While this lengthy article was written early in EPIC vs Apple debate online here its still has a lot to ponder about.
Rethinking the App Store - Stratechery 8/25/20
A New App Store Approach
I know this Article has been wide-ranging, but there is a reason:
- First, while I recognize there are good reasons for Apple’s approach to the App Store, in a vacuum I would prefer far more openness and freedom, primarily for the sake of increased innovation.
- Second, under current law, I expect Apple to retain total control of the App Store.
- Third, I believe that Apple’s current approach to the App Store is bad for developers, bad for innovation, and ultimately bad for Apple.
All of these points are important; it is tempting to write a screed about the App Store that ignores point two, for example, which means the screed doesn’t matter; at the same time, I am concerned that Apple itself will ignore point three, and miss an opportunity to rethink its approach.
That, then, is the spirit of my proposals: if we accept the fact that Apple is determined to make a significant amount of money off of the App Store, and that they have the right to do so, what is a better approach? For this I will incorporate all of the above, and also draw on the distinctions I made to discrete App Store functionality
last week (and again, let me be very clear: this isn’t my preferred outcome, but rather one that I hope is plausible).
App Installation: Apple should stop using App Installation to stifle new business models like Google Stadia or Xbox Game Pass. This is, admittedly, one of my weaker arguments in terms of getting Apple’s buy-in: I believe Apple should allow these because innovation is important, and cloud gaming is exactly that. At the same time, cloud gaming is a direct challenge to Apple’s App Store control, so I understand why 30% is not enough from Apple’s perspective.
Payment Processing: This is where the marginal cost/cross-platform distinction comes into play:
- If your app experience is contained to the iPhone and has zero marginal costs, you can only use in-app purchase at Apple’s rate (30% currently).
- If your app experience is cross-platform and has zero marginal costs, your app can simply be a login page at launch, with the assumption you are paying elsewhere; if you wish to offer payments, you have to offer in-app purchase at Apple’s rate.
- If your app experience has marginal costs, then you can offer either a webview for purchase or an in-app purchase at a new Apple rate (~10%) (keep in mind that marginal costs means something discrete; simply needing some indeterminate amount of more server capacity doesn’t suffice).
There will still be edge cases here, particularly when it comes to determining what is an iPhone-only experience, as opposed to a cross-platform one; Fortnite, for example, can be played cross-platform, but I would still classify it as an iPhone-only experience (I would be okay with simply assuming that all games are iPhone-only experiences). What makes these edge cases far more tolerable, though, is that they are arguing about who gets what share of zero marginal cost goods, as opposed to driving folks who need to pay for what they provide out of business.
In addition, I will never rest in my call for traditional trials and upgrade pricing (and go ahead Apple, take your 30%); it’s a better model for productivity apps than subscriptions, particularly small-scale apps, and it genuinely bums me out that this doesn’t yet exist. Indeed, this is the strongest possible argument as to why one company having a monopoly over payment processing is such a terrible idea.
Customer Management: Here Apple both gives and takes. The taking is clear: by virtue of controlling payment, Apple controls the customer relationship. That is a reason for a developer to try and consummate the payment on their own.
At the same time, the App Store is itself a marketing channel. I do believe that Apple massively overstates its importance — sure, it is nice to for an app to be featured, but you can’t build a business model around that like you can
targeted advertising — but it is a potential value-add. What Apple should do is make discovery in the App Store contingent on using in-app purchase. If you want to be featured or show up in charts use in-app purchase; if you don’t, then customers have to search for your app directly.
The odds are that Apple isn’t going to change anything; the App Store is extremely profitable, and Apple is probably going to win its court case. Why give up a single dime? At the same time, the constant wave of controversies have to be wearing on the company, from a morale perspective if nothing else. Apple can be legitimately accused of profiteering off of COVID-19!
To that end, I hope the company will at least consider the possibility that this isn’t the 1990s, they’re not about to go out of business, and that being perceived as an asset to developers and not a tax opens up the possibility of growing the pie, not simply taking their slice. If that is the outcome of this summer of App Store turmoil, it will be a win for everyone: developers, Apple, and the users that want both security and innovation.