Apple's Past Sideloading Plans, Ecosystem Lock-in Strategy, and More Revealed in Internal Documents

[I7guy]

Which part of "very common situation" was not clear?

Furthermore, the issue here is not simply that Apple built sophisticated products which by nature are highly integrated and so difficult to switch from. The issue is that Apple's management clearly debated strategies to leverage and increase the switch cost for consumers, meaning that such switch cost is not something which merely "happened", but something which was at least in part arbitrarily inflated.

There is nothing clear about this. And while we can debate until the cows come home, whether this amounts to a hill of beans or not remains to be seen.

That Apple discussed customer retention is what every company should do. Not discussing how to make the exit strategy easy.

 

[bsolar]

There is nothing misleading about the $150m figure.

The original statement I replied to was:

I think Apple’s total investment in bringing the iPhone to market was only about $150 million.

That was not the cost of Apple's total investment in bringing the iPhone to market, that was "only" the development cost of the device. Trying to conflate the two is indeed misleading.

What you are arguing is that the figure is orders of magnitude lower of what others invested so it doesn't matter that it was factually wrong, but even assuming this reasoning (which I find questionable in itself), the question is not how much you can invest and fail, the question is how little you can invest and succeed.

 

[bsolar]

There is nothing clear about this. And while we can debate until the cows come home, whether this amounts to a hill of beans or not remains to be seen.

What this will amount to is irrelevant: it's still vendor lock-in even if it doesn't lead to any antitrust violation. It's simply what it is, by definition.

That Apple discussed customer retention is what every company should do. Not discussing how to make the exit strategy easy.

Exactly, and one of the most widespread ways companies try to foster customer retention is by implementing some form of lock-in.

 

[I7guy]

What this will amount to is irrelevant: it's still vendor lock-in even if it doesn't lead to any antitrust violation. It's simply what it is, by definition.



Exactly, and one of the most widespread ways companies try to foster customer retention is by implementing some form of lock-in.

Customer retention is a carrot approach, lock-in is a body guard at the door. Apple uses a carrot approach

 

[bsolar]

Customer retention is a carrot approach, lock-in is a body guard at the door. Apple uses a carrot approach

Customer retention merely refers to the ability of a company to retain its customers over time: it has no implication on which means the company employs to attain such retention.

You are likely confusing "customer retention" with "customer satisfaction": customer satisfaction is indeed a way a company can attain high customer retention, but not the only one.

 

[I7guy]

Customer retention merely refers to the ability of a company to retain its customers over time: it has no implication on which means the company employs to attain such retention.

You are likely confusing "customer retention" with "customer satisfaction": customer satisfaction is indeed a way a company can attain high customer retention, but not the only one.

Lock in refers to keeping customers by making exit as tough as possible. That’s not customer retention, nor does it lead to high levels of customer satisfaction. A positive customer retention policy such as a well designed ecosystem is not a lock in policy.

 

[bsolar]

Lock in refers to keeping customers by making exit as tough as possible. That’s not customer retention, nor does it lead to high levels of customer satisfaction. A positive customer retention policy such as a well designed ecosystem is not a lock in policy.

Keeping customers by making exit tough is definitely customer retention if it allows the company to, er, retain customers. That's what customer retention is.

You seem to argue that since Apple is engaged in providing high customer satisfaction, it cannot at the same time employ strategies to increase the switch cost of the consumers, but this is not the case since both options can be employed simultaneously to some degree.

We don't even have to guess whether that's the case here since Apple's own exec plainly discuss these strategies as disclosed in the article.

 

[Abazigal]

The statements in the article are not from "disgruntled competitors", they are from Apple's managers discussing business strategies. Vendor lock-in is clearly among the strategies discussed.

Note that this doesn't mean these are automatic violations of antitrust regulations.

Point being there is nothing sinister or nefarious about what Apple is doing here, so I am not sure why this even deserves a thread of its own. People are reacting like this is some new revelation that will bring Apple to its knees, while we are like “duh…”

 

[I7guy]

Keeping customers by making exit tough is definitely customer retention if it allows the company to, er, retain customers. That's what customer retention is.

You seem to argue that since Apple is engaged in providing high customer satisfaction, it cannot at the same time employ strategies to increase the switch cost of the consumers, but this is not the case since both options can be employed simultaneously to some degree.

We don't even have to guess whether that's the case here since Apple's own exec plainly discuss these strategies as disclosed in the article.

We have different interpretations of customer retention vs customer jail.

It’s a positive that apple discussed customer retention. What will make the difference if there was notorious intentions involved and implemented. But a discussion? As far as the $$$ to switch platforms, it’s always a given as I pointed out previously.

 

[bsolar]

Point being there is nothing sinister or nefarious about what Apple is doing here, so I am not sure why this even deserves a thread of its own. People are reacting like this is some new revelation that will bring Apple to its knees, while we are like “duh…”

That's correct in the sense that these practices are widespread and per-se nothing to write home about, but here the context is a lawsuit where two sides are trying to present two different narratives and the documents presented are going to be used to try to show inconsistencies between the narrative presented and reality.

 

[I7guy]

That's correct in the sense that these practices are widespread and per-se nothing to write home about, but here the context is a lawsuit where two sides are trying to present two different narratives and the documents presented are going to be used to try to show inconsistencies between the narrative presented and reality.

In your opinion, what are the narratives and what are the inconsistencies and how does the sleazy behavior of epic figure into all of this?

 

[TheRevenantFromDoom2]

I really wish iOS would just let us sideload apps.

 

[bsolar]

In your opinion, what are the narratives and what are the inconsistencies and how does the sleazy behavior of epic figure into all of this?

Epic's and Apple's respective narratives are pretty clearly explained in their respective legal filings, e.g Epic's Finding of Facts and Apple's.

About lock-in, to understand Epic's narrative I suggest to read from the first document:

• II.B: Switching Costs Tend To Lock Users into iOS
• II.C: Because Users Are Locked into iOS, Mobile App Developers Cannot Forgo Developing Apps for iOS
• V.E: Apple’s Conduct Increases Barriers to Switching by Preventing the Development of Effective Middleware
• X: SECURITY JUSTIFICATIONS FOR APPLE’S RESTRAINTS ON APP DISTRIBUTION ARE PRETEXTUAL
• XI: SECURITY JUSTIFICATIONS FOR APPLE’S REQUIREMENT FOR IN-APP PURCHASE ARE PRETEXTUAL

To understand Apple's narrative, from the second document:

• IV.A: In opening up the iPhone to third-party applications, Apple sought to protect consumers and prioritize their experience.
• IV.B: To achieve these goals, iOS architecture intentionally diverged from the macOS architecture in material ways.
• IV.C: Apple built IAP on principles of efficiency, reliability, security, and privacy
• XVI.B: Game consumers are not locked into any relevant foremarket, whether the device, as Epic alleges, or the operating system, as Dr. Evans argues
• XVI.C: There is no reliable evidence that Apple’s conduct has increased user switching costs and mixing and matching costs, as described by Dr. Athey
• XVI.D: Game developers are not locked into any relevant foremarket, whether the device, as Epic alleges, or the operating system, as Dr. Evans argues

To summarize: my interpretation of the above is that Epic is arguing that Apple's conduct arbitrarily increases the cost of switching (that would be lock-in by definition) and that the security justifications Apple uses to support the limitations it imposes are pretextual, whereas Apple defends it position by arguing that there is no significant switching cost in the first place and that its main priority is consumer protection and experience.

Note that in my interpretation I don't necessarily agree with either positions, they are Epic's and Apple's.

With the statements in the article, Epic would likely attempt to demonstrate that Apple's priority was not consumer protection but indeed increasing the switching cost arbitrarily and that Apple's statement that they did not increase switching costs is false since its managers explicitly acknowledge these costs and ways to increase them themselves in their discussions.

 

[JKAussieSkater]

…admitted that "LinkedIn has been rejected for using the same language on their subscription call to action button that Apple uses in our own apps."

At first, I was thinking "What exactly does this mean?" But now I realise it's not a statement of different languages (English, Japanese, etc.). Apple don't like that other apps mimic/copy their "terminology", which seems a little petty for generic things such as "Click here to subscribe" or similar.

 

[mazz0]

We and the major game developers have tried high-end gaming on the Mac

I must have missed that…

 

[MJaP]

It's the ecosystem lock-in that is the thing that truly frustrates me about Apple. If you want to dive in with both feet and embrace everything Apple and only Apple then Apple makes it very simple and a great experience... however... I want to be free to make choices on whatever platforms I choose, and I need my non-Apple and Apple devices to all work together, and the one company that more than any of the others that doesn't want to play nice with the other children and the one that I have the most problems in being cross-platform is almost always Apple, and that's why I can never trust leaning too heavily on Apple in case they break compatibility with other vendors in their never ending desire for lock-in.

 

[I7guy]

Epic's and Apple's respective narratives are pretty clearly explained in their respective legal filings, e.g Epic's Finding of Facts and Apple's.

About lock-in, to understand Epic's narrative I suggest to read from the first document:

• II.B: Switching Costs Tend To Lock Users into iOS
• II.C: Because Users Are Locked into iOS, Mobile App Developers Cannot Forgo Developing Apps for iOS
• V.E: Apple’s Conduct Increases Barriers to Switching by Preventing the Development of Effective Middleware
• X: SECURITY JUSTIFICATIONS FOR APPLE’S RESTRAINTS ON APP DISTRIBUTION ARE PRETEXTUAL
• XI: SECURITY JUSTIFICATIONS FOR APPLE’S REQUIREMENT FOR IN-APP PURCHASE ARE PRETEXTUAL

To understand Apple's narrative, from the second document:

• IV.A: In opening up the iPhone to third-party applications, Apple sought to protect consumers and prioritize their experience.
• IV.B: To achieve these goals, iOS architecture intentionally diverged from the macOS architecture in material ways.
• IV.C: Apple built IAP on principles of efficiency, reliability, security, and privacy
• XVI.B: Game consumers are not locked into any relevant foremarket, whether the device, as Epic alleges, or the operating system, as Dr. Evans argues
• XVI.C: There is no reliable evidence that Apple’s conduct has increased user switching costs and mixing and matching costs, as described by Dr. Athey
• XVI.D: Game developers are not locked into any relevant foremarket, whether the device, as Epic alleges, or the operating system, as Dr. Evans argues

To summarize: my interpretation of the above is that Epic is arguing that Apple's conduct arbitrarily increases the cost of switching (that would be lock-in by definition) and that the security justifications Apple uses to support the limitations it imposes are pretextual, whereas Apple defends it position by arguing that there is no significant switching cost in the first place and that its main priority is consumer protection and experience.

Note that in my interpretation I don't necessarily agree with either positions, they are Epic's and Apple's.

With the statements in the article, Epic would likely attempt to demonstrate that Apple's priority was not consumer protection but indeed increasing the switching cost arbitrarily and that Apple's statement that they did not increase switching costs is false since its managers explicitly acknowledge these costs and ways to increase them themselves in their discussions.

Thanks for the above. As I understand this, Epic can allege anything they want. But it seems the less specific a claim is, the harder it will be to prove and/or have any standing.

 

[0924487]

I’m puzzled as to why Apple doesn’t purge their executive conversations after some time? Maybe they talk about the real confidential topics on Signal with destruct-on-read turned on.

 

[MacAddict1978]

What this will amount to is irrelevant: it's still vendor lock-in even if it doesn't lead to any antitrust violation. It's simply what it is, by definition.



Exactly, and one of the most widespread ways companies try to foster customer retention is by implementing some form of lock-in.

There is a key difference. When you only sell your own products and services and use those as a lock in method, it is very transparent. Not that this cannot still lead to a monopoly (Internet Explorer is a great history lesson) if you use your power to abuse things and break the law.

But in Apple's case, they take on a role of a products/services provider, marketplace, and distributor with a large market share of the space in which they operate.

When you hamstring competition willfully, deliberately, and knowingly in an arena where there are contracts and rules you created (and legally, if you create rules even if they aren't law, you can and will be held to those rules in court), you're asking for an antitrust suit and probably deserve one.

Adding fuel on the fire, most of Apple's services and apps they've been anticompetitive with are complete copies or rip offs of things that were in their marketplace, with Apple having access to every line of code. When you reject apps for reasons that your own offerings have the same issues but exist, that is another problem.

The real pain point for Apple is that a developer is required to use the App store, it's payment systems, and abide by the rules which are not equitable across developers. A juggernaut like Amazon gets a 15% rate, but a start up would have to pay 30% for a music or video streaming service, giving Apple a competitive edge as they don't pay any cut to themselves and have more margin while putting their services front and center and burying competing services that they .... yes, copied and ripped off.

These aren't the first round of damning emails nor will I expect them to be the last.

Google is under the same scrutiny but Google has a bit of an advantage. 1. They allow side loading (and let their users adult with their choices). 2. Anyone can skin and fork their own flavor or Android and can also create their own App stores for Android of they so choose to.

What Apple is doing is not the same thing as what Comcast does to lock in subscribers by offering almost free wireless phone service for using their internet or charging an exorbitant ala carte cost for internet to deter cord cutting.
Don't listen to me.... they quite blatantly discuss the anticompetitive strategies they use in emails.

If you ever had to take business law classes in college, literally all of these behaviors are in the list of things that are used to identify monopolies.

 

[visualseed]

The original statement I replied to was:



That was not the cost of Apple's total investment in bringing the iPhone to market, that was "only" the development cost of the device. Trying to conflate the two is indeed misleading.

What you are arguing is that the figure is orders of magnitude lower of what others invested so it doesn't matter that it was factually wrong, but even assuming this reasoning (which I find questionable in itself), the question is not how much you can invest and fail, the question is how little you can invest and succeed.

I was originally neither addressing how little or much one could spend to succeed or fail. I was specifically answering to the assumtion that creating a competing smartphone was no longer affordable by any company other than Apple (or a company equal to their current size) when you intorduced a tangent of “groundwork” and fact questioning. If you want to get specific that $150M did not incude the intial ideation phase of the product, but it does include everthing spent on “Project Purple” going back to 2004 including 2007’s marketing budget. This incudes both the parallel iPod and Mac tracks of the project where it was determined which technology would evolve into the phone. So when I say “bring to market” I do mean bring to market.

 

[8281]

All companies either become successful and highly profitable, or stay ethical. Even google took down their “don’t be evil” sign at their campus.

Acting ethically and success are not mutually exclusive. This line of thinking is exactly how Enron, subprime mortgages, and countless other corporate misdeeds happen. Capitalism is great, but the logic of markets taken to an extreme can do a great deal of damage. How many companies have poisoned whole communities because it was more profitable than cleaning up their own mess.

 

[pacalis]

Imo, there is no such thing as lock-in. Apple is right to produce products that interact with one another … as is Samsung.
Good luck with epic proving “lock-in.”

All systems are locked down to a certain extent. But that’s different from “lock-in” as you are describing in which apple uses a carrot, not a bodyguard to get one to remain within the ecosystem.

The irony is that Epic has "locked-out" their Apple users.

 

[Michael Scrip]

The irony is that Epic has "locked-out" their Apple users.

Haha... true.

I don't understand the Epic and lock-in argument anyway.

Fortnite, for instance, was available on every platform. So it didn't matter which platform you used, or switched to and from. I think I have a toaster that runs Fortnite.

But yeah... Epic's own actions eventually got them banned iOS. They knew the rules (even if they didn't like them) and they violated those rules.

 

[senttoschool]

All companies strive to increase lock-in in their products. Which company doesn't want to keep their customers?

 

[nexusrule]

You can but with significant switch costs if you are invested in the previous platform, which is by definition what vendor lock-in is.

Now about Apple's situation, let's cite from the article the first sentence from the first quoted statement by Eddy Cue:



Those "hundreds more" are dollars, and are the dollars a customer invested in Apple's ecosystem would need to additionally pay to, as the article states "get where they are today" on the Samsung platform by switching from Apple's.

So, what Eddy Cue is arguing in the rest of the quoted statement is that Apple should better leverage this investment consumers make into their ecosystem because it makes it harder for them to consider switching to other platforms, and it describes how the iTunes gift cards system should be used as tool to implement said strategy.

TL;DR: It's 100% a vendor lock-in strategy, basically by-the-book.

And I know you argue this switch cost is insignificant, but your opinion on the switch cost is irrelevant: Apple's management definitely did not consider it irrelevant and it's their intent which is being discussed.

What about the fact that most of the things Cue describes are not really Apple decision and definitely not exclusively theirs? Even if Apple wanted the music and movie/tv industries wouldn’t let them sell their products unconditionally, DRM, devices-limit and so on are not Apple‘s ideas or decision, and the same is true for apps, developers always sold Platform-specific apps, even before the advent of mobile, if you had a Photoshop for Windows and moved to Mac you had to buy the license again, and this is always been true of virtually all software. And more importantly it is true for all apple competitors, from Amazon to Google etc. They don’t manage the rights or terms of distribution of what they sell because it’s not theirs, they are just the middle man.

Obviously the more invested you are in a platform the harder it will be to switch, but it’s intrinsic to platforms not a specific company strategy, if you move from Mac/Windows to Linux, the more free platform existing, it will cost you money; if you move from Linux to Mac or Windows, it will cost you money. If you move from iOS to Android it will cost you money, sure, but the same it’s true if you want to switch from Android to iOS.

If Apple tomorrow should start allowing third party app stores, for example, you would still be bind to their platform because the apps would work on iOS only, you would just pay someone else for your purchase. Unless they would sell you web apps, something you can already buy today, and something nobody would want to sell you be cause the money are in apps and having a store.