Here’s How Apple Should Respond to the Epic 1984 Bait
As you are reading this, you probably know about Epic Game’s lawsuit filing against Apple and Google.
For the uninitiated:
- Epic Games, within Fortnite app, offered to purchase its V-Bucks for 20% through its own payment system.
- This constituted the violation of App Store’s terms, which states that app developers cannot bypass in-app purchase framework.
- Apple removed Fortnite from App Store within few hours of this violation, because not doing so will be visible injustice to its million other developers who are paying 30% fees from all the income resulting from App Store.
- Epic Games pulled a similar move on its Android app, resulting into its removal from Google Play Store as well.
The Aim Is Apple:
While Epic Games has sued both Apple and Google for their monopolistic behavior, its main target for this open legal challenge is Apple, considering that:
- Google, while strict on what could remain on Play Store, still allows to install apps on Android devices from outside its Play Store. This is also in line with the fact that Google is primarily a licensing company (barring meagre market share belonging to Google smartphones and tablets), while Apple is the hardware owner.
- Apple wants tighter controls over what should, and should not, remain on iDevices, because Apple controls the entire supply chain from design to shipping + development of iOS. As a result, Apple does not allow installing third party app market software on iDevices — something in contrast with Google. This is also in line with its increased focus on privacy and protection against malware.
- Soon after its pullout, Epic released a campaign showing Apple changing into Big Brother just like IBM it vibrantly took on in 1984.
While the lawsuit may take its course, this is sure to make significant dent into Apple’s public image.
Why 30% Apple Tax Is So Much Loathed:
App Store developers’ outcry against steeper cut is nothing new. In 2018, Netflix pulled out in-app subscription purchase option altogether from its iOS app. Spotify also did the same.
Apple also had a similar battle against Basecamp’s Hey, an email app that sold its subscription services outside iOS.
Yet, they all could stay on App Store, as long as they do not offer an alternate payment method (e.g. Stripe) within the iOS app. Such a system is viable for players who are already famous enough to pull its user base from outside app boundary.
If you want to sell your iOS app on your terms, you not only have to create an alternate app store. You also need an alternate iOS.
Such an option is not viable for game/app companies simply because in-app experiences are best sold during encompassing in-app scenarios.
Imagine being an App Store rookie, releasing a game, and offering to buy your loot boxes from your website, instead of from within the game.
This is where Epic Games thought it needed to offer an optional in-app marketplace to bypass Apple’s 30% cut.
Epic (and many others) thinks it to be fair, also because there are no such restrictions for Mac apps. A mac developer can choose to sell his app on App Store for Mac, as well as his website.
Smaller developers have been quite vocal complainant about Apple’s 30% (tax, as they describe it), because they are completely reliant on App Store for their app’s discoverability — a thing quite difficult to attain even for high quality apps (with no marketing dollars) because of high app volume, App Store’s historically skewed app search algorithm, and Apple’s efforts to sell iAds on top those two factors.
Unlike Android, iOS cannot have an alternate App Store without jailbreak. If you want to sell your iOS app on your terms, you not only have to create an alternate app store. You also need an alternate iOS.
Apple’s 30% cut is completely disconnected from costs incurred in app store hosting, visibility and payment processing.
Apple’s latest push to authenticate advertising was publicized as its tighter measures for privacy. However, this can potentially reduce how much advertising revenue an app store developer can earn — a regime where no app store % cut is involved.
Apple also follows the most rigorous standards for app submission, so small to medium developers always have to walk on a tighter rope.
In his interview with Bloomberg, Tim Sweeney, CEO of Epic Games, stated that Apple’s 30% cut was completely disconnected from costs it incurred in app store hosting, visibility and payment processing.
Why Apple (And Not Just Its Lawyers) Must Be Cautious This Time:
A time when political strings are too precarious to pull.
Apple recently sued a small developer for cloning their logo — apparently a case without merit and completely unworthy of Apple’s brand positioning.
While 30% cut shoutout is not new, Epic Games, with its experience and (possibly) not so small legal strength, has baited Apple into a battle that will remain under the public eye during the election season — a time when political strings are too precarious to pull.
It isn’t that Epic didn’t know what it was trying to pull off by offering an alternate payment method within Fortnite. Epic has clearly stated that it is not seeking monetary compensation. It has taken high moral ground, reminding Apple of its own maverick spirit against monopolies.
Irrespective of where the verdict lands, it is the public perception front where Apple might take more wounds.
And unfortunately, that’s the front Apple must open — earlier, the better. The only way to do it is by making its developers feel at home in the ecosystem, rather than selling to them.
In order to dust off any possibility of a class-action suit by tiny developers, and regain its prestige as a tech maverick that it was in 1984, Apple can respond by taking one or more of the following steps.
#1: Introduce Dynamic % Cut For App Store Developers:
Apple wouldn’t lose much by subsidizing smaller developers.
Apple’s services arm, the segment that includes App Store revenue (including the infamous 30% cut) has been continually growing. However, its combined revenue is still far off from its dominant product: iPhone.
At the same time, besides App Store, services include its other offerings such as Apple News+, Apple TV+, Apple Arcade, and Apple Music.
As anyone can imagine, all content acquisition is money pit for Apple, and the only thing that makes up to keep service segment afloat is App Store — namely, the lucrative 30% cut Apple takes off of each developer’s revenue.
People buy iDevices not only because of iOS’s new features. They buy it to continually enjoy innovative experiences built by millions of developers.
This makes more the reason to strengthen the hands that feed its ecosystem: Despite being small segment in its revenue breakup (almost 1/5th of the iPhone+iPad+wearables+Desktops+itself), it feeds almost every other thing that Apple sells.
Beyond revenue, there is the value perspective, too.
People buy iDevices not only because of iOS’s new features. They buy it to enjoy innovative experiences built by millions of developers. That’s how newer iPhone model sells year over year. That’s how era of mobile arrived, and reined in.
Technology is nothing. What’s important is that you have a faith in people, that they’re basically good and smart, and if you give them tools, they’ll do wonderful things with them.
Steve Jobs
Game engine makers like Unity 3D have been hailed historically for making themselves free until developer earns $100K off it first. Unreal, product of Epic Games (yes, the Fortnite maker) is free until developers make their first $3000, and charges $19+5% of revenue/month thereafter.
Valve, the desktop gaming marketplace for Steam, has dynamic revenue split rewarding its higher earning developers (70/30, 75/25, 80/20 splits for <$10M, $10M-$50$ and $50M+ respectively), while subsidizing smaller developers under Steam Direct Program.
Developers are suppliers in the app ecosystems. While Apple made history by being the first to create a groundbreaking software market with an unprecedented 70%-30% ratio, it is well beyond its point of breakeven.
It is time to empower the hand that feeds its mouth. It is time to alter the game again. If Apple does that, Google is sure to follow.
An ecosystem increasingly dependent on its suppliers revenue cut to grow its next flagship arm is a time-bomb
Many argue that Apple spends big money training developers, hosting apps, and processing payments. However, all developers under its iOS and Mac Developer program already pay their fees to be eligible, starting at $99 / year minimum. This more or less makes up for the hosting costs already.
Apple even sold its new Mac with Apple Silicon for porting iOS apps to newer Mac — $500 for one year (Mac to be returned to Apple past that). Imagine shelling out $500 for a desktop to keep for a year, and to beta-test it.
Like any other marketplace, App Store has app revenue pyramid with top few % of developers earning most. Apple wouldn’t lose much by subsidizing the wider, bottom part, but its popularity and credibility will surely grow.
In any case, an ecosystem increasingly dependent on its suppliers revenue cut to grow its next flagship arm (services) is a time-bomb — both for the company and the investors.
#2: Improve Its Toolset, And Get Rid of Distribution Woes:
In 2020, XCode lacks crucial productivity boosters such as hot reload
While Apple is way more lucrative for its developers than all other platforms selling mobile apps, it may soon face retention challenge by combined attack from Android + cross platform community.
Cross platform toolchains like React Native, Flutter and Xamarin are inroads by Facebook, Google and Microsoft into Apple’s territory. Startups are increasingly choosing them in their roadmaps, despite native yielding the best possible personal experience.
While they do not earn any direct revenue off of those tools, they are taking away the mindshare of Apple’s most undervalued commodity: App developers.
They do it by offering them an alternate platform (iOS/Android) for distribution against their one time effort in development.
On top of that, they also ensure that a developer needs mac only for building/testing the iOS binary, not for the entire app development life cycle. This could be a small dent in Apple’s desktop market share that would gradually widen, given the booming presence of virtual servers and cloud computing.
All those developers begrudgingly hold Apple as a walled garden that enforces Mac purchases for development + eats into their efforts and money.
While iOS, based off BSD, is quite robust, the overall developer experience of developing for iOS has not improved in the last decade.
XCode is far behind VSCode, the de-facto IDE maintained in open source and primary tool for almost all programming environments except Apple’s.
As of this writing, StackOverFlow is replete with almost 6x more questions about XCode compared to VSCode.
Whether it is app distribution signing hell, costly hardware, or unlimited radars for obvious design flaws, Apple makes it so visibly hard for developers to publish onto their platform that a majority of newcomers abandon publishing on Apple.
Other systems (especially the ones like Flutter/RN that depend on 3rd party GitHub packages) sucks big time, yes. Apple’s end product — an iOS app running on iOS device — is decidedly superior. That’s precisely why quality devs consider Apple first as their publishing platform.
But Apple’s messaging to developer community is mostly sluggish and often indifferent. Many developers selling subscriptions via Apple got reprimanded by poorer user ratings, mostly arising from Apple’s undocumented subscription purchase API.
Swift attracted quite some newbies to the platform, but continual updates with little or no backward compatibility made it extremely hard for developers that were already heavily invested with ongoing projects.
SwiftUI successfully followed declarative UI bandwagon, but Apple did little to improve its existing UI WYSIWYG tools (storyboards and XIBs) that have so many developers engaged already. Worse, SwiftUI is not backward compatible.
In 2020, XCode lacks crucial productivity boosters such as hot reload, and developers have to rely on some benevolent 3rd parties to come up with them, which Apple might sherlock some day — much to the applause from WWDC audience.
#3: Flat Fee Structure Across the Globe Is Outdated:
Flat fee structure + 30% is quite outdated in the world where pay-as-you-use is prevalent.
Amid the ongoing trade war, China, Apple’s biggest market, announced that all iOS apps to be distributed on App Store in China must have governmental approval.
Apple warned all of its developers to get the approval by 31st July, or be ready to be removed from Chinese App Store.
Such measures can snowball when geopolitical tensions rise. Other countries with enough leverage on Apple are likely to follow suit. Bigger developers can easily go around such fences with their legal teams. But small developers — who came into an ecosystem with worldwide distribution guarantee — takes the blow.
How does Apple help them ensuring an entry into the biggest app market? After paying platform distribution fees + 30% cut, if developers are still at the mercy of the laws of the land, maybe it is time to devise developer contracts suited to individual distribution needs.
Flat fee structure + Flat 30% is quite outdated in the world where pay-as-you-use is prevalent.
Taking a parallel from cloud environment, I do not pay Amazon for Chinese server if I do not have an AWS server in China. Likewise, I do not pay Apple 1/6th of my fees if my app isn’t distributed in China and 1/6th of the world population isn’t going to see it at all.
Developers from underdeveloped countries could be subsidized too. After all, it is merit that creates level playing field, and Apple will only increase its goodwill if it incentivizes its underprivileged evangelists.
Conclusion:
Developers want Apple to succeed. Their criticism of Apple is that of despair, not that of demerit.
Epic has presented Apple with an opportunity — a window to correct its structural misdeeds. The spirit with which Steve Jobs took on the IBM monopoly must be awakened.
People want Apple to succeed. Their criticism of Apple is that of despair, not that of demerit.
Apple stands on the giant shoulders of combined knowledge of its vast developer community.
It’s time it recognizes it before starting to lose on credibility. And profits.
No one wants to die. Even people who want to go to heaven don’t want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life’s change agent. It clears out the old to make way for the new.
Steve Jobs