Congress, keep your mitts off the App Store. It’s fine. [Opinion]

Congress, keep your mitts off the App Store. It’s fine. [Opinion]

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Apple exec Phil Schiller calls the App Store a good deal for devs. That's just one of the reasons Apple deserves a fair commission for powering the App Store.
Apple exec Phil Schiller calls the App Store a good deal for devs. That's just one of the reasons Apple deserves a fair commission for powering the App Store.
Photo: Globovisión/Flickr CC

When Apple CEO Tim Cook takes questions from Congress on Wednesday, he’ll surely get an earful of software developers’ complaints about how the App Store operates. Chief among the criticisms will likely be the fact that Apple charges a percentage of revenue earned from in-app sales.

There’s not a bit of justification for any of these highly publicized complaints. They come from companies that want to have their cake and eat it, too.

The App Store does business like a grocery store

Apple requires companies that make money through the App Store to share some of their revenue. It takes a 30% commission for apps and in-app purchases. For subscription services, Apple charges 30% for the first year, and 15% afterward.

The streaming-music service Spotify went crying about this to European regulators, claiming that it’s unfair for Cupertino to take a chunk of its revenue when it offers a competing service, Apple Music.

Before you agree with Spotify, take a trip to your local grocery store. Suppose it’s a Kroger. You’ll find store brands — products made by Kroger — on the shelves next to products made by outside companies, like Procter & Gamble. I hope you’re not surprised that if you buy a Procter & Gamble product, Kroger takes a share of the revenue.

That’s exactly what Apple does with the App Store.

To be fair, it’s not just Spotify who’s complaining. The CEO of Epic Games (maker of Fortnite) whined about the App Store just last week. And the developers of premium email app Hey engaged in a very public spat with Apple in June, accusing Cupertino of acting like “gangsters.” But none of these companies’ criticisms hold up.

To demonstrate why, let’s continue with the grocery store analogy. Kroger built its store into a successful business. But suppose the companies who make the products sold in that store wanted to keep using it, without sharing any of the revenue with Kroger. That would be completely unfair. Kroger is paying upkeep on the store, but these other companies don’t want to contribute.

But that’s just what Epic Games, Spotify and the rest of the complainers want to happen with the App Store.

Selfish developers want to use the iPhone ecosystem without paying their share

Of course, the analogy isn’t perfect, because it underplays Apple’s role. It didn’t just build a grocery store — it built the entire town.

Phil Schiller, Apple’s senior VP of worldwide marketing, told Reuters this week that Apple sought to give indie devs the virtual equivalent of precious shelf space alongside big tech companies when it launched the App Store.

“One of the things we came up with is, we’re going to treat all apps in the App Store the same — one set of rules for everybody, no special deals, no special terms, no special code, everything applies to all developers the same,” Schiller said. “That was not the case in PC software. Nobody thought like that. It was a complete flip around of how the whole system was going to work.”

The ultimate result? Innovative disruption of how software gets sold. In effect, there would be nowhere for Spotify and the rest to sell their products if the iPhone and the App Store never existed.

The major reason these software developers have a business is because Apple makes iPhones that people carry with them everywhere. Without them, there’d be no Spotify. Fortnite would be a PC-only game.

Phil Schiller, Apple’s senior VP of worldwide marketing, told Reuters this week that what Apple tried to build was a level playing field when it launched the App Store.

“One of the things we came up with is, we’re going to treat all apps in the App Store the same — one set of rules for everybody, no special deals, no special terms, no special code, everything applies to all developers the same,” Schiller said. “That was not the case in PC software. Nobody thought like that. It was a complete flip around of how the whole system was going to work.”

The ultimate result? Innovative disruption of how software gets sold. In effect, there would be nowhere for Spotify and the rest to sell their products if the iPhone and the App Store never existed.

Of course, Fortnite and Spotify’s music service run on Google’s Android devices, too. But Epic Games and Spotify also object to sharing any revenue with Google. They refuse to acknowledge the role of any company but themselves in their successes. And they’re wrong.

These companies love to play on the idea that a 30% share of revenue is an egregious price to pay to be on the App Store. However, a recent study found  that Apple’s percentage falls in line with other software stores (.pdf). And Procter & Gamble wouldn’t blink to hear that Kroger charges 30% extra for one of its products.

Consumers benefit hugely from the App Store

Suppose the House Judiciary antitrust subcommittee — where Apple CEO Cook will answer questions Wednesday (as will the leaders of Facebook, Amazon and Google) — mistakenly thinks there is some justification for these developers’ complaints. Regulations that forced Apple to change the way the App Store worked would benefit a few big-name software companies, but they would hurt hundreds of millions of Apple users.

True, Apple rules the App Store with an iron fist. While it sometimes acts in opaque and arbitrary ways, firmness is absolutely necessary in a world full of unethical developers who’d happily flood the App Store with crapware designed to steal user information. No one wants that.

No matter what lawmakers and regulators hear during Wednesday’s testimony, it’s clearly better for everyone that iPhone software only come through the App Store. People know they can trust their apps because Apple checked them before release.

Letting companies avoid this process would release a wave of malware on iPhone users everywhere. In a world where everyone’s phones are networked together, introducing another way for criminals to spread nefarious software is a horrible idea.

Cupertino deserves its fair share

Cupertino deserves a cut of the action for the hard work it does policing the App Store. (And don’t forget about the enormous cost of operating and maintaining the servers that power this $519-billion-a-year economic engine, to say nothing of building the software tools developers use to create apps for iOS and macOS.)

It’s also understandable that software developers want customers to pay them directly, rather than sending payments through Apple. And admittedly the company does make exceptions for certain services, like Amazon Prime Video, that bring customers to Apple’s ecosystem.

However, Cupertino’s general policy on payments means customers can feel safe shelling out for software and services within the Apple ecosystem. We know some shady firm won’t steal our credit card info. Even the best-intentioned companies get hacked, and I trust Apple’s network security far more than I do some random developer’s.

Maybe Apple’s 30% cut seems steep for digital products. But, as Ben Bajarin, head of consumer technologies at Creative Strategies, points out, the App Store seemed like a bargain to developers when it launched in 2008. At that time, developers typically surrendered 50% of the retail prices on software sold through physical stores. And small devs couldn’t even gain a toehold.

Perhaps Apple should shave a few percentage points off its take from App Store revenues to keep everyone (including Congress) happy. But third-party developers absolutely should pay a share of their revenue to support the iPhone ecosystem. Everyone benefits from it, including the companies that are whining. They just don’t want to admit it.