On the latest podcast episode of Accidental Tech Podcast, Marco Arment was back at it again. He basically doubled down on his “Apple is too big” argument. I’m going to break out why his two main arguments are wrong
Apple vs Video Game Consoles
Video game consoles are also walled gardens that charge 30% software commissions. Nothing gets onto the Xbox or PlayStation platforms without first getting vetted by Microsoft or Sony. There is no other way to side load games onto these platforms because these companies want to maintain strict control. Just like Apple.
In order for Marco’s argument to hold any water, he needs to explain why Apple is different from video game consoles. Because console makers are the same, if not worse offenders than Apple. So Marco makes the assertion that Apple is so much larger than the video game companies that it falls into a different category. This is an arbitrary differentiation based on wishful thinking. The bulk of his case rests on the fact that the iPhone has become the main computer for most people. Never mind that this is the same guy who says that the iPad in no way can rival a Mac as a main computer system. Now all of a sudden when it’s expedient, iOS has become his “main computer system”.
So Marco says that since people use their iPhones for banking, shopping, and entertainment that it’s an anti-trust issue for Apple to be the only gatekeeper to these services. Only, he’s dead wrong. Apple doesn’t have a monopoly in any sense of the word for banking, shopping, gaming or anything.
For any business that has an iPhone app, the phone is only one access point to that business. The phrase “Call, Click, or Come In” has become pervasive in today’s commerce. Marco might have a stronger case if people could only access their bank via their iPhone. But any court is going to see that banking existed long before the iPhone. Anyone can still conduct their banking or shopping in a myriad of ways. Apple knocking someone’s app out of the AppStore doesn’t preclude their customers from picking up right where they left off through some other avenue.
For the sake of argument, if I grant Marco the supposition that people can only do business online these days. There’s the fact that people can access the web on their home computers. Apple has no monopoly on online banking or shopping. For that matter Apple isn’t even close to a monopoly for phones. Except for maybe the United States Apple isn’t even over 50% market share in any country. And even in the USA, it is only right around 50%.
This is a far cry from the companies that originally spurred anti-trust laws in the first place. If there was only one railroad or one oil company, you had no other choice. If you can’t get Fortnite on your iPhone, you just walk over to your desk or TV and play it there. You could carry your entire iMac to your beach house if you had to. In the 1800’s there were no other platforms. To state that Apple is so big that it warrants government intrusion is laughable.
AT&T Proves the Opposite of What Marco Intends.
Marco also tries to prove his case by comparing to AT&T. He says that AT&T could never get away with charging a 30% commission on all business that transpired on their network. But he unknowingly brings up a great example that makes my point. Which is that Anti-Trust has historically been about companies who charge prices which are too low, not too high.
If I wave my wand and remove all restriction on AT&T so that they are free to start charging 30% commissions on all business that happens on their network, guess what happens? They start to lose customers in droves. Why? Because the high prices will make the competition look good. All of a sudden Verizon and T-Mobile start poaching AT&T customers who want to avoid the fee. If AT&T started to charge a 30% commission rate their business would implode.
If I take my magical world and make AT&T the only company in the United States. Then what happens? Would they be free to charge 30% commissions because there is no competition? No, at this point foreign companies would see the opportunity to undercut the entrenched incumbent. Until Trump put a stop to it, we’ve seen Huawei make alarming inroads by undercutting everyone with their 5G network.
The anti-trust line of thinking that Marco tries to employ is stuck in the 1800’s when global competition wasn’t feasible. It’s not relevant in today’s global economy. Charging higher prices leads to customer defections and increased competition. Unless you are offering something else of value to a customer or have no competition, it’s not easy to raise prices.
I can’t think of a single party who is wholly dependent on the iOS to deliver their services. If you make games, you can offer them on Android or PC. If you sell widgets, you can setup your own website or go through some other platform like Amazon. And yet, everyone wants access to Apple’s customer base without contributing. A customer base that is expensive to maintain.
Marco likes to throw out that 30% is expensive for handling security and currency transactions. He completely ignores the fact that AppStore fees support iOS development. And it’s iOS which is what is attracting that huge market of high income customers. Marco himself admitted that most of the security on iPhones comes via the OS platform.
Apple would back down from their 30% commission rate if they were losing customers or developers because of it, but they’re not. Why? Because everyone is charging the same rate. Google also charges a 30% commission rate. Why? Because everyone says that if you want to stay safe on Android, only download from the official Google Play store. Google charges a premium for their stamp of approval.
The argument about how Android allows you to download software outside of the Play Store is weak. Android pundits almost always respond to the accusation that Android is risky by stating that if you stick to Google’s Play Store, you’ll be safe. And a significant portion of the Android consumer base won’t purchase software outside of the Play Store. That’s why most software is sold via the Play Store. It’s the same situation as Apple.
30% is standard. If Apple’s AppStore policies were so onerous they should be losing business and service revenue should be shrinking. But the opposite is happening, it’s growing.
Apple Journalism Is Broken
I’ve lamented in the past that when it comes to Apple, people who write or podcast about it are skewed towards the developer community to a fault. In Marco’s case, he is a developer who stands to reap significant financial gains if Apple caves. As for other journalists, they either are also developers or are chummy with developers.
They aren’t objective whenever it comes to the Apple and developer relationship. They communicate in their private Slack channel echo chambers to keep each other in lock step. And now that that this issue stands to directly enrich the developer community, the one-sided reporting has risen to a whole new level.
Video game consoles are also walled gardens that charge 30% software commissions. Nothing gets onto the Xbox or PlayStation platforms without first getting vetted by Microsoft or Sony. There is no other way to side load games onto these platforms because these companies want to maintain strict control. Just like Apple.
In order for Marco’s argument to hold any water, he needs to explain why Apple is different from video game consoles. Because console makers are the same, if not worse offenders than Apple. So Marco makes the assertion that Apple is so much larger than the video game companies that it falls into a different category. This is an arbitrary differentiation based on wishful thinking. The bulk of his case rests on the fact that the iPhone has become the main computer for most people. Never mind that this is the same guy who says that the iPad in no way can rival a Mac as a main computer system. Now all of a sudden when it’s expedient, iOS has become his “main computer system”.
So Marco says that since people use their iPhones for banking, shopping, and entertainment that it’s an anti-trust issue for Apple to be the only gatekeeper to these services. Only, he’s dead wrong. Apple doesn’t have a monopoly in any sense of the word for banking, shopping, gaming or anything.
For any business that has an iPhone app, the phone is only one access point to that business. The phrase “Call, Click, or Come In” has become pervasive in today’s commerce. Marco might have a stronger case if people could only access their bank via their iPhone. But any court is going to see that banking existed long before the iPhone. Anyone can still conduct their banking or shopping in a myriad of ways. Apple knocking someone’s app out of the AppStore doesn’t preclude their customers from picking up right where they left off through some other avenue.
For the sake of argument, if I grant Marco the supposition that people can only do business online these days. There’s the fact that people can access the web on their home computers. Apple has no monopoly on online banking or shopping. For that matter Apple isn’t even close to a monopoly for phones. Except for maybe the United States Apple isn’t even over 50% market share in any country. And even in the USA, it is only right around 50%.
This is a far cry from the companies that originally spurred anti-trust laws in the first place. If there was only one railroad or one oil company, you had no other choice. If you can’t get Fortnite on your iPhone, you just walk over to your desk or TV and play it there. You could carry your entire iMac to your beach house if you had to. In the 1800’s there were no other platforms. To state that Apple is so big that it warrants government intrusion is laughable.
AT&T Proves the Opposite of What Marco Intends.
Marco also tries to prove his case by comparing to AT&T. He says that AT&T could never get away with charging a 30% commission on all business that transpired on their network. But he unknowingly brings up a great example that makes my point. Which is that Anti-Trust has historically been about companies who charge prices which are too low, not too high.
If I wave my wand and remove all restriction on AT&T so that they are free to start charging 30% commissions on all business that happens on their network, guess what happens? They start to lose customers in droves. Why? Because the high prices will make the competition look good. All of a sudden Verizon and T-Mobile start poaching AT&T customers who want to avoid the fee. If AT&T started to charge a 30% commission rate their business would implode.
If I take my magical world and make AT&T the only company in the United States. Then what happens? Would they be free to charge 30% commissions because there is no competition? No, at this point foreign companies would see the opportunity to undercut the entrenched incumbent. Until Trump put a stop to it, we’ve seen Huawei make alarming inroads by undercutting everyone with their 5G network.
The anti-trust line of thinking that Marco tries to employ is stuck in the 1800’s when global competition wasn’t feasible. It’s not relevant in today’s global economy. Charging higher prices leads to customer defections and increased competition. Unless you are offering something else of value to a customer or have no competition, it’s not easy to raise prices.
I can’t think of a single party who is wholly dependent on the iOS to deliver their services. If you make games, you can offer them on Android or PC. If you sell widgets, you can setup your own website or go through some other platform like Amazon. And yet, everyone wants access to Apple’s customer base without contributing. A customer base that is expensive to maintain.
Marco likes to throw out that 30% is expensive for handling security and currency transactions. He completely ignores the fact that AppStore fees support iOS development. And it’s iOS which is what is attracting that huge market of high income customers. Marco himself admitted that most of the security on iPhones comes via the OS platform.
Apple would back down from their 30% commission rate if they were losing customers or developers because of it, but they’re not. Why? Because everyone is charging the same rate. Google also charges a 30% commission rate. Why? Because everyone says that if you want to stay safe on Android, only download from the official Google Play store. Google charges a premium for their stamp of approval.
The argument about how Android allows you to download software outside of the Play Store is weak. Android pundits almost always respond to the accusation that Android is risky by stating that if you stick to Google’s Play Store, you’ll be safe. And a significant portion of the Android consumer base won’t purchase software outside of the Play Store. That’s why most software is sold via the Play Store. It’s the same situation as Apple.
30% is standard. If Apple’s AppStore policies were so onerous they should be losing business and service revenue should be shrinking. But the opposite is happening, it’s growing.
Apple Journalism Is Broken
I’ve lamented in the past that when it comes to Apple, people who write or podcast about it are skewed towards the developer community to a fault. In Marco’s case, he is a developer who stands to reap significant financial gains if Apple caves. As for other journalists, they either are also developers or are chummy with developers.
They aren’t objective whenever it comes to the Apple and developer relationship. They communicate in their private Slack channel echo chambers to keep each other in lock step. And now that that this issue stands to directly enrich the developer community, the one-sided reporting has risen to a whole new level.
RSS Feed