Apple Appeals Epic Games Ruling Over 'Anti-Steering' Provisions to U.S. Supreme Court

[Michael Scrip]

No, they don’t need to keep getting a cut. They can just take their app from the App Store and don’t have to worry about any of those pesky payments anymore.

A small percentage of disingenuous developers have a problem with it. Or, I should say, they have a problem with it NOW. When they signed up, they were like “Whatever, as long as I get access to your customers and their credit cards.” That’s why I say disingenuous. Now they’re like, “I still want access to your customers, but, do I still have to pay? Yeah, I signed an agreement saying that I would fine with that but… c’moooon!” They had an opportunity to stand on their principles, and found it convenient not to.

No humans… are involved… with the upkeep… and maintenance… and security… of an international payment system.

You make great points! 👍

Although there are some people (governments?) who want to fundamentally change the way the App Store operates.

I'm interested to see how this all shakes out.

I have no dog in this fight. I just enjoy the discussion.

😎

 

[Analog Kid]

Agreed. It is definitely a wonderful thing to sell software at the tap of a finger... without all the hassles of software distribution in the old days. And it flipped the revenue model, too. It used to be that developers were lucky to make 30% while the retail stores and distributors kept 70% or higher.

But now that a lot of this software has moved to subscriptions... does the platform need to keep getting a cut from what is essentially an automated electronic transaction every month?

That's where many developers are having a problem with this.

Yes... Apple has reduced their cut to 15% on subscriptions... but only after a year. I'm not seeing the difference between months 1 through 12... and month 13 through whatever.

And like I said... this is an automated process. The customer's credit card gets charged automatically every month in a fraction of a second. No humans are even involved in this task.

I'm generally in support of the app store model. But I still think there are certain aspects that need to be re-examined.

I think they do… I could charge you $12 and Apple would get $3.60, or I could give you the app for free with a dollar a month subscription and Apple would get $0.00. Having provided all the same services plus subscription management services…

There’s other ways of doing it, but they’d all be gamed one way or another. Or they'd kill free software.

 

[Analog Kid]

Although there are some people (governments?) who want to fundamentally change the way the App Store operates.

And the beneficiary of the changes talked about would be other massive companies like Epic.

 

[bgillander]

Agreed. It is definitely a wonderful thing to sell software at the tap of a finger... without all the hassles of software distribution in the old days. And it flipped the revenue model, too. It used to be that developers were lucky to make 30% while the retail stores and distributors kept 70% or higher.

But now that a lot of this software has moved to subscriptions... does the platform need to keep getting a cut from what is essentially an automated electronic transaction every month?

That's where many developers are having a problem with this.

Yes... Apple has reduced their cut to 15% on subscriptions... but only after a year. I'm not seeing the difference between months 1 through 12... and month 13 through whatever.

And like I said... this is an automated process. The customer's credit card gets charged automatically every month in a fraction of a second. No humans are even involved in this task.

I'm generally in support of the app store model. But I still think there are certain aspects that need to be re-examined.

I would flip that argument and ask why they all switched to a subscription. For many (or most), it was because the App Store doesn’t really have an upgrade process, so there is no paid version 2 upgrade for your V1, and the developer loses out that version upgrade income. I assume that is why you will sometimes see Pro versions replace V1, usually switching to subscription.

As developer, I understand why they would flip to subscriptions to get an upgrade revenue stream, but, as a customer, there are few things I hate more than subscription software.

As much as I do not miss poorly timing my upgrade purchases, it is probably the only thing I would consider “good old days” for software, at least versus subscriptions. If Apple would add an upgrade process, then upgrades could be normal “old school upgrade” purchases, and perhaps people would understand why it makes sense that they get their percentage. As it is, the subscription argument makes it sound like there is no work being done by Apple, but the multiple upgrades pushed weekly to my iPad by Apple’s app servers say otherwise. Developers have always had a cost to deliver their paid upgrades to generate their revenue, and I really don’t see why subscribing to those upgrades should be a reason to avoid that cost. They are already coming out ahead with prepayment versus having to worry whether someone will bother to upgrade, and don’t have to ship floppies or print manuals. (Darn, I’m getting old and grumpy…when I was a boy, we had to code our Pascal at school going uphills both ways! 😀)

 

[Ethosik]

looks to make up for any lost revenue by selling games and online subscriptions.

So the platform is not truly at a loss. Do you have proof this does NOT apply for iPhones? Cases, accessories, (used to be) lightning licenses, etc. Those might make up any lost revenue of the iPhone in the SAME WAY as consoles.

Essentially, the Console Division of the company is not at a loss. That is my entire point. The actually CPU, RAM, Plastic etc MIGHT BE, but the entire division is not selling at a loss. Otherwise they would close up shop and be out of business.

 

[gco212]

So if they charged an extra dollar and sold at a profit, then they would need to shut down their app stores? How much of a loss must one sell at to charge a fee of what percentage? If they go on sale and temporarily sell at a loss, is that sufficient? What if they transfer their IP to a separate business and then license that IP back at a loss? If they donated their console profits to charity, is that the same as selling at a loss? Does it matter which charity?

This is among the silliest lines of reasoning that, for whatever reason, some people still think makes sense... Money is money, it really doesn't matter what path that money takes to the bottom line.

It's not "some people" saying it makes sense, it's the US Supreme Court, which makes it one of the few lines of reasoning that actually matters. Your nonsense about charities aside, it goes back to the Kodak decision of the 90's. And what that case says is exactly what you argue, except that you take a wrong turn at the end and come to the wrong conclusion.

Money is money, so if you start by selling at a loss then make up the difference on the back end, then you have to combine the two to come up with the actual price and figure out if that pricing scheme is anti-competitive and consumer, or if it's pro-consumer by allowing the consumer to spread the cost of ownership out as a benefit to the consumer.

 

[theotherphil]

I would flip that argument and ask why they all switched to a subscription. For many (or most), it was because the App Store doesn’t really have an upgrade process, so there is no paid version 2 upgrade for your V1, and the developer loses out that version upgrade income. I assume that is why you will sometimes see Pro versions replace V1, usually switching to subscription.

As developer, I understand why they would flip to subscriptions to get an upgrade revenue stream, but, as a customer, there are few things I hate more than subscription software.

As much as I do not miss poorly timing my upgrade purchases, it is probably the only thing I would consider “good old days” for software, at least versus subscriptions. If Apple would add an upgrade process, then upgrades could be normal “old school upgrade” purchases, and perhaps people would understand why it makes sense that they get their percentage. As it is, the subscription argument makes it sound like there is no work being done by Apple, but the multiple upgrades pushed weekly to my iPad by Apple’s app servers say otherwise. Developers have always had a cost to deliver their paid upgrades to generate their revenue, and I really don’t see why subscribing to those upgrades should be a reason to avoid that cost. They are already coming out ahead with prepayment versus having to worry whether someone will bother to upgrade, and don’t have to ship floppies or print manuals. (Darn, I’m getting old and grumpy…when I was a boy, we had to code our Pascal at school going uphills both ways! 😀)

Devs have had the ability to provide reduced prices for "upgrades" for approx 3yrs.

However, this doesn't address the "stable source of income" that developers now expect.

Whilst I am not a fan of the subscription model, it has allowed me access to a number of services that are iterated on on a very regular basis with new features being added on a way more regular schedule than once per year, like the good ole days.

 

[Naraxus]

So the platform is not truly at a loss. Do you have proof this does NOT apply for iPhones? Cases, accessories, (used to be) lightning licenses, etc. Those might make up any lost revenue of the iPhone in the SAME WAY as consoles.

Essentially, the Console Division of the company is not at a loss. That is my entire point. The actually CPU, RAM, Plastic etc MIGHT BE, but the entire division is not selling at a loss. Otherwise they would close up shop and be out of business.

I never said anything about iPhones, so I'm not sure why you would even bring that up.

Nobody said anything about the console division of Sony, Microsoft, or Nintendo either. Rather, what we said, was that those companies typically sell their consoles at a loss (usually in the short term) and make up the bulk of their revenue with software sales.

 

[Analog Kid]

It's not "some people" saying it makes sense, it's the US Supreme Court, which makes it one of the few lines of reasoning that actually matters. Your nonsense about charities aside, it goes back to the Kodak decision of the 90's. And what that case says is exactly what you argue, except that you take a wrong turn at the end and come to the wrong conclusion.

Money is money, so if you start by selling at a loss then make up the difference on the back end, then you have to combine the two to come up with the actual price and figure out if that pricing scheme is anti-competitive and consumer, or if it's pro-consumer by allowing the consumer to spread the cost of ownership out as a benefit to the consumer.

The Supreme Court ruled you can charge arbitrary fees in your App Store if you sell hardware for a small loss? I haven't seen that case...

Can you link to the Kodak case? Is it the same one that the judge in the Apple/Epic dispute already reviewed and ruled wasn't applicable? It could, I suppose, be overturned in this final appeal but that's no where near certain and far different than saying that SCOTUS is "saying it makes sense".

"Since 1992, five circuit courts and numerous district courts refused to find a Kodak-type single-brand aftermarket where customers had knowledge of the alleged restrictive policies and were not subject to a post-purchase policy change. Big tech may ultimately convince the Supreme Court to change the calculus, but for now the state of antitrust law has that distinct parameter.​

[...]​

The breadth of antitrust law on the issue has counseled that currently “to establish a single-brand aftermarket under Kodak and Newcal, the restriction in the aftermarket must not have been sufficiently disclosed to consumers in advance to enable them to bind themselves to the restriction knowingly and voluntarily.” [...] In other words, a plaintiff must show evidence “to rebut the economic presumption that [defendant’s] consumers make a knowing choice to restrict their aftermarket options when they decide in the initial (competitive) market to” purchase in the foremarket."​

 

[Unregistered 4U]

The Supreme Court ruled you can charge arbitrary fees in your App Store if you sell hardware for a small loss? I haven't seen that case...

Can you link to the Kodak case? Is it the same one that the judge in the Apple/Epic dispute already reviewed and ruled wasn't applicable? It could, I suppose, be overturned in this final appeal but that's no where near certain and far different than saying that SCOTUS is "saying it makes sense".

"Since 1992, five circuit courts and numerous district courts refused to find a Kodak-type single-brand aftermarket where customers had knowledge of the alleged restrictive policies and were not subject to a post-purchase policy change. Big tech may ultimately convince the Supreme Court to change the calculus, but for now the state of antitrust law has that distinct parameter.​

[...]​

The breadth of antitrust law on the issue has counseled that currently “to establish a single-brand aftermarket under Kodak and Newcal, the restriction in the aftermarket must not have been sufficiently disclosed to consumers in advance to enable them to bind themselves to the restriction knowingly and voluntarily.” [...] In other words, a plaintiff must show evidence “to rebut the economic presumption that [defendant’s] consumers make a knowing choice to restrict their aftermarket options when they decide in the initial (competitive) market to” purchase in the foremarket."​

Thanks for the information!

 

[Ethosik]

I never said anything about iPhones, so I'm not sure why you would even bring that up.

Nobody said anything about the console division of Sony, Microsoft, or Nintendo either. Rather, what we said, was that those companies typically sell their consoles at a loss (usually in the short term) and make up the bulk of their revenue with software sales.

The argument is because a console is sold at a loss, it's okay for them to take 30% cuts from sales. But iPhones are not so they shouldn't be able to. That is what I am questioning. Do you know how much the iPhone devision costs and the iPhone makes up enough of that? How much dd it take in R&D to create the A17 Pro?

 

[George Dawes]

Considering Apple have such a small gaming marketshare they're making an epic mountain out of a molehill

 

[Naraxus]

The argument is because a console is sold at a loss, it's okay for them to take 30% cuts from sales. But iPhones are not so they shouldn't be able to. That is what I am questioning. Do you know how much the iPhone devision costs and the iPhone makes up enough of that? How much dd it take in R&D to create the A17 Pro?

Ahh ok mb. That does make sense to my old brain when you put it like that.

 

[Unregistered 4U]

Devs have had the ability to provide reduced prices for "upgrades" for approx 3yrs.

However, this doesn't address the "stable source of income" that developers now expect.

Whilst I am not a fan of the subscription model, it has allowed me access to a number of services that are iterated on on a very regular basis with new features being added on a way more regular schedule than once per year, like the good ole days.

Yeah, while those users that lack the money OR lack the desire for the subscription model are plentiful, if a developer can find an audience that is fine with or actually enjoys a subscription payment (knowing they’re helping the developer), they’ll usually do well in the long run.

It’s not too different from Apple’s view of the market. Millions may dislike Apple’s products as too expensive and not worth the value, but the only thing that matters is if they’re able to find enough consumers that don’t find their products too expensive and think they ARE worth the value.

 

[bgillander]

Devs have had the ability to provide reduced prices for "upgrades" for approx 3yrs.

However, this doesn't address the "stable source of income" that developers now expect.

Whilst I am not a fan of the subscription model, it has allowed me access to a number of services that are iterated on on a very regular basis with new features being added on a way more regular schedule than once per year, like the good ole days.

Cool, thanks! I totally missed that addition! As you said, though, once you get a taste of monthly subscription money, occasional upgrade money doesn’t sound as good, which goes back to my point that developers are still coming out ahead (or my grumpy old man cliche “kids these days have it good”… well for software delivery, if nothing else.)

I agree that the constant upgrades can be a value when it is an often used software (though I sometimes hate the occasional new versions), but (and I could be wrong, as I wasn’t aware of the upgrade change) doesn’t most subscription software either lose features or stop working if you stop the subscription? I’m just not a fan of that non-ownership model. I prefer the “Support Plan” model like Bitwig uses, where your purchase is a one year download and support plan and you continue to own the most recent version at the time when your support expires.

The IT world seems circular to me, as Novell Netware supplanted time share systems, then NT Server offered no per seat licensing, then added it as soon as Netware was no longer major competition. The connectivity of the Internet has allowed a switch back to the rental model, and I prefer to own, but I expect business would prefer moving back to time share and permanently renting everything to us.

 

[JimmyHook]

But it matters how big you are and how essential the service is that you provide. That's why different regulations apply to electricity providers than for confetti manufacturers.

Fifteen years ago we might not have been at a point where mobile phones were so essential to people's lives that applying regulation would have been justified, but today they are.

Once a large enough fraction of society depends on something to a high enough degree, the companies providing that something can no longer be allowed to do just whatever they please.

You pretty much need a cell phone in today's world, at least the vast majority of people does. And developers need to make software for mobile phones because it's the largest part of the software market. Now if there's something that you need, but where you can only decide between two providers who both dictate the exact same conditions, then there is no actual competition and you are entirely powerless, right? That's where regulation comes in to help you as a developer or as a consumer.

That's where the video game console market is way different from the mobile phone market. Nobody needs video game consoles.

They are only essential because you believe they are essential. You can live just fine without one. Humans did for thousands of years.

 

[JimmyHook]

But it matters how big you are and how essential the service is that you provide. That's why different regulations apply to electricity providers than for confetti manufacturers.

Fifteen years ago we might not have been at a point where mobile phones were so essential to people's lives that applying regulation would have been justified, but today they are.

Once a large enough fraction of society depends on something to a high enough degree, the companies providing that something can no longer be allowed to do just whatever they please.

You pretty much need a cell phone in today's world, at least the vast majority of people does. And developers need to make software for mobile phones because it's the largest part of the software market. Now if there's something that you need, but where you can only decide between two providers who both dictate the exact same conditions, then there is no actual competition and you are entirely powerless, right? That's where regulation comes in to help you as a developer or as a consumer.

That's where the video game console market is way different from the mobile phone market. Nobody needs video game consoles.

Apps aren’t essential. Cell phones aren’t essential. Water and food is.