Prominent third-party developers have long tried to leverage public outrage to reduce their contributions to Apple’s App Store. But a world where rich developers get a free ride from Apple is also a terrible deal for the general public, as a brief review of history makes very clear.
For just over a decade now, Apple’s iOS App Store has been phenomenally successful. It not only generates billions in revenue for Apple, but also supports the work of hundreds of thousands of developers around the world, providing a real market for mobile software that simply didn’t exist before it first opened its doors in 2008.
As I regularly documented in detail back then, mobile software was fundamentally broken when iPhone first arrived. Developers had to charge unreasonable prices for their software because most users were stealing bootleg copies of their work. That not only meant that the minority of honest users — or those who were wealthy enough to not balk at paying something like $30 for a simple mobile game — were subsidizing a free ride for everyone else who was pirating cracked software.
Additionally, developers were hard-pressed to invest in many ideas that simply couldn’t survive without a fair playing field, resulting in limited offerings that were often “safe” to a fault. The App Store literally changed the world in making mobile software development viable and sustainable.
It wasn’t all invented by Apple. Danger, Blackberry, Nokia, Palm, and other early smartphone vendors originated various efforts toward building a safe, secure, and commercially functional software store, but none were able to deliver a full solution before Apple launched its own App Store featuring a carefully considered model of how to build a software market that would be fair to both developers and buyers, while also being able to sustain itself and compete with alternatives, including the wide-open web with all of its drawbacks and flaws.
As Apple worked out the details for how the App Store would work— which included strict security in iOS and iPhone hardware that would work to restrict casual piracy, counterfeit bootlegs, and malicious or cracked titles designed to cause damage or spy on users— legitimate third-party developers raised various concerns while overall celebrating the premise of a market for mobile software that would work similarly to music sales in iTunes.
If everyone paid a little, developers could profit on high volume sales of affordable apps while sharing a slice of their revenues with Apple to ensure the App Store could maintain itself. Yet a variety of developers and disgruntled users also complained that Apple was profiting on the sale of software for its platforms.
Those concerns were also amplified by the fact that Apple was also in some cases a competitor to its third-party partners, offering its own music, movie, ebook, and productivity titles as well as bundling its own first-party email, web, maps, and media playback clients and often setting rules that prevented unrestricted competition on the iOS platform.
The world doesn’t need another rehash of the complaints from developers over Apple’s App Store rules or the sometimes ostensibly arbitrary and capricious enforcement of those rules. But we do need to remember what a world without the App Store and all of Apple’s various rules would look like. It’s an ugly place.
Before the App Store
Before the iOS App Store opened, Apple had a solid three decades of experience in selling hardware and maintaining software platforms without an App Store in place. This Wild West world of third party development that owed nothing to Apple was not only bad for consumers but was also responsible for nearly killing off the Mac as a viable platform itself.
Across these first 30 years, Mac developers got to set their own prices but also had to handle their own distribution, marketing, sales transactions, and upgrades. Users were faced with paying upwards of $500 for a box of Microsoft Office apps or Adobe creative titles. Games were easily $50 or more each, and even simple utilities for backing up or copying files could easily cost $100.
Software was not only expensive to obtain, but minor upgrades often cost nearly as much as the initial full price, and moving from one generation of Mac to another — such as in the transition to PowerPC, or to Mac OS X, or to Intel Macs — often required buying an expensive new box full of manually-installed media all over again.
The idea of fixing bugs in existing software was unappealing to developers because there wasn’t any easy way to get anyone to willingly pay for this. It made more sense to focus on new features that could be marketed as a paid upgrade.
Bill Gates of Microsoft famously stated that it was foolish to fix bugs for free when “new features” could be sold at a profit. That explains why the “feature creep” of the 1990s resulted in increasingly buggy spaghetti code that offered to do all sorts of things that weren’t really very valuable, rather than delivering great, streamlined software of high quality.
Things weren’t just bad for users. Developers had to eat the costs of shipping around heavy boxes of old media to install their paid software. Most relied on third-party distributors and retailers who needed to mark up the price to cover their own costs of stocking inventory and paying salespeople to offer it. That meant that the original developers were not actually bringing in most of the revenue of that expensive software. Small developers often gave away their work through “app bundle” promotions just to establish an installed base of users.
Apart from the minority of developers who managed to luck out on a hit game, or establish themselves in a protected niche, or become the standard everyone had to buy, the software market was a very high risk business. Even developers who did well faced the threat of having their work copied by somebody else. Long before the App Store, Apple itself was criticized for launching apps or bundling features that performed the same tasks as some popular third-party software. Microsoft was notorious for not only copying the work of its third-party developers but often even stealing their code.
Microsoft and Intel conspired to steal Apple’s QuickTime code to bring the original video development work Apple had created to Windows— which was already a PC copy of Apple’s work on the Mac platform. Microsoft stole so much other software from its developers that by the early 2000s it was regularly paying out court settlements in the six figures to all of the various companies it defrauded. But stealing software was so easy— particularly for a massive platform vendor like Microsoft— that it made sense commercially to keep stealing and just pay out settlements.
On top of all these ugly realities of the broken software model that persisted up into the late 2000s, developers also had to pay out huge fees and high prices for development tools from the platform vendors. Apple and Microsoft charged their developers hundreds of dollars to provide ongoing technical support, and often required expensive paid training and other fees just to write apps for their platforms and gain access to their latest development tools. Apple once charged $50,000 just to license WebObjects.
iTunes and the App Store
The radical thing that forever changed the nature of software started with iTunes. In the early 2000’s, Apple began to realize that if most of its iPod user base were paying small, regular, but reasonable fees to legitimately buy songs, it could build out the infrastructure in iTunes to create a market that brought in sustainable revenues for music labels and the talent they represented, while also offering convenient, affordable access to music to its iPod users.
Music labels initially balked at the idea of allowing Apple to sell songs for 99 cents. This generated far less revenue that CD sales had, and transferred lots of control to Apple. But the only real alternative were the music stores being created by Microsoft and Sony, both of which created rules that mostly benefitted themselves and hurt consumers with over the top restrictions and excessive cost. The other real factor was piracy.
Buyers were increasingly less likely to buy CDs because of widespread “file sharing” of bootleg copies, which generated nothing at all for the labels or their musicians. Apple’s iTunes solved a long list of problems and effectively saved the music industry.
Once iTunes became popular, Apple worked to replicate a similar model for TV, movies, books, and other media. But the most successful expansion occurred when Apple took the iTunes model and applied it to software, starting with iPod games in 2006. Using digital signing that helped to prevent users from casually stealing apps, Apple could create a real market that served the needs of both developers and consumers.
Once again, some developers balked at the idea of sharing their revenue with Apple to support the business of the App Store. But most realized that that alternatives were much worse. Now, rather than paying huge fees for development tool access and technical support, they could join the ranks of Apple’s App Store third party developers for a minor annual fee of $99, and produce as many app titles as they liked for no additional cost. All of their distribution, sales, credit card transactions, international storefronts, app updates, and refunds were being handled by Apple for a cut far smaller than any software distribution system had ever charged before.
Hard to duplicate without the full formula
Apple’s incredibly functional App Store was copied by Microsoft’s Windows Phone and Google’s Android markets, with much less success. A big part of the reason why was that other stores lacked the security to deliver software without piracy or counterfeiting. Microsoft’s Windows Mobile platform, like the PC and Mac, tried to impose App Store rules on an existing but dysfunctional free-for-all market where developers faced giving up control and revenues without seeing similar revenues back.
Similarly, Google’s Android Market rules followed the wide-open promiscuity of Linux and open-source coding, where developers don’t often get paid for the work and users expect everything for free. All these years later, Android app stores have never caught up to Apple, largely because of a toxic mix of cheapskate users and ripped off developers who have to make do with ads or data surveillance gathering rather than legitimate sales revenues. Android remains a mess of a software market.
Even inside of Apple, the iOS App Store has not been easy to replicate. Despite opening versions for the Mac and for Safari, the same success hasn’t occurred because like the Windows and open source communities, developers have balked at accepting Apple’s restrictions and there haven’t been enough Mac buyers to support enough sales to make the Mac App Store as commercially relevant.
That could change if Apple releases new Mac hardware with more iOS-like security via custom silicon that ties future Mac software more tightly to the App Store model, perhaps even making the App Store obligatory in order to download ARM-executable apps.
And just as Apple’s iTunes store for ebooks was never able to match the success of iTunes music and movies, Apple’s App Store for Apple Watch similarly lacks the same ingredients to support itself as a viable market. Apps for Watch tend to be extensions of the iPhone experience, and are less likely to sell on their own. That makes the market important, but unable to sustain itself as an independent market for “wearable software.”
There are also tons of free apps, which either are supported by ads or exist as marketing for brands. For example, most banks offer App Store titles that charge nothing and therefore contribute nothing back to the App Store. All of these free apps, along with extension content such as Watch apps, have to be supported by the minority of apps that do generate revenues.
That creates a certain unfairness where some apps benefit greatly from the work that supports Apple’s platform and the App Store, but contribute very little or nothing back— including Facebook and its apps including Instagram, which have consistently remained top App Store titles for many years despite never contributing a cut back.
Other apps that rely on In-App purchases or subscriptions might feel that they are paying in too much, in some cases losing money on sales with minor margins because of the slice Apple charges them. Spotify and Netflix both have to pay out licensing fees for the content they provide to subscribers. If Apple takes 30% of their subscription fees, they’re left with very little, while also competing directly with Apple’s own subscription services which get “free” access to the App Store (it’s not really free of course).
For these reasons, Apple has reevaluated its App Store policies at regular intervals to keep its market as fair as possible. For example, it recently slashed its cut in half for subscriptions after the first year, under the assumption that the developer deserves a larger cut of its revenues for having maintained that customer relationship. But Apple has also defended its policies established to keep the App Store functional, including the rules that insist that revenue-generating apps must generally offer In App access to allow customers to pay for subscriptions through Apple in addition to the option of directly establishing a relationship with the vendor and not paying Apple anything.
Establishing fair rules that never result in unintended consequences for users or developers is difficult work, but nobody else has established a mobile store that’s as commercially successful as Apple’s. That’s why BaseCamp complained that it can’t exist without Apple’s App Store, even as it complains that it shouldn’t have to share any revenues with the platform that’s essential to its success. But that’s a legitimate cost of doing business, and most of Apple’s developers enthusiastically agree.
The virtue-signaling flack hacks seeking to dump on WWDC
Despite lots of noise, there really isn’t so much legitimate controversy over Apple’s App Store policies. Some companies expect a free ride, benefitting massively from the work Apple has established in building exceptional hardware and a functional software ecosystem that has never existed before — while refusing to contribute anything back.
This is as disingenuous as claiming that any retailer should be free to set up a kiosk in a popular mall and benefit from its foot traffic, climate control, electricity, and proximity to clean public bathrooms and easy parking while refusing to pay the mall any rent. That’s just ridiculous.
Government regulators in the EU and US and elsewhere are also salivating at the idea of breaking up Apple’s operations and taxing them with additional fees beyond existing sales and income taxes. One argument common to these cases is that Apple shouldn’t be able to sell its own first-party software in competition with its third-party developers. Yet this is also problematic. Virtually every retailer — from Amazon to Bloomingdales to the grocery store — sells their own house brands while benefitting from sales analytics on what draws customers to the other third party brands they sell. This isn’t illegal.
Further, there is also a flip side: third parties can also compete with Apple’s offerings, often selling premium alternatives to niche audiences Apple isn’t interested in offering a specialized product for. This is the nature of competition, and customers win when they — not the government — get to chose which market participants wins by voting with their own dollars.
Along the same lines, Apple built its iOS, iPad, Mac, Watch, and other platforms, and should have the right to set policies that demand, for example, that third parties can’t set up their own ‘app stores-within an app,’ or deploy their own web browser engines on its platform, or access its private APIs, or use its Enterprise Certificates to undermine its distribution rules, or any other issues designed to protect Apple’s own security and control over its own platforms. Apple is certainly not the only mobile platform, and in fact has vibrant competition from alternatives that are more broadly deployed. It is not a monopoly.
Columnists who are painting the App Store out to be a terrible thing that Apple should feel ashamed and greedy about, or portraying it as a “rent-seeking” effort by a platform that offers nothing of value, or promoting the idea that it is a “monopoly” or “highway robbery” are all also the same people who have been wrong about virtually every issue in the mobile space. If the rules were written by them, Apple’s App Store would be just as much of a dumpster fire as Android’s, or just as vacant a lot of tumbleweeds as Microsoft’s or Samsung’s.
We don’t really need long-winded diatribes replete with footnotes or dramatic language about how “arrogantly imperial” Apple is for having and enforcing App Store rules of any kind. The failed ideology behind communal development out in the open by big tweeting developers with massive egos has been settled: Android lost, and it’s resulted in something of such little value that the corona-pandemic quickly convinced Google that it’s not even worth throwing a developer conference this year.
These public figures know this, and that’s why they dribble out such contempt for the platform that won, along with their regular spoilers designed to inflict the most damage possible on the platform and the vendor that have achieved the most success and rewarded developers and benefited user far beyond anyone else. They are no heroes.
We’re anticipating WWDC20 despite the pandemic because Apple is by far the most competent, fair platform vendor in computing, even if the controversy stokers are falling over themselves to ratchet up a stink while simultaneously wondering aloud to their audiences why Apple is “generating controversy” right before WWDC. That’s false, it’s the peanut gallery that’s working to create this, all for their own benefit in virtue signaling how unbiased they are and how daring they are to be punching up.
They’re free to do that, but the flip side is that reasonable, intelligent people are losing a lot of respect for them over this unhinged absurdity.
Apple has plenty left to do
Having said that, there are also reasonable concerns and ongoing issues that Apple, its developers, and its customers can continue to seek better solutions for than those that currently exist. Even after 11 years of running the App Store, the company still has employees making mistakes in allowing apps or holding back titles for reasons that may not make sense.
There are also ongoing issues with policies related to relatively recent features such as App Store search ads. Developer Will Shipley detailed a variety of issues with the current status quo of the App Store that appear very worthy of serious consideration by Apple. Should search ads really be able to stick knockoff apps ahead of the legitimate title that a user is obviously searching for?
Shouldn’t developers be able to issue major updates that involve an update fee? Shouldn’t there be better curation of valuable apps rather than putting “shovelware” on the same level? And while Shipley doesn’t ask for a free ride, he does ask for a reduction in the cut Apple is asking. That’s a reasonable request.
Apple does need to sustain its revenues to meet the continuous demands for growth from the capitalist patriarchy it exists in. But as a fantastically prosperous enterprise, surely Apple can exercise some discretion in working to subsidize more of the best work of its highest value developers, something that would dramatically benefit not only its smaller developers, but also its vast installed base of users, and of course, benefit its own platforms.
Apple is already experimenting with various ideas to enhance the App Store and how it works, with the intent of improving the quality of the content it can offer. One example is Apple Arcade, which— albeit without much transparency— appears to be helping a wide swath of large and smaller developers to produce a broad variety of creative, sustainable titles that are free from the shovelware, In-App gambling addiction, and loot box issues that have been plaguing mobile gaming. It’s also beginning to share some of the success of the iOS App Store across the Mac and Apple TV, although there’s plenty of room for additional improvement there.
The App Store will never be perfect in a way that nobody can complain about. But today’s App Store reality is the best software market we’ve ever had, so let’s not wish it away too flippantly— because the alternatives were horrific.