I think the most important issue from these email isn't the lack of Alternative App Store, IAP, or 70/30 split. It is that Apple Execs has Zero understanding of how other business works especially with respect to Internet or Software Services. They continue to think Netflix as a physical product ( As they often like to compare Physical Software distribution before App Store ) that is being continuously sold with recurring revenue like staples or other commodities.
Not to mention Netflix knew Apple were doing AppleTV+. Directly competing with them. I love how Apple complains about testing IAP as not OK as in we deserve our 15%.
So Reed made the decision to stop IAP. And reading all the emails from Apple execs, Eddy Cue often seems to be the culprit.
Steve From D5
>You know, because Woz and I started the company based on doing the whole banana, we weren’t so good at partnering with people. And, you know, acatually, the funny thing is, Microsoft’s one of the few companies we were able to partner with that actually worked for both companies. And we weren’t so good at that, where Bill and Microsoft were really good at it because they didn’t make the whole thing in the early days and they learned how to partner with people really well.
And I think if Apple could have had a little more of that in its DNA, it would have served it extremely well. And I don’t think Apple learned that until, you know, a few decades later.
AWS is streaming video, operating hundreds of edge location CDN locations, and everything else running on expensive server infrastructure. AWS has real serious costs with offering that service, to the point that Netflix has yet to determine that it is better to build it themselves.
Apple by comparison demands 15% which is 3.5x as much of a cut. Apple provides credit card processing, and approval into the App Store (plus according to a comment in this email, it sounds like they keep Netflix in the App Store promotion rotation as "free" ad-space). This isn't anywhere near the value that AWS provides, despite demanding a much higher premium. Of course this is the "generous" 15% IAP cut, instead of the normal 30% which is even more atrocious.
Apple seems to maintain the expectation that they deserve 30% of revenue from massive corporations like Netflix, Amazon, etc.. Even the "generous" 15% fee is quite atrocious, especially considering the fact that Apple provides next to no value for Netflix, if anything they are a pain in their side or a necessary evil for Netflix.
Apple is wildly delusional on the value that they provide. It is absolutely no surprise to me that Netflix would consider not allowing IAP subscriptions at all. They already have the marketing power to force people to subscribe at their website. I am surprised Netflix is honestly being as understanding on this issue as they seem to be.
That's exactly what Apple believes.
From Tim Cook's testimony in Epic v. Apple, from Ars Technica:
> The in-app-purchasing (IAP) system itself, Cook said, is simply the most efficient way of collecting a 15 to 30 percent commission on each in-app sale. "If not for IAP, we’d have to come up with another system to invoice developers. It would be a mess."
This view is explicitly affirmed in the Epic v. Apple verdict[1]:
> Under all models, Apple would be entitled to a commission or licensing fee, even if IAP was optional.
The court found the 30% rate arbitrary but not objectionable[2]:
> Indeed, while the Court finds no basis for the specific rate chosen by Apple (i.e., the 30% rate) based on the record, the Court still concludes that Apple is entitled to some compensation for use of its intellectual property.
Personally, I don't approve of Apple feeling entitled to a cut of commerce that doesn't hit their app store, but the court's take (before appeals) is that it's perfectly legal.
[0]: https://arstechnica.com/gaming/2021/05/ceo-tim-cook-faces-po...
[1]: Page 67, https://s3.documentcloud.org/documents/21060631/apple-epic-j...
[2]: Page 150
Somewhat off the core topic, but netflix run their own CDN (I also don't see any evidence for that 1.2 billion AWS bill figure, can you provide a link? Their latest SEC filing doesn't separate cloud service costs from the running of their Open Connect CDN)
It's access to an extremely valuable demographics. Everyone ships on the App Store first because that's where paying customers and high value users are.
All that AWS infrastructure to stream media is worthless without consumers at the other end of the wire.
Apple by comparison demands 15% which is
3.5x as much of a cut. Apple provides
credit card processing, and approval into
the App Store (plus according to a comment
in this email, it sounds like they keep
Netflix in the App Store promotion rotation
as "free" ad-space). This isn't anywhere
near the value that AWS provides
Apple provides them access to, literally, nearly a billion potential customers who, on average, spend twice as much on app store purchases relative to Android users. [1]
Apple spends billions of dollars to do this, by creating (by many measures) best-in-class hardware devices, including designing their own bespoke in-house CPUs that trounce the majority of their consumer level competition.
It's not directly comparable to what AWS does, so I'm not sure we could possibly quantify how valuable it is to Netflix vis-a-vis AWS. However: it sure isn't nothing, and may well be 3.5x the value that AWS provides.
[1] https://timesofindia.indiatimes.com/gadgets-news/iphone-user...
I'm not saying 15% isn't a high fee, but your argument that Apple provide little to no value is simply false.
Wheras, there is no such thing as the other App Store?
IIRC, Apple customers spend more and don't quote me on this, but are more influential in the spending of others. If that's true, then I think this comment under-represents the utility of operating in the App Store.
It doesn't necessarily mean that it should command the 15% tax, but it isn't "no value" either.
But the one thing that Apple did right (for me and I guess most iOS users) is that they kept control over the UI & UX. This was my main driver into getting an iPhone. The fact that I interact with Apple and not just every developer in the world. I want to keep that interaction. What I don't want is for most apps to force me to enter my personal info (email) and card details store them somewhere "securely". I want to have a single vendor I trust (arguable this might not be Apple atm). But for me and for most ppl I know that single place is the thing that is the driving factor to keep in the eco system.
What I don't understand is why developers feel entitled (maybe the wrong word) to harming my UX by requesting external payment methods. Again, the investment for this "great" eco system comes from both sides and Apple do deserve a % of that. Maybe 15/30% is not fair but this is the free market. You can always decide not to develop for iOS - nobody is forcing you. Except your customers who I feel in this case developers/companies ignore as per the given theory above.
Apple basically has an iron-fisted grip on _worldwide_ audience of people with money to spend. Google, for example, does not, and their App store is a raging dumpster fire in comparison. I'm not saying that their "cut" shouldn't irritate people, it should - that's just market forces at play, but one must also recognize that for Netflix to not be in the App Store would be pretty catastrophi revenue-wise, much for the same reason why it'd be catastrophic for Google to not be the default search engine in iOS.
I haven't studied it, so I'm speaking out of turn, but I'm thinking that it's cheap for smaller players and expensive for larger ones, and not as a smooth function. NFLX is well past the knee in the curve I guess.
If you buy that, then it's unfair to say Apple is delusional about their value add. On average it's probably fair within reason.
> Apple is wildly delusional on the value that they provide.
For non-Netflix-like services, strongly disagree. A service with no customers means 0 costs required to pay AWS. Say what you want, but sales & distribution is one of the most important, if not THE most important factor of a business.
> They already have the marketing power to force people to subscribe at their website.
Yes, Netflix specifically does, but other developers who leverage Apple's ecosystem? Not so much.
What's interesting here is that other traditional distributor and retailers of goods and services often have negotiated rates. Apple does no such thing - it's rate is fixed (on paper), meaning Apple thinks is distribution is equal in value for all developers - I think this is where the criticism should be.
But needless to say that is a very different XP in comparison to all the millions of engineers who don't get that chance and the dev forums are useless most of the time.
Anyways just wanted to share that as an XP as I've never heard of anyone else ever been on one of these from my tech friends.
However, I suspect Apple developer relations has largely turned into a broadcast/funnel system since 1:1 support doesn't scale well to millions of developers.
Framing the relationship this way gives Apple more power and control, so that's what they're doing, no surprise. They're too smart to be merely misunderstanding such things.
Like the expansion slots in the [Apple II, Apple ///, Mac II, IIgs, Power Mac, Mac Pro, etc.] or the [SCSI, ADB, USB, FireWire, PC/Express/SD card, Thunderbolt, etc.] expansion ports on various Apple computers?
At this point, an organization like Apple is too cemented to easily change. I think you can't learn _everything_ on the job, because some things you'll learn too late. Now, it's more than "a few decades later," and have they really learned how to partner?
As shown in Qualcomm, IMG case. Tim Cook's Apple just aren't very good at partnering.
Enabling companies to categorize themselves as 'platforms' or otherwise and then stipulating both benefits and requirements based on those labels makes a lot of sense comparatively. The general problem though is that the government isn't typically using regulations to improve freedom and competition. The government looks at regulation as a way to extract money, so solutions that encourage competition on a level playing field through market forces (like OP's) aren't given fair consideration.
Nothing Apple does is a natural monopoly.
Artificial monopolies can be maintained through vertical integration. If you don't like their app store, use another one. If all they provide is the app store, that's easy, and every platform would have half a dozen or more.
But if using a different app store requires you to develop your own operating system, and convince millions of third party developers to make applications for it even before it has any users, and make your own hardware, on and on, well then it's infeasible to make a competing app store and you get an uncompetitive and abusive market.
The solution there isn't to regulate it like a utility, it's to break up the company so that the operating system isn't made by the same company as the app store and has no reason to restrict the users to only the one. Then you have competition again and don't need any regulation other than the constraint on vertical integration.
In my local municipality I have no way to choose renewable energy apart from building my own power plant on my roof. That’s a complete failure of these government granted monopolies.
> The Myth of Natural Monopoly
> Most so-called public utilities have been granted governmental franchise monopolies because they are thought to be "natural monopolies." Put simply, a natural monopoly is said to occur when production technology, such as relatively high fixed costs, causes long-run average total costs to decline as output expands. In such industries, the theory goes, a single producer will eventually be able to produce at a lower cost than any two other producers, thereby creating a "natural" monopoly. Higher prices will result if more than one producer supplies the market.
> Furthermore, competition is said to cause consumer inconvenience because of the construction of duplicative facilities, e.g., digging up the streets to put in dual gas or water lines. Avoiding such inconveniences is another reason offered for government franchise monopolies for industries with declining long-run average total costs.
>It is a myth that natural monopoly theory was developed first by economists, and then used by legislators to "justify" franchise monopolies. The truth is that the monopolies were created decades before the theory was formalized by intervention-minded economists, who then used the theory as an ex post rationale for government intervention. At the time when the first government franchise monopolies were being granted, the large majority of economists understood that large-scale, capital intensive production did not lead to monopoly, but was an absolutely desirable aspect of the competitive process.
Tariffs don't solve these problems either. OP's suggestion is pretty decent idea relative to playing wack a mole with price fixing while trying to make sure your country's corps can compete on the global market.
Why should I not get the best wages, negotiated employment agreement, interest rates, lease terms, and deal with the IRS on taxes that I really don't want to pay as my most successful peer?
Banks bend over backwards for their VIP customers, why shouldn't they do the same for me?
My neighbours didn't get a rent increase this month because my landlord likes them, why should I have to negotiate for getting the same thing?
Bill on my team got a 30% bonus this year, I also want a 30% bonus... And would love to see this sort of thing codified in law.
There does start to be a problem however if he's the only mechanic in town or if he charges more or less based on race or some other protected class.
I think it's a very hard in general to find the balance on problems like this one, and I don't expect you can come up with a one size fits all rule.
So Apple might have $100B stuck in Ireland, unable to bring it to the US, but it doesn't matter, that money still counts for their shareholders.
And it's the same thing here. If you try to tax $10B they'll just have 100 companies all making $9.9B/yr, in a variety of different countries, completely separate from each other, and you're back where you started.
And while this would be extremely complicated/expensive for them to manage, it'd be profitable because the alternative is to get a 100% tax on those profits.
Taxes aren't easy. And calling a company that sells phones a "society-destroying problem" is a bit hyperbolic, don't you think?
edit: Or lets pick a real example and see how that works out. ArcelorMittal is a major steel provider. They sold $53B last year. They had a tough year though, so their final net loss was actually about half a billion.
Under your proposal, they would have lost 43 billion dollars. Uh oh, you just collapsed the steel industry.
There are a lot of jobs created between the $10B and $1T levels. And as citizens of Apple's home nation, it greatly benefits us that those high-quality jobs are available.
A 100% tax (or even 80%) tax would discourage a lot of products from existing. Apple would probably move down to simply offering just phones and apps only and removing everything else. I know that sounds good in theory, but there are indirect benefits for these other services that they offer, in addition to jobs. It also bolster's California's economy all the way down to bodegas, bars, restaurants, and hobby shops.
So an alternative tax like 60% on revenues above $50B that can not be deducted against might be a more reasonable alternative.
For example, if a company wanted to keep growing, it would have to split organically into separate corporate entities. What would stop them establishing "favored" relationships with each other? Say for example Facebook splits out "Zuckerburg data centers inc" - what's to stop them pricing themselves above market to avoid taking on other customers, and then giving FB a hefty discount? You could mandate that there be no board overlap, but shareholders would probably receive a split.
>Cook: “We treat every developer the same. We have open rules. It’s a rigorous process. Because we care about privacy and quality, we do look at every app before it goes on. We apply these rules equally to everyone.”
> “We treat every developer the same. We have open and transparent rules,” Cook said, in his testimony. “It’s a rigorous process, because we care so deeply about privacy and security and quality. We do look at every app before it goes on,” he added.
Slightly different quote, added some context and here is a source too: https://techcrunch.com/2020/07/29/apples-app-store-commissio...
In my personal belief, Cook would've won more by admitting they may have some exceptions, but actively try to get rid of those. It's arguable of course, but it the email he justifies it by end-user interests and he probably means it. That's just real-world realities - that exceptions happen even with the principled people, just because things are never white-and-black.
Instead, he told a lie how they're holier than the Pope. Even if he believes in that and genuinely wants things to be that way, he surely knew it's not the reality.
And I just wonder why. I don't have any knowledge how things work at those levels, but my very naive risk analysis is that if there's any serious investigation there are significant chances such lie would be uncovered, and legal and PR consequences of that would be harsher than admittance, especially with justifications.
Perhaps I’m just cynical but I can’t help but think all of the Apple execs have had “best for the consumer” drilled into them for the purposes of the antitrust issues that are inevitably coming. If I were a shrewd Apple exec trying to posture against antitrust litigation and/or regulation I’d be sprinkling “best for the consumer” at every possible opportunity. Memos. Emails. Slide decks. Fucking everywhere. There’s no down side to mentioning it and a ton of upside if the document ever becomes public.
Not that I think that anything would happen if it were in the IAP context.
Your question made me think of that quote. There are technical answers to you question (that lying under oath is a crime), but the realist answer is, that unless Congress/executive has the will to enforce consequences, very little.
After all, Congress critters constantly lie or spout nonsense, why should we ask more of those before them?
In principle, it's a crime. But, nobody will do anything about it, especially when it comes to a powerful white man.
There's no technical reason software needs to be distributed this way. It's only greed.
I hope this mounting evidence leads to a single verdict from the DOJ: "no more app stores" for common computing devices.
(Please don't rehash the video game console argument.)
https://www.theverge.com/2021/2/8/22272849/apple-app-store-s...
I think there's "merit" to it, in that the logic holds: if we restrict the apps in an app store to be selected by a trusted entity then we can more likely trust the app. This computes, I think it's reasonable enough logic, but we could extend this further to something farcical too: I could make my phone "unhackable" and "more secure" by throwing it into a wood chipper. It would be impossible to hack, there's virtually no chance of my personal details leaking because of it, but of course I lose access to features of the phone (or in this case the entire phone itself). A corporation (or any large entity) will always be able to justify a restriction as a means of "increased security". Security vulnerabilities will almost always come from being able to actually use a computer as a computer.
This wouldn't inherently be a problem if it weren't for the fact that there are plenty of things things that are perfectly legal, but Apple won't approve, presumably out of fears of legal headaches, like video game console emulators.
My "solution" to approximate something decent would be to do something more or less akin to what macOS does. By default, don't allow any sideloading and only allow things to be installed via the App Store. If one would like to install something outside of the app store, they must (on a per-app basis) go into the security settings and allow things. This would still give preferential treatment to the App Store, but would allow people who know what they're doing to go around this.
NOTE: I'm aware of the self-signing AltStore thing, and it's definitely a step in the right direction, if still a bigger pain in the ass than it should be.
However, when you force companies to only signup and accept payment through your payment gateway instead of giving customers the option, and then unequally applying rules and colluding with other companies you start to get in trouble in regards to monopolistic practices.
Trust and security don't mean much when apps have unfettered internet access. You cannot find who the app is contacting, how often and what is sent. You also have no ability to filter or block the contact. *
* there are minor hacks.
Also, that has absolutely nothing to do with banning third party payment processors for IAPs. That is just criminal, or well, it should be.
App review is meant to enforce Apple's payment rules as much as anything. They don't and can't catch everything.
Strong sandboxing, granular permissions, and remote kill switch (that can be disabled) can do effectively the same job. It just won't earn Apple gobs of racketeering money.
Why not?
> “Since TV App is not going to happen right now, there’s nothing else to get from Netflix at this time”
The TV App is actually pretty great — one of the few parts of the Apple ecosystem where the garden walls are very low.
I can search for a TV show or film, and even when the iTunes Store has it available, TV still suggests I watch it for free (effectively) on Amazon Prime, or any other streaming services I have set up.
It’s a little surprising Apple seem happy to forego the revenue themselves — but great for users like me.
For whatever reason, Netflix is the only major streaming provider who don’t integrate with the TV App — which is a shame.
For example, say Netflix allowed access and their customers got used to going to the TV app instead of the Netflix app, then Apple over time decides to feature Netflix content less and less over their own offerings or deprioritizing Netflix content in search results. They could slowly bleed Netflix's customers away. They'd also have detailed data on what Netflix content users watched.
In general, I'm with Netflix on this one considering how many businesses Apple has screwed over throughout the years when they choose to compete directly.
At least from my perspective, Netflix really dropped the ball on this decision.
Sure, right now they'll lose a few people like you who cbf switching apps to see what's on Netflix - but they're banking that there's a lot more who will resign themselves to switching apps for the show they want, because they're used to finding their Netflix shows in the Netflix app anyway.
Whereas if they join TV App, they'll be training their users to find their content in TV App - which gives Apple a lot of leverage. Now a threat to kick them out of TV App has teeth - because there will be a lot more users like you, who've grown accustomed to finding their Netflix shows in TV App, and won't know to go switching apps to find it.
They don't want to hand Apple a club to beat them with.
I am now using Plex/Sonarr/Radarr and it works flawlessly, a much better ecosystem with open APIs and tons of integrations with tvdb/discord/trakt/opensubtitles etc. Netflix had a good thing going on for a while but they managed to screw it up.
Similar to why Amazon doesn't like it when you Google for products and end up at Amazon, they would rather you just visit amazon.com and search from there so they can show you ads.
Netflix, refusing to share their user data with Apple: "Terrible. Anti-consumer. Last straw."
The thing that's lead me back to piracy is not Netflix itself, but the proliferation of streaming providers, with their exclusives. Let me pay for the show I want, easily, and I'll pay for it. Make me jump through hoops and subscribe to services I don't want, well, it's just as easy to torrent it. Netflix didn't screw this up; it was every studio wanting to lock viewers into their own service.
Even if the app store was run differently, say allowing a competing way of installing apps, Apple still have plenty of fungible power to make such deals. You might have ticked a box to make it technically fair, for some definition of, but that would probably be just cosmetic. IE, app store would still represent most revenue and everyone is in the same position but a few geeks.
The "platform game" establishes market power, where buyers and sellers need to go through you. They have no negotiating power, and you can price to make deals that take all the "surplus utility" off the table, in classic economic terms.
So... reality isn't perfect and some players are big enough to negotiate. Netflix is that player here. They negotiate when they have to, but try to keep it quite.
When the market is this structured, this is how it works.
So we have to get a law against a "monopoly that arises after you've bought a product".
You could submit paid products to default Cydia repositories, where you personally handled payments. There was no commission in such scenarios. If you opted for payments to be handled by SaurikIT, a 30% fee was in place.
Cydia had special deals in place for Intelliborn products, I dont think this extended to other groups. Intelliborn previously operated Rock Your iPhone, which was acquired by Cydia and this was a negotiated term.
https://news.ycombinator.com/item?id=27615663 <- some commentary I wrote about Apple's negotiating position with respect to the 15% discounts for anti-bulk sales (which is weirdly backwards) where I touch on special deals (and tie in how Intelliborn's special deal was in some sense due to store competition).
I use AppleTV for all my viewing (which isn’t really that much), and one thing that really annoys me, is the crap quality of the apps; even marqée-brand apps.
I’m constantly having to reboot the unit to get out of “lockups.”
Wouldn’t be surprised if a big reason that Netflix and Apple don’t play well with each other, is that they can’t code it (as opposed to nefarious motives -Hanlon’s Razor).
And, BTW, you might not need to reboot to escape a lockup. I don't have an ATV on and accessible, but I'm pretty sure you double-tap the TV/Home button that brings up an Alt-Tab-like view of your running apps. Swipe or arrow left or right to the problem app, swipe up to kill it. It's what I do with the Netflix app way too often, like when I used the search functionality. :-)
I have seen some results give an “Open In” choice for Netflix, but selecting that simply opens the Netflix app at the “Home” screen. It’s also quite rare. I think I have only encountered ite once or twice.
Most results for movies and shows that are only available in Netflix, come up as “Rent or Buy.”
Shows and movies exclusive to Netflix don’t show up in AppleTV searches.
I also prefer the AppleTV “Details” screen, but even there, when reviewing a certain actor, the displayed “filmography” is really strange; often missing some major roles.
Sometimes, headline actors are missing from a show’s cast, in “Details.”
It seems like legal issues, but it is so random, that I suspect technical reasons.
Yeah, apps hang all the time. They don't crash, per se, but you can't break out of the screen they are presenting.
Am I reading that right? Would this churn discrepancy apply to other services besides Netflix (like developer tools, access to smaller content libraries, etc)? Finally, what did Apple do to address their “voluntary churn” problem?
As is the case for virtually every dark pattern subscription (most of them) when not through Apple.
This isn't a problem, it's a benefit -- from customer point of view.
Apple makes a customer-friendly rather than seller friendly subscription UI, the reason I won't subscribe to things any more except through Apple.
It's genuinely surprising to me the proportion of customer hostile rhetoric on this topic.
Also very easy to change your plan level up or down.
I just bought an iPad app the other day (my first), it didn't meet my needs, but I still can't figure out where to go to refund it. And Apple's subscriptions expire immediately if you cancel during a free trial, whereas the Google ones will still let you finish the term of your trial.
Apple's not really the good guy either. They're just the powerful ones.
https://developer.apple.com/app-store/review/guidelines/#rea...
https://www.slideshare.net/danctheduck/gdc-2011-game-of-plat...
"First you sign long-term contracts with certain influential developers"
Why should it be a surprise that a partner in a stronger negotiating position negotiates a better deal than is offered at the door?
https://www.theverge.com/2021/9/16/22676706/apple-watch-swip...
The power dynamics is different with content providers for Apple. Apple TV needs content from the Big 4/5 Studios and that is a lot of leverage they have to negotiate better rates,
Netflix may not have the same leverage as other content providers, it would have been easier for them to negotiate comparable terms.
If any paid content or game must use their iap and forced to pay … then there is an argument whether the set price is fair. Like is Mac Pro is fair. If you do like it is there any alternative. Given there is two players …
For low end developer …
For high buck developer …
Price discrimination is really a monopoly way to do things. Or tie-in sale. Not sure forcing apple to do it is right.