Tim Cook gambles big on the App Store and loses (for now)
If you noticed the ground shaking, don’t bother checking USGS1: it’s not an earthquake, it’s just a court order upending Apple’s App Store model.
Court filings often provide illuminating looks into organizations that are all too often shielded from public view, and this one is no exception. Take, for example, this fascinating nugget:
Internally, Phillip Schiller had advocated that Apple comply with the Injunction, but Tim Cook ignored Schiller and instead allowed Chief Financial Officer Luca Maestri and his finance team to convince him otherwise. Cook chose poorly.
Cook choosing poorly isn’t just that he opted to side with Maestri rather than Schiller, it’s that he chose to make a risky bet. He rolled the dice on trying to hold on to as much App Store revenue as he possibly could, in the hopes that Apple would simply…get away with it. That may have worked for a while, but the bill has come due, and the end result is likely to be a significant blow to Apple’s entire App Store model.2
On a surface level, Cook’s bet would appear to be purely about the money, because isn’t it always? (CFO Luca Maestri being on the side of charging the commission certainly supports that idea.) But at the same time, it’s hard to imagine that flouting compliance like this was worth the few…billion, perhaps?…dollars that Apple has made via this mechanism over the last few years.
Which is why I think that more than purely being a matter of bottom line, it was about exerting control. Unfortunately, the end result probably means Apple will lose even more control than it will revenue.
Competition is good for the soul
Ultimately, though, I think this decision could be good for Apple—and especially good for its customers. Because getting rid of these long-time ridiculous measures forces Apple to compete—which, lest we forget, was the entire point of this court case in the first place.
Yes, some developers may continue to use Apple’s purchases system because it’s easy and integrated, but a good many of them will probably look at that 15-30 percent commission and think maybe it’s better to put in a little extra work to go outside the store.
In that case, what’s Apple going to do? It would be bad business for the company to just keep its terms the way they are, holding onto its “my way or the highway” philosophy. I have to assume that—at the very least—it will lower the commission. Because getting 5 or 10 percent is unarguably better than zero percent.
Apple could, of course, have done this long, long ago and frankly should have even before this case started. The closest they ever got was the Apple Small Business Program, which launched in 2020. While the program cut the commission for those making under the $1 million threshold, its structure always felt more beneficial to Apple. One could argue that disincentivized developers to try and make their apps popular and to generate revenue, lest they accidentally cross that threshold.
The same is true in the European Union, where Apple’s attempt at recouping its investments via structures like the Core Technology Fee make it unattractive to switch away from Apple’s existing terms and thus actually have a depressive effect on developers taking chances.
Good riddance, goodwill
All of this amounts to Apple squandering the goodwill that its products have long engendered. As longtime journalist and developer Christina Warren noted on Mastodon:
You want to know why visionOS has no devs/apps? A big reason that I’ve long argued is that Apple abused the goodwill it had with its developer community over capricious IAP/linking strategies. Apple assumed devs needed Apple more than Apple needed devs. And for the iPhone, maybe that’s true. But for new platforms, it isn’t. When you actively kick someone every time they come to hang out, don’t be surprised when they don’t come to your house anymore.
Yeah. Apps and developers enrich Apple’s ecosystem. They help enhance the platforms and devices, turning them into things that people want to use. But the company’s overriding behavior over the last fifteen years has been to try and squeeze those developers for everything they’re worth, using its platform control as a cudgel instead of treating them as partners.
Adapt or die, the old saying goes. And though Apple might not be in danger of dying if it doesn’t make these changes—as I just wrote the chances of them ever really dying are slim—it’s still not without damage. To paraphrase the immortal words of one of our greatest heroines, the more Apple tightens its grip, the more revenue will slip through its fingers.
The thing that Apple used to be so good at understanding is that the bottom line isn’t just about how the numbers add up. Apple has long been a company that prides itself on its image and its brand, and marring that, whether it be via contentious relationships with developers or seemingly bending over backwards for authoritarians, does have an effect in the long term.
- It’s probably been defunded by this point, anyway, right? Laugh/sob emoji. ↩
- Pending appeal, of course. But given that the injunction takes place immediately and an appeal will likely take time to wend its way through the courts, there is a good chance the horse will be out of the barn by the time another court gets involved. ↩
[Dan Moren is the East Coast Bureau Chief of Six Colors. You can find him on Mastodon at @dmoren@zeppelin.flights or reach him by email at dan@sixcolors.com. His latest novel, the sci-fi spy thriller The Armageddon Protocol, is out now.]
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