karkowski

Show Notes:

• Time to Play Fair
• Apple vs. Hey
• Epic Games Free Fortnite FAQ
• Study on commission rates
• Sideloading

Episode Transcript:

Tim Bornholdt 0:00
Welcome to Constant Variables, a podcast where we take a non-technical look at all things technical. I'm Tim Bornholdt.

Rob Bentley 0:06
And I'm Rob Bentley. Let's get nerdy.

Tim Bornholdt 0:22
So today on the show, we are going to cover some of the recent controversies surrounding Apple and its beloved App Store. So big picture, Rob, what's going on? Why are all these different companies so ticked at Apple right now?

Rob Bentley 0:36
Pretty much because Apple wants all the money, which I mean, can you blame them, but some people think it's a bit unfair.

Tim Bornholdt 0:46
Yeah. So right now, if you list an app in the App Store, and you make any money through Apple's product, you know, whether it's through an in-app purchase, whether it's a subscription through Apple, whether it's just listing the app in the App Store, if it's free, obviously, they don't make any money off of it, but if you charge even $1, they take 30% of whatever money runs through it. And there is one exception, where if you are doing a subscription, and you've had that subscription in play for over a year with a specific customer, then it's 15%. But for the most part, we're talking 30% of everything that goes through the App Store.

So we have a couple different apps in the App Store ourselves. With the Half Staff app, it's $2 up front. We actually make like $1.40 every time someone buys it. And then we have the Minnesota Craft Beer Tracker, and that app has a bunch of different in-app purchases. And if somebody was kind enough to buy the hundred dollar crazy in-app purchase we threw in there, we would only make $70 off of it. We don't even make the full hundred. And that's just the way it's always been ever since Apple started this thing.

Rob Bentley 1:58
Right. And that's before taxes. So it really cuts into the profit margins when you try to make a great product.

Tim Bornholdt 2:05
Yeah, there's basically no profit margin at that point, unless you're doing serious volume through the store.

But anyway, there's been a few different examples. Over the years, there have been a lot of examples you can look up. Like Amazon, for example, right now, if you were to go into the Kindle app on iOS, you actually can't buy any books through Amazon through there. And that's because Apple and Amazon had a huge issue over splitting any of that money. And Amazon said, Forget it. So if you were to go into the Amazon app, and you look up a book, sometimes the Amazon app kicks you into Safari. And the reason is, then they can make all of the money as opposed to having to give Apple 30% of their profits or of the price.

But that's been going on for years. The three that have happened very recently, I'd say over the past year, have involved Spotify, Basecamp, and Epic, who are the creators of Fortnite. So Spotify, obviously one of the largest music streaming services on the planet, they recently filed a lawsuit against Apple alleging unfair and anti-competitive practices, because they don't allow people to subscribe to Spotify through the app. And the reason that this is obviously not a good thing is because Spotify wants to keep more of the money for themselves. And Apple insists, if you're gonna do any sort of subscription, that you have to do it through their payment process, through all of their own stuff. And obviously, Apple Music, there isn't any kind of barrier for them to do that. They just do it and get to keep 100% of the profits. So there's a few other things that Spotify alleges, but that's the big one is forcing people to subscribe, they can't go and subscribe to Spotify and pay Spotify. They have to pay Apple who then pays Spotify and Apple takes 30% of it. So that's obviously again, quite a bit of money,

Rob Bentley 4:00
Right. And while there are some workarounds that are available, such as if you ever tried to use Netflix on an Apple TV, you can only sign in there, you can't handle any payment info. If your credit card gets declined, or it's just expired or whatever, you have to go on your web browser and update it from there. You can't just conveniently be like, Oh, I'm gonna update my payment method on the app. And that's because if you were to that money would then be routed through Apple. So they do do things to make it more difficult to have a good user experience for payment stuff if you're not directly going through them and giving them 30% of the money you make.

Tim Bornholdt 4:38
And that leads into the next company pretty well too with Basecamp. If you're familiar with Basecamp, they do productivity tools, and they recently came out with their own email service called Hey, and they basically took Apple to task right before WWDC. This was in June or May of this year. And basically, they were saying it's not fair because they don't want to force people to create accounts and pay Apple the 30%. They would rather let people go to their website and create an account and go from there. But Apple and Basecamp had this huge back and forth. You can read about it on Basecamp's website, it's hey.com/apple. It was quite a big issue. And it kind of put a damper on this year's WWDC, at least for the developers. And that was kind of the sentiment going into WWDC was, you kind of said this before about a poor user experience. All of this kind of comes down to it's a poor user experience, and it's not fair for some of these companies that are trying to make money.

And there's so many weird rules. One of them you'll hear about is called the reader app rule. And you can Google it and look up what that is yourself. Basically, Apple makes these weird exceptions. And it's very much like, if you look at how the way Congress is laid out of congressional districts in our country, you might have heard of the term gerrymandering, where the lines of different districts are very specifically drawn to make it so certain parties are favored over the others. This is exactly like gerrymandering, but in the App Store rules where certain apps are given the ability to get around the rules. Like Netflix has certain exceptions, different email clients have certain exceptions, but Apple wasn't willing to give those exceptions to Basecamp. And they made a big fuss about it.

Rob Bentley 6:33
Which kind of goes into the main topic that you were talking about earlier. It's, you know, what's going on between Epic Games who makes Fortnite and Apple. And they have been pretty bold recently, with Apple telling them, We don't like what you're doing. They've even gone so far as to make statements about like, Well, you don't need 30%. You could make money with a lot less. Why are you doing this? And they even said, We plan to purposely violate your terms. And we're going to do that. And they did do it. Which led to Apple, this is what the big fight is about, they're like, Okay, well, you're going to violate our rules, we're going to take you off the App Store, and then the lawsuit started happening.

Tim Bornholdt 7:20
And even one step further, not only was Epic taken off the App Store, but they also revoked all their developer certificates. Epic created this engine called the Unreal Engine. And that's what a lot of games out there rely on, the Unreal Engine, in order to operate. And Apple basically just said, Well, you can't develop for our platforms anymore if you're going to violate our terms. And they revoked their certificate and that got everybody in the community really upset and worried because if you can't obviously build on the Unreal Engine, then a lot of games are going to be not working correctly. So there's this huge ripple effect.

And how Rob said that they were purposely violating their rules, there kind of are two rules that they're fighting against. One is the in-app payments. In any game, you can buy different coins and different packs and things like that, and Epic tried going around the payments by just offering it by themselves and saying, You don't need to use Apple's account. And the way they did it was they issued an update. And then when Apple had approved it, and it was live in the store, then they flipped a switch and turned it on, which then Apple was like, Hey, that's not cool. That didn't obviously make it through review. And so yeah, now like you said, the lawsuits started flying.

Rob Bentley 8:45
I'm not sure, I was trying to read up cause it's been a developing story, especially through the month of August. And it looks like there was a legal decision made by a judge that did have Apple give back the developer rights to Epic, which means that Unreal Engine could work again. However, they did not necessarily at that time, and I don't know if there's something happened since then, but they have not allowed Fortnite back on the App Store at that point. So they kind of got a little and lost a little on that one. And I feel like it is still ongoing.

Tim Bornholdt 9:22
Absolutely. Yeah, this is very much a situation playing out in real time. And now that we've taken 10 minutes to summarize everybody being ticked off, you know, I think it's probably fair to look at Apple's position and what do they think about all of this. Apple commissioned this really weird study. And we can link to it in the show notes, but the high level of it was, you know, 30% is fair when you compare it to other platforms like say, Android. Google also will take 30% of a cut of whatever action goes through the Play Store. They also say if you look at the gaming markets, like if you look at getting a game to play on Xbox or the PS4 or the Switch, 30% is a pretty industry standard cut in those industries. And Apple said, Well, it's it's just fine and just fair for us too. We created this App Store. Without us, none of this would exist. And we want our fair cuts. The other point that Apple makes is, The reason we take so much is because our platform is better. We have a more curated platform. We make sure that everything is secure. People trust our payments, people trust the security of our systems, and our platform is super popular. So we deserve to have a fair share of the profits and their definition of fair is to remain at that 30%.

Rob Bentley 10:44
Right. So one could argue if you really wanted to own 100% of everything, if you wanted to make a game, you could make your own hardware device for it, preload it with that software, and ship it out, and let people buy it in stores. And then obviously, you're not beholden to Apple. And they did do all that. They created it. So again, it's like who's right, who's wrong. It's not for me to decide, definitely. The judges and lawyers will figure that out. It is just an interesting debate, though. And I hope, just as a developer, that maybe what will come to this as we won't have to pay as much into Apple for products we make, but also the products we make wouldn't be possible without them. So it's hard to not see things both ways a little bit.

Tim Bornholdt 11:31
I think what it comes down to is, for the longest time, Apple had a very good moral high ground as to why they would charge 30%. Especially at the beginning, in 2009, 2010, there literally was nothing else out there. And their platform was really great. And people loved developing for it. And it grew, for very good reasons, it grew to where it grew. But their argument was, you know, if we make a great product, then people will come. And now I don't really think that they can hold to that same point anymore. There is really nowhere else to go. Right? Like you and I, Rob, if we wanted to go and build our apps for something else, we could go to Android I guess, but then we would just be cutting out 50% of the market, you know, and that's not a realistic way to build a business. And I think Apple just by holding true and crossing their arms and saying we're not gonna do anything about it. If you don't like it go somewhere else. It's not really realistic and fair to say that because there really is nowhere else to go. Apple has built such a moat around what they do. And it's to the point now where it's like, you want to call in the referees, right? And say, Hey, like, these guys aren't playing this game fair. They're holding the ball, and they're not letting anybody compete and try to even overcome it. And I think that's where, you know, we might start seeing some antitrust stuff happening if our government actually ever did anything. It would be exactly like Microsoft back in the day. You might might see Apple's business being broken up. And I personally don't want to see that.

I think Apple does best when they are forced to compete. And they're forced to compete in certain ways. But in this case, it's like, they're just kind of sitting back and being like, Oh, we built this thing, and you have to use it or else. But it's not even the best thing to use. Right? Like, Rob, would you rather incorporate in-app purchases, or Stripe? If you had the choice?

Rob Bentley 13:39
Yeah, I guess it depends on the use case. That's just the developer in me, but definitely, most cases, I would choose to use Stripe.

Tim Bornholdt 13:48
Yeah. It's because it's a more superior product. And there's certain ways that it's better, obviously. There's certain ways that using Apple's purchase stuff is better, but I just think they just don't really have a way and an excuse to innovate anymore and keep making their stuff better. And in that regard, it's kind of a really crappy situation for everybody.

Rob Bentley 14:12
Right. And again, you know, when it comes to the thought of like, everyone has an iPhone, and Epic could try to get everyone to boycott it, but someone else would be really happy to just step in and start making that money instead, even with the 30% cut. So I don't know if I see a resolution to this situation happening in favor of Epic, that's just my opinion. Maybe something, like you said, an antitrust law or something will come out of it. But even though it seems like a lot of money, and it might not seem fair, I don't necessarily know if it's wrong. They can do what they want because they did create a monster and it's working for everyone and it's very popular and it is all the things they say it is. So yeah, I just don't know how I feel about it.

Tim Bornholdt 15:00
I think you said that it's working for everyone. And I think evidenced by all these large companies saying that it's not working for them. I mean, I personally would like more money.

Rob Bentley 15:12
Yeah, I would too. I'm not gonna say I wouldn't.

Tim Bornholdt 15:16
And it's like, we're trying to look at this as if things are all fair, but between us and Apple, like, which company is the largest company in the world? Which company doesn't literally need to make another dollar because it has so much cash that it's sitting on. This is exactly what you talk about when things aren't fair and aren't even. And that's what's interesting about this is in a fair market, there may be some upstarts that could come up and make a better platform than Apple and and do that, but at this point in the game, and with how mature app development has gotten, and mobile phones have gotten, it's like, if somebody would have done it already, they would have.

Rob Bentley 15:59
Yeah, it's not that easy.

Tim Bornholdt 16:00
Right. I don't see anyone coming by and knocking Apple off its pedestal in terms of quality anytime soon. And that's bad in so many different ways. Again, not least of which Apple has always been better when they're underdogs. I don't think they've ever been that great when they've been on top, just look at the whole butterfly keyboard thing on the MacBook Pros over the last few years. When they get complacent, then it's bad for everybody. And at the end of the day, I think that's what we need to look at. The lens that I would want to look at it as is, if Apple is truly the company that excels in user experience, is forcing everybody to use their payment platform the best user experience, or is it not? And you have to argue that if Spotify and Basecamp and Epic are saying that we're not going to have our apps on your platform if you're not going to let us do our thing, then that's bad. That's a bad user experience. If I can't play Fortnite on my iPhone, or I can't check my email, or I can't listen to Spotify, like those are bad user experiences. And I think there's nothing that says Apple has to continue to grow. And like they've already won, right? They're the biggest and largest company in the world. Like, why do they need more money? What good is going to come of that? I'm not saying they don't deserve to win. And this is I guess, getting into like, capitalism versus socialism, right. But there has to be some point at which you say, All right, you won. Like enough. You know, it's overkill. And their services, bottom line doesn't have to grow double every year. I think Apple would win so much curry back with their developers and with everybody else if they were to say, Okay, we're coming out instead of 30%, we're taking 20% now. Just making some kind of concession where, yeah, they'll make less money, but it's gonna make everybody else happy. And it's gonna keep your developers happy and keep the platform growing.

Rob Bentley 18:00
Yeah, if they did that, I'm sure they'd still be fine.

Tim Bornholdt 18:04
Yeah, I mean, I wouldn't personally like to take a cut like that, like cutting my services by 30%, or 33%, but it's Apple, like, come on, we're not talking about the mom and pop shop down the road competing with Walmart. We're talking about a Walmart that's 10 times bigger than Walmart, you know, like it's not apples to apples in this comparison.

Rob Bentley 18:26
Also, though, you know, there's always the possibility they do cut that number down, then maybe more people will be incentivized to build great platforms for it that aren't afraid of that. Maybe some people hold off because it's so much money that would have to go to Apple where they might make even more money just based on volume. I mean, who's to say, but you know, it's always possible.

Tim Bornholdt 18:46
I would think that's the case. I think more companies would be willing to. I mean, I think at this point, maybe, because, early on, I think a lot of companies were like, 30%? Nah, we're gonna skip Apple. Let's not do that. But now it's to the point where there's nowhere else to go. Yeah, you can build for Android. But there's so much data out there that says Android generates like a third of the money that iOS does. So I don't know if cutting it is going to grow the revenue that much. But I see what you're saying like, maybe some other apps would come out or maybe more volume could be done. Because a lot of apps right now, if they could lower their own rates by a certain percent, you know, then maybe more people would buy apps. And, you know, that would help too, I guess.

Rob Bentley 19:32
Right, just whenever I've consulted with a client about an in-app purchase, and what that means when I tell them 30% of it's Apple's, I never get like a reaction that's like, Oh, that's great. It's always, Uh.

Tim Bornholdt 19:46
And then it's always, Is there anything you can do about it? And it's like, Yeah, I'll call up Tim Cook.

Rob Bentley 19:53
Got him on speed dial.

Tim Bornholdt 19:55
Give us a quick exception to the rule there.

Rob Bentley 19:58
Next time I'm in the boardroom, I'll bring it up.

Tim Bornholdt 20:03
But yeah, and that's exactly it is, we don't have any other recourse. There's nothing else you can do. You kind of gotta just shrug your shoulders. And leaving this off, it's like, what could change as a result of this? I think basically one of two things are going to happen, either Apple caves, in which case, the rates will go down and more of their closed off garden will open up to different things. Or they're going to just keep their arms crossed and say, We're it. We built it, you deal with it. And I think that they're going to get regulated at some point, again, if we have a functioning government, that's what should happen is a company like that should be able to be held accountable and and have to split up. So we might have like, the App Store becomes its own separate company or its own separate entity of Apple or something like that.

Rob Bentley 20:58
Yeah, I guess we'll just have to see.

Tim Bornholdt 21:02
Another part of this puzzle that we haven't talked about is, Apple doesn't allow other app stores on their device. And that was like another thing Epic was trying to do was, have kind of like Steam on the PC and on the Mac, like, you download one app, and then that downloads other apps to play as games. Apple obviously doesn't allow that. And maybe that would be something that would change is that there might be competing app stores. And I don't know if that's necessarily a good solution.

And then another thing that could happen, right now, the only way to get an app on your phone is through the App Store. Now obviously, Rob and I, there are technical ways that we know. You can get an enterprise certificate or you could jailbreak or whatever, but like, my mom isn't going to do any of those things, right? Like the only way she can get an app on her phone is through the App Store. So like is sideloading going to be a thing? And I don't even know if that's necessarily the right solution. Because the way that Apple phones are created right now, the security is such a huge thing. And I don't know if doing sideloading of apps is going to, you know, create more vulnerabilities for the phones to get exploited.

Rob Bentley 22:20
I think it just would by the nature of what it is. But that's just me.

Tim Bornholdt 22:26
Well I mean, you could sandbox it, there's ways that you can maybe keep it safe. But I think just anytime you poke a hole in your system, it's just like those people that want Apple to create a special backdoor for encryption. It's like, that's not a thing. If you open up encryption to anybody, then anybody can hack it. It's not like you can just be like, Here you go, you're the good guys. You have a key, it's like, no, if you break math, then anyone can break math.

Rob Bentley 22:53
Right.

Tim Bornholdt 22:54
Yeah, I guess wrapping this whole thing up. It's a weird situation. And I personally am glad that other companies are kind of going to bat for all of us as developers, because Apple traditionally has put, I think, itself first, obviously, users second and developers third. And in that order. And I think, you know, developers constantly get kind of the short shrift, which is fine. You know, I think a lot of times they have that model in mind because they want to create the best user experience. But, man, this whole 30% App Store stuff really doesn't feel to me like it's in the best interest of anybody but Apple. So I really hope that they make some changes soon. And I hope that they just don't get forced to do it by some antitrust committee.

Rob Bentley 23:44
Couldn't have said that better myself. Again, I'm just kind of curious to see what does actually happen with this lawsuit battle with Epic and Apple. My hunch is probably nothing will change. But if it does, hopefully, it is for the better. And, you know, iy allows more innovation and competition and you know, just good things all around. That's my hope. But, you know, again, we just have to see.

Tim Bornholdt 24:08
Yeah, I think that's just us being entrepreneurs, you kind of have to be a little optimistic at times and you hope that the system does right, you know, for everybody, but we're just kind of in a wait and see position right now.

Rob Bentley 24:22
Exactly.

Tim Bornholdt 24:23
That's it for the show today. Show notes for this episode can be found at constantvariables.com. You can get in touch with us by emailing Hello@constantvariables.co. I'm @TimBornholdt on Twitter, and the show's @CV_podcast. You can find me and Rob on LinkedIn too. It's probably the best place if you want to get in touch with us. Today's episode was produced by Jenny Karkowski and edited by the ecumenical Jordan Daoust.

If you have one quick minute before you leave, we would really love it if you left a review for us on the Apple Podcast app. It shouldn't take you much time at all and it really does help new people find our show. Just head over to Constantvariables.co/review and we'll link you right there.

This episode was brought to you by The Jed Mahonis Group. If you're looking for a technical team who can help make sense of mobile software development, give us a shout at JMG.mn.