Phil Schiller says App Store fostered competition, ahead of antitrust testimony
Amid antitrust scrutiny of the App Store, Apple's Phil Schiller says that the digital marketplace leveled the playing field for developers when it launched.
Credit: Apple
Apple is currently facing both questions and backlash about its App Store policies, particularly the 15% to 30% cut it takes of in-app purchases. And on Wednesday, CEO Tim Cook is set to testify about its App Store and other practices in a U.S. House antitrust hearing.
On Tuesday, Apple Senior Vice President of Worldwide Marketing Phil Schiller offered a different take about the App Store. Specifically, he said that when the marketplace launched, it actually fostered competition.
"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 told Reuters.
Schiller added that when the App Store launched in 2008 with 500 apps, that wasn't the case in PC software. "Nobody thought like that. It was a complete flip around of how the whole system was going to work," he said.
At the time, software sold through physical retail channels had to pay for shelf space at stores. That could cost up to 50% of the retail price. Even digital marketplaces like App Store predecessor Handango charged developers up to a 40% commission, potentially blocking out small developers.
"Apple took that to a whole other level. And at 30%, they were a better value," said Ben Bajarin, head of consumer technology at Creative Strategies.
Of course, apps submitted to the marketplace must adhere by Apple's guidelines, which include a clause that requires the use of Apple's own payment system for most apps. Those guidelines were originally a private list, but were published in 2010.
Schiller added that the cut that Apple takes is used to maintain the marketplace, including paying for secure servers to deliver apps and systems to vet and test them. In a previous interview, the Apple SVP said that Apple's sometimes strict guidelines are meant to ensure consistency and an overall good experience for users.
Now that Apple's digital marketplace is part of a duopoly with Google, Dogtown Studios CEO Marc Fischer said the fees should be lower. He offered the idea of the single-digit cut that payment processors.
The company 15% to 30% commission has faced backlash over the years, including most recently by Basecamp-created email app Hey. The chairman of the House subcommittee set to interview Tim Cook also equated Apple's cut to "highway robbery" in a June interview.
Credit: Apple
Apple is currently facing both questions and backlash about its App Store policies, particularly the 15% to 30% cut it takes of in-app purchases. And on Wednesday, CEO Tim Cook is set to testify about its App Store and other practices in a U.S. House antitrust hearing.
On Tuesday, Apple Senior Vice President of Worldwide Marketing Phil Schiller offered a different take about the App Store. Specifically, he said that when the marketplace launched, it actually fostered competition.
"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 told Reuters.
Schiller added that when the App Store launched in 2008 with 500 apps, that wasn't the case in PC software. "Nobody thought like that. It was a complete flip around of how the whole system was going to work," he said.
At the time, software sold through physical retail channels had to pay for shelf space at stores. That could cost up to 50% of the retail price. Even digital marketplaces like App Store predecessor Handango charged developers up to a 40% commission, potentially blocking out small developers.
"Apple took that to a whole other level. And at 30%, they were a better value," said Ben Bajarin, head of consumer technology at Creative Strategies.
Of course, apps submitted to the marketplace must adhere by Apple's guidelines, which include a clause that requires the use of Apple's own payment system for most apps. Those guidelines were originally a private list, but were published in 2010.
Schiller added that the cut that Apple takes is used to maintain the marketplace, including paying for secure servers to deliver apps and systems to vet and test them. In a previous interview, the Apple SVP said that Apple's sometimes strict guidelines are meant to ensure consistency and an overall good experience for users.
Now that Apple's digital marketplace is part of a duopoly with Google, Dogtown Studios CEO Marc Fischer said the fees should be lower. He offered the idea of the single-digit cut that payment processors.
The company 15% to 30% commission has faced backlash over the years, including most recently by Basecamp-created email app Hey. The chairman of the House subcommittee set to interview Tim Cook also equated Apple's cut to "highway robbery" in a June interview.
Comments
On the other hand, if you get an app from the App Store, use a browser to search up the developer's website, create account credentials over there, pay the developer money, and then return to the app to enter your credentials to use your subscription or whatever, it's really clear that your financial relationship is with the developer, not Apple.
And alternatively, if you conduct your in-app purchases through Apple, they're taking full responsibility for the financial relationship. As such, they can make sure that subscription prices are clear, and that there's a single place to go to manage or cancel those subscriptions without any difficulty or shenanigans where the cancel button is hidden or an argument on the phone with a "sales retention specialist" is required to disengage. This consistency and simplicity actually delivers customers to developers, because they know the exact dollar amount of risk involved with trying whatever it is that's being sold.
As I have stated earlier, I want Apple to win this fight, but to do so they need to stop relying on ad campaigns that only make sense to Apple's loyal customers and defenders in the press and start coming up with strategies and legal arguments design to win over people who are used to platforms that give them more choice on the hardware that they buy and own. This not only includes macOS but even iPods. I would buy MP3s from Amazon, Microsoft or wherever, import them into iTunes and sync them to my iPod all the time. This included songs and podcasts that weren't available on the app store and from suppliers who were offering tracks for 79 cents instead of 99 cents for whatever reason.
People quickly forget what things were like before Apple re-imagines an entire concept.
Apple's loyal customer base exists specifically because we have chosen the devices that don't require the end-user to futz with things under the hood just to get everything to work. What we don't want is for others to forcibly ruin what we have by insisting that it function more like Windows or Android. The closed system is a core feature, not a bug.
Apple can do whatever it wants forever.
Don't like it? Invent a competitor and create your own innovative store from the ground up.
Um, no.
It's like going into the supermarket, buying the product from the website and walking out with the product.
I purchased an App via the App Store (~$35) for specific functionality that, after installing, became evident was not there (my fault for not reading the detailed feature set).
I requested an imnmediate refund with Apple along with the acknowledgement that it was my bad. In less than 30 minutes, Apple had processed the refund.
I guess with refunds processed so quickly, there is no need for App trial periods.
If Apple went belly up and closed up shop, including the App Store, do you think the government should step in and force Apple to maintain the App Store because it is some sort of public utility? If your answer is Yes then Apple should be granted the right to operate as a monopolistic public utility and be allocated taxpayers money to prop up their business, just like taxpayer subsidized power plants.
Everyone likes to talk about the free market and the rewards going to those who take on the big risks but ultimately prevail. But that’s just talk. Everyone’s actually looking for a handout and their piece of the pie that someone else paid for.
There is not a single developer who is forced to use the App Store. It’s a choice, opt-in model, business agreement, and the rules associated with opting in are put in place by the owners of the store. Those who opt-in are signing a business agreement with Apple. Don’t like dealing with Apple, Walmart, or Home Depot?No problem, seek out another store that has better terms or build your own, like Apple did. Running and crying to Big Brother is a losers game.
It’s their store and everything that goes into it is controlled by them, up to and including requiring product vendors to stock the shelves where the vendor’s product sits, making sure the shelf space remains tidy and filled with inventory, and making sure everything is fresh (if applicable). And yes, they will scrutinize everything about the product labeling to make sure it contains all required information and meets the store’s business objectives. Oh, and they will often come back to you and require that you sell your product in their store within a certain price target, which may require you to find ways to cost reduce your product to fit within their expectations. The latter model is widely used in home improvement stores, which is why some products, say plumbing fixtures or lawn mowers, sold at certain home improvement stores are not identical to the “same” product sold at other stores.
Saying that the cost of something is unreasonable is an interesting opinion but is something that needs to be reconciled at the point that one voluntarily enters into a business agreement with someone else. Unless you’re locked in for a certain time period or minimum unit sales number per the upfront agreement (like Apple was with Samsung recently), you’re free to walk away at any time and take your business elsewhere. Yes, even if it means changing platforms.
Um, yes.
It's not, because you can't pay for the product (the app) anywhere but the App Store, nor can you download that app anywhere but the App Store. But that's a different matter.
Since you're trying to stretch my analogy, I shall extend it: You buy a coffee maker from Walmart for $69.99. Walmart gets 30%. You can also buy capsules from Walmart for the coffee maker with Walmart's 30% markup. Or you can go to the coffee maker's website which is listed on the box and get the capsules for less. Apple is forcing the manufacturer of the coffee maker to hide any reference to the sale of coffee capsules anywhere other than the App Store, even though Apple have nothing whatsoever to do with the distribution of those coffee capsules. They've already had their cut: the distribution cost, transaction cost, customer service costs etc have already been paid for, why should they be paid again for something that is entirely separate from their systems?
As a huge multinational with sole control over what does and does not get submitted to the massive market that is App Store, forcing someone to pay them for something that they have no part in or the dev gets disallowed access to the store, could very well be seen as anticompetitive.
Plus, if Apple arbitrarily changes their minds about a rule, that's it, your app is pulled and you have zero recourse. Most of the time you don't even get a couple of weeks notice, it's just gone. The core functionality of your app might be disallowed overnight, because of an Apple whim.
Well no it can't, have you forgotten about the law?