Time for Ap­ple to re‑eval­u­ate how the App Store does busi­ness

The App Store is the most con­tentious busi­ness Ap­ple runs, and it needs some fixes. Dan Moren re­ports

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If there’s a seg­ment of Ap­ple’s busi­ness that seems to fly in the face of the com­pany’s phi­los­o­phy – not just in terms of mak­ing a prod­uct that is sub­stan­dard or lack­lus­tre – but in terms of ac­tu­ally be­ing at odds with the way it oth­er­wise does busi­ness, you couldn’t put forth a more prom­i­nent ex­am­ple than the App Store. The dis­cus­sion, al­ways at a con­stant sim­mer in the

Ap­ple com­mu­nity, bub­bled up once again last month even as Ap­ple CEO Tim Cook was grilled by law­mak­ers over an­titrust con­cerns. De­vel­op­ers, reg­u­larly dis­sat­is­fied with the com­pany’s lack of trans­parency and equal­ity over rules, took the op­por­tu­nity to re­new crit­i­cism of not only that, but the hefty 30‑per cent cut of pro­ceeds.

The App Store has been a prof­itable busi­ness for both de­vel­op­ers and Ap­ple in the decade‑plus since its launch, but there’s a strong ar­gu­ment that as much of its ben­e­fits have ac­crued to those mak­ing the apps that feed it, just as much – if not more – has found its way into the cof­fers of the plat­form owner. Enough so that the com­pany has built an en­tire fast‑grow­ing seg­ment of its in­come around Ser­vices, among which the App Store is un­doubt­edly the crown jewel.

Ap­ple’s im­pe­tus to keep on keep­ing on isn’t hard to un­der­stand. But, as the App Store em­barks upon its sec­ond decade of op­er­a­tion, it may at least be worth­while to in­ves­ti­gate what changes could be made to im­prove it.

The un­kind­est cut

Many of the con­tro­ver­sies around the App Store re­volve at least in some way around pay­ment. As Ap­ple is quick to point out, its 30‑per cent cut hasn’t in­creased since the store’s open­ing, and in some cases, it has even been re­duced, such as the 15‑per cent that the com­pany takes from sub­scrip­tion rev­enue af­ter the first year.

I’m not be­grudg­ing Ap­ple tak­ing a cut: there are cer­tainly over­head costs to main­tain­ing the store, in­clud­ing band­width, per­son­nel and in­fra­struc­ture.

That said, for years, the com­pany main­tained that it op­er­ated its dig­i­tal stores at break‑even – I don’t think that’s been the case for a while. And if 30 per cent does go above and well be­yond what the com­pany needs to op­er­ate the busi­ness – which is un­known, since Ap­ple doesn’t break its fi­nan­cial re­ports down to that level of gran­u­lar­ity – then frankly, the rent is too damn high.

Years ago, Steve Jobs made the point that the goal of sell­ing dig­i­tal mu­sic wasn’t to erad­i­cate piracy, but to com­pete with it. To make it easy for peo­ple to do the right thing and pay for their me­dia in­stead of steal­ing it. That served Ap­ple well at the time, but hav­ing at­tained a lofty po­si­tion in the mar­ket, it seems to have for­got­ten that pre­cept.

Pay off

Speak­ing of pay­ment, Ap­ple re­quires that all com­pa­nies sell­ing dig­i­tal goods in its store use the built‑in pay­ment sys­tem that’s been in place since those ear­li­est days of the iTunes Store. This has led to a num­ber of con­flicts with app mak­ers, some of whom have wanted to use their own sys­tems; that’s led to sit­u­a­tions with apps mak­ing awk­ward end runs around pay­ment, in­clud­ing not be­ing able to tell users of their apps how to sign up for a ser­vice.

Here’s my pro­posal: a two‑tiered sys­tem. De­vel­op­ers who want to opt in to Ap­ple’s pay­ment sys­tem and have every­thing han­dled for them would stay the course, giv­ing 30 per cent of rev­enue in ex­change for that op­tion.

Mean­while, those de­vel­op­ers who would rather roll their own so­lu­tion could do so, pro­vid­ing that they of­fer Ap­ple Pay as an op­tion. It has the same ben­e­fits of se­cu­rity and re­li­a­bil­ity as the iTunes pay­ment sys­tem, but re­quires de­vel­op­ers to ei­ther do a lit­tle more heavy lift­ing on their ends, or make a deal with a third‑party pay­ment pro­cess­ing sys­tem like Stripe. But, with­out Ap­ple pro­vid­ing the pay­ment in­fra­struc­ture, the com­pany would take ei­ther a much smaller cut, or no cut at all. That way, the choice is ul­ti­mately up to the de­vel­oper, but doesn’t re­quire com­pro­mis­ing the App Store’s rep­u­ta­tion for safety and se­cu­rity.

See­ing (it) through

When it comes to the App Store, if there’s one thing that hurts de­vel­op­ers more than the im­pact on their wal­lets, it’s the lack of trans­parency. Tim Cook may state that the com­pany pro­vides clear rules that it en­forces equally for all de­vel­op­ers, but that’s at best disin­gen­u­ous: the com­pany has cer­tainly struc­tured its rules to be able to ne­go­ti­ate in­de­pen­dently, al­low­ing it to reach more favourable terms with big providers, such as the re­cent ne­go­ti­a­tions with Ama­zon that have come to light.

What Ap­ple des­per­ately needs is an om­buds­man: some­body who ad­vo­cates for the de­vel­op­ers, but is in­de­pen­dent of the App Store hi­er­ar­chy. And, most im­por­tantly, some­one who has not only the abil­ity but the re­spon­si­bil­ity to go pub­lic when things aren’t up to snuff. Putting forth ideals of trans­parency and equal­ity are all well and good, but let’s call it like it is: un­less some­body’s hold­ing the com­pany ac­count­able to those

ideals, stan­dards are go­ing to slip in the name of the bot­tom dol­lar.

Such a move is not only good for de­vel­op­ers, it’s good for Ap­ple, too, be­cause it helps them avoid get­ting to the point the com­pany is now at, when gov­ern­ments are forc­ing them to tes­tify pub­licly, dredg­ing up in­ter­nal com­mu­ni­ca­tions or threat­en­ing them with in­ves­ti­ga­tions. No com­pany is per­fect, but ad­mit­ting that you aren’t is the first step to­wards do­ing bet­ter. The com­pany learned that les­son the hard way with its for­ays into the en­vi­ron­ment and its sup­ply chain, it’s time for it to in­ter­ro­gate its re­la­tion­ships with de­vel­op­ers too.

Ap­ple CEOs Tim Cook tes­ti­fied be­fore the House Ju­di­ciary Sub­com­mit­tee on An­titrust Law

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