This sounds as a “want my cake and eat it too” argument.
Apple’s default construction for getting payments for the usage of their IP is via commission on revenue.
This is by definition a differential pricing strategy because not everyone has to pay for the usage of Apple’s IP.
Many didn’t like the commission structure and made all sorts of arguments against it.
It would just be for payment processing, it would just be for distribution, etc.
Apple has always maintained it was primarily for the use of their IP, all the rest is thrown in as a bonus. They have structured it as such in the developer agreement and US courts have wholesale accepted it as such.
One alternative that has been floated around a lot by people that accept that Apple wants payment for their IP but didn’t like the commission structure regardless was to split off the fee for IP into its own thing.
Now they do that very thing in the form of the CTF (at a more competitive rate than Epic does for Unreal mind you).
In addition there’s a separate commission for App Store services and a separate commission for payment processing.
Now the new complaint is that this payment for their IP for first installs on EU iPhones per 12 months in excess of 1M installs in the EU isn’t good either.
So what is the desired outcome? Use Apple’s IP for free?
I don’t see how this disadvantages third party stores. Does it disadvantage Steam when Epic comes knocking on my door for their share of the pie?
Epic charges me 5% of all my revenue above a million, Apple charges me €0.50 of all my EU installs on iOS above 1M installs in the EU.
Apple’s fee is directly tied to my usage of their IP, I pay them €0.50 in 12 monthly installments for each installation that goes over 1M, but they don’t touch anything else I make off of that install.
Epic wants 5% over every dollar I make over $1M worldwide.
Don’t get me wrong, personally I was content with my 30% and the 15% is a steal for what I get out of it.
But if commission of revenue is the big bad, then the only logical thing for licensing IP is an upfront cost for usage whether you earn money with it or not.
This is how it was with consoles. Thousands upfront for the right to publish and using the IP + thousands for every build to be certified + commission over revenue.
Indies later on got a reduced rate in the hundreds, until you got big.
> So what is the desired outcome? Use Apple’s IP for free?
The desired outcome is for third-party apps and app stores to be able to run on iOS devices for free. Traditionally, building software for consumer operating systems, including Mac OS hasn't been considered using the OS vendor's IP such that it would require permission or payment.
Dev tools were often paid, true, but not necessarily to the OS vendor.
What Apple has done here is bring the console gaming model to general-purpose computing devices. I believe the EU wishes to roll that back and will probably not allow Apple's announced fees and restrictions.
And Apple already charges for those through their $100 annual developer program fee. They can't just make up arguments about how that's not really for developer tools because it happens to suit their agenda.
Quote from their own website:
> By enrolling in the Apple Developer Program, individuals and organizations receive everything they need to develop apps for distribution.
Apple won't be the one distributing them, alternative app stores are, that's the point.
Besides, Apple never claimed their new fee was for distribution, but for "core platform services", i.e. the SDK and tools, which they're already charging for.
> The Core Technology Fee (CTF) is an element of the new business terms in the European Union (EU) that reflects the value Apple provides developers through ongoing investments in the tools, technologies, and services that enable them to build and share innovative apps with users around the world.
"Core platform services" is the term used by the EU.
Someone always pays for the cost to develop and maintain the OS. In the Windows model it's the user. In the iOS model it's the app developer. I don't find the argument that either is superior particularly compelling, and certainly don't see a reason for legislators to be involved in dictating which model a particular company should use.
OSs are expensive things to build and maintain, and I don't take for granted the fact that my iPhone XS Max (2018) is running the latest version if iOS. If Apple's App Store pricing structure makes that possible, then it's certainly working for me.
They pay for updates indefinitely? That's not very sustainable for the business is it? To justify continued investment in backwards compatibility and security patches, a business needs an ongoing source of revenue.
This is just wrong. Historically application platforms charged for developer tools and support. You had to buy new tools regularly to access new OS features and you had to pay for documentation or human support. The commission model just flipped the fee structure, which is arguably better for everyone because the upfront costs were a barrier to entry and disincentivized free apps.
Appeal to tradition isn’t a beneficial argument, which is why it’s considered a fallacy.
It crumbles under the most benign forms of scrutiny.
The comment below already pointed out that vendors charged for all kinds of stuff. Your reply seems to suggest that, for some reason, you’re ok with that, but not if the OS vendor does it.
There’s also the argument that investment in frameworks for iOS is significantly higher than, say, the investment Microsoft made into frameworks for Windows back in the day.
Then there’s the general criticism of an appeal to tradition that there were many traditions that we currently aren’t ok with, and an appeal to tradition suggests that they are inherently good just by virtue of once having been a tradition.
I remember a tradition not too long ago where console manufacturers would charge thousands just for access to the platform and the IP (sometimes rolled into the price of a dev kit), plus thousands more for each build that needed certification plus a commission on sales.
It was so cumbersome for some developers that they did not bother updating their game[0].
Even later on, with lower fees, there’s still a lot of cost to get games published[1].
Now, you might say that consoles are nothing like iPhones, and I will respond by saying that iPhones are nothing like Macs.
And on and on we might go.
What matters is what is legal. Apple is in the clear to charge for usage of their IP, even when they use differential pricing and even when other companies are willing to give away their work for free because they see other avenues of revenue by doing so.
Further down, you state:
> I believe the EU wishes to roll that back and will probably not allow Apple's announced fees and restrictions.
Can I ask what fuels that belief? Or perhaps more importantly, what fuels the belief that they are at all in the position to do something about it?
I see a lot of “Wait till your dad comes home” style comments every time Apple is brought up as if there’s some collective amnesia that “dad” also has to stick to the law and doesn’t have the final say in this universe.
The European Parliament and Council of the European Union are the legislative bodies of the EU, and as such, they can create laws.
But like any legislative body, they are limited and need to move within the bounds of the laws.
The European Commission, on the other hand, functions as the executive body of the EU and is to enforce the law. They, too, are limited by the bounds of the law.
Neither the DMA nor its enforcement have been tested in court yet. All of that will start once the EC tries to enforce something, and the EC has, at best, a mixed track record before the court.
Apple made a smart move today because, contrary to what many here think, they went above and beyond the DMA requirements (e.g., it has no price regulation, so all the discounts in fees are freebies), and as such, took the wind out of the EC’s legal argument sails for many of the potential arguments.
The biggest hurdle that one needs to overcome is IP and property rights. Something neither the EU nor the US wants to tackle because it would have significant effects across all commerce.
The idea that you can just take a company’s IP and essentially make it public domain will never fly.
At best, in sporadic instances, can you get a court to agree that a company should be forced to charge “reasonable” fees, but with Apple’s fee structure for the EU being less than that of the rest of the markets and and option to evade all but one fee, it’s nearly impossible to convince a court that the CTF is somehow out of line.
Ironically, as I write this, I just realized that an upfront fee for IP usage that is entirely decoupled from revenue is actually very traditional when it comes to fees like this.
The general timeline from investigating violations to ECJ is about ten years, so this will take a while.
> Appeal to tradition isn’t a beneficial argument, which is why it’s considered a fallacy.
Appeal to tradition is a fallacy in logic, but laws are not made using pure logic. Laws are made when some group with sufficient political power wants them to be made, and such groups are often driven by tradition, what they perceive to be tradition.
> Or perhaps more importantly, what fuels the belief that they are at all in the position to do something about it?
The European Union is a government; it makes and enforces laws. In this case, it has made a law called the Digital Markets Act which addresses certain types of gatekeeping behavior by large tech companies including Apple. Some readings of this law I've seen forbid Apple from charging fees for distributing apps outside its store and from using any legal workarounds to circumvent that prohibition. It remains to be seen how EU regulators and courts will interpret it.
Your comment makes several references to "IP", but isn't clear about what IP is involved. Is it necessary to use inventions patented by Apple to write an app that runs on an iPhone? Is it necessary to know Apple's trade secrets (aside from things like signing keys that exist for the sole purpose of gatekeeping)? Does it require making copies of things Apple holds copyright to?
> Laws are made when some group with sufficient political power wants them to be made, and such groups are often driven by tradition, what they perceive to be tradition.
This can certainly be a motivator.
In Europe, and the EU in particular, many individual member states as well as the EU itself have the tradition of including an explanatory memorandum when passing new laws.
The function of this is to explain the mindset of the legislators and the motivation behind a law. It is sometimes used by courts to gain clarity on laws that might be a bit more ambiguous in their intent.
Below is a link to the explanatory memorandum of the DMA.
I wasn’t able to find a reference to traditions on regarding licensing fees, or monetization of IP.
But you’re welcome to point me in the right direction.
> Some readings of this law I've seen forbid Apple from charging fees for distributing apps outside its store and from using any legal workarounds to circumvent that prohibition. It remains to be seen how EU regulators and courts will interpret it.
Could you point me to these readings, or better yet the specific articles that these readings are based on?
To the best of my knowledge the DMA has little in the way of price regulation. So this is news to me.
> Your comment makes several references to "IP", but isn't clear about what IP is involved.
The IP in question would be code written by Apple provided in the form of frameworks, SDKs, APIs and the like. There’s also the use of software like Xcode, but for the sake of simplicity let’s stick with code written by Apple.
Creating an app by definition makes use of this IP. IP I’m sure will have cost a considerable amount to develop by Apple, so I can see why they’re eager to get payment for it or, alternatively, strategically decide who can use it for free.
Trade secrets aren’t really involved in this and neither is copying, at least not in most cases.
> The IP in question would be code written by Apple provided in the form of frameworks, SDKs, APIs and the like. There’s also the use of software like Xcode, but for the sake of simplicity let’s stick with code written by Apple.
Code generally falls under copyright. Copyright means that making copies requires permission from the owner. Installing and using XCode, for example involves making a copy of XCode, and Apple charges a subscription fee for the privilege. Distributing an iPhone app that statically links Apple libraries is also making copies of Apple's copyrighted code, which requires permission. Dynamic linking to libraries present in the OS, however does not involve distributing copies of them and does not require permission.
Distributing an iPhone app built with open source tools and libraries would not involve copying Apple's code. There aren't many iPhone apps built this way right now as far as I know because App Store rules require the use of Apple's tools, but the DMA requires that apps can be installed from other sources and do not need to comply with those rules.
The other options for IP are trade secrets, trademarks, and patents. Only patents seem likely to support a fee for distributing any app that can run on a certain device, but I don't think Apple has a patent with that effect.
> Can I publish an application that does not use Apple IP, let’s say something written in ARM assembler? Or am I forced to use Apple IP?
Not sure what you mean by forced to use Apple IP. You are running on their ARM chip under their kernel, using their libraries to read touch events and display to the screen.
IP is incredibly broad; you can't really avoid using say all copyrighted libraries.
If you are speaking toward is there a path to write applications which will work on iOS devices without signing agreements, paying royalties or having legal action taken against you, there's the Safari browser and it sounds like there will be many more web browsers soon.
> I can publish on windows without using Microsoft IP, I can publish on android without using google IP, right?
I don't see how you could publish a legitimate app for Windows without using e.g. ReadFile.
I don't know how you would publish an Android app without using its proprietary manifest file; you probably come closest there to a minimal working application due to instead using lots of Oracle IP.
iOS would not run code which is not built and signed by their tools.
Unless EU mandates the minimal interoperability requirements. You do not pay if your app is a Web app, so maybe better interop with web apps mandated would be more interesting (like allowing to add icons for these apps).
Using APIs is fair use. If you can avoid using Apple code to do so, or only minimal ones, like headers, then I think you would be in the clear. See Google vs Oracle. IANAL of course and personally I wouldn't pursue this.
In the EU there's a "Computer Programs Directive" which grants us the right to go as far as to reverse engineer any licensed software for the purposes of interoperability.
Reverse engineering APIs is fair use, not simply using APIs. Eg when Google implemented their own implementation of Java APIs, that was deemed fair use. Google only copied the interface. The courts ruled you can build a competing product that copies an interface for compatibility, just like Compaq did with IBM’s BIOS. Google absolutely would have been on the hook had they used Oracle’s implementation of the APIs.
> If you want a store in a mall, you have to pay higher leases and probably additional fees than you would if you operated out of your garage.
An iPhone is not a mall. An iPhone is a device owned by the end user. If the end user wants to use an app by some third party developer, they should be able to.
We don't let car dealers from prevent customers from installing aftermarket addons.
If any global entity owned such a large percentage of malls that suppliers had little choice but to appear there in order to be competitive, and charged for mall use via a general tax on original and follow up economic activity (instead of in proportion to mall resources used), requiring products be registered with them, and copies of direct and follow up sales records, many people might protest that too.
I think a large part of the disagreement here is the idea that all digital things should be free compared to how the physical world has been forever.
To sell to a hardware store, for example, you need to offer the retailer 40% as a minimum. Then you need to pay, often compulsorily, trading terms, ranging fees, advertising levies and other off invoice things.
They have high costs to cover, but they also force shelf prices down as much as they can.
In my opinion, Supermarkets and hardware stores mis-use their market power way more than Apple appears to be doing
I take your point. Commercial real estate companies can abuse their market position too!
But Apple's (duopoly level) gatekeeper status on global/mobile applications, services, information and transactions is allowing them to hold back an enormous amount of latent innovation.
Shelf space is important and necessary for many businesses, but that isn't where tomorrow's world is being crafted.
Oh, I’m not a blind supporter of Apple. They absolutely could be much less arrogant and handle this and many other things much better.
However, the entitlement that is pervasive here that whatever Apple does is bad and it’s ok to expect them to give their work and infrastructure away for free is just crazy.
If we’re arguing about the value that developers get for what they pay, or if Apple is stifling innovation, or even if Apple is being maliciously compliant, then that’s a different conversation. I’m much more sympathetic to that.
But this is about people demanding Apple give their IP away from free so that they can make money from that expensive to make and operate infrastructure is ridiculous
I don't think anyone believes Apple shouldn't be able to set normal supply and demand optimized product and service fees.
But Apple owns one of only two global mobile app, service and info platforms, and so has tremendous power to limit and veto other businesses opportunities. Few businesses that need to operate in those ecosystems can be viable only operating in one of them.
And Apple is using that tremendous leverage to do two things normal businesses can't do.
Both of which damage the larger economy.
1) It is gatekeeping fundamental technological and business innovation. Apple limits the types of technology and business models that it will allow on its platforms, in favor of its own versions, or in favor of simply not enabling innovation it finds competitively threatening.
It is very difficult for new innovation on the margins to succeed starting out unable to participate in half the marketplace.
2. It has enough veto power over businesses, that it is able to tax other businesses' success, instead of charging for the value of its products and services to them. I.e. Apple charges a percentage of other businesses product and service revenue - instead of flat charges for its security checks, app listings, etc. Apple charges a percentage of follow up revenue, even if the transaction happens elsewhere. Apple charges a percentage on revenue of transactions that don't even require Apple's assistance or participation but were initially enabled by being on Apple's platform. It even charges a percentage of revenue for fourth parties it has no relationship with, such as for transactions by participants on third party markets, like digital art creators!
No normal business could extend taxes on other's productivity like that, to multiple levels of extraction, independent of productive value provided. They would be rapidly replaced by a competitor happy to make profits set by supply and demand, instead of taxes imposed by the ability to deny (or seriously hamper) entry to a strategic global market.
> But Apple owns one of only two global mobile app, service and info platforms, and so has tremendous power to limit and veto other businesses opportunities. Few businesses that need to operate in those ecosystems can be viable only operating in one of them.
However, it is important (from a capitialism angle at least) to realize Apple has never falsely represented things. They have not done a bait and switch. They launched with their 30% commission rate on agency-model pricing almost 15 years ago (for apps, which was the same commission rate for music before that), and every change in licensing terms has been either enabling new transactions that were otherwise restricted, or by offering lower rates - such as for certain types of financial transactions, or certain business sizes.
They have also tended to do this with public policy changes rather than unilateral arrangements, although there are some partner programs around tvOS which are pretty tailor-built such that few companies would be able to take advantage of them.
And it is worth noting that they launched first as a platform for web based apps, and when you filter web technologies to actual standards (and not Google inventions) they tend to fight between first and second place with Chrome on actual interoperability.
Companies recognize the marketing value of having a native app within the App Store vs just a normal website. Apple obviously does as well.
> Apple charges a percentage of follow up revenue, even if the transaction happens elsewhere.
Note this is only true via 'new terms' to allow for steering toward alternative payment systems. Apple has always allowed you to operate your own out-of-store payment system (e.g. signing up for a Netflix account on the Netflix site, or purchasing kindle books on kindle.com) without paying them any commission.
However for most consumer apps (e.g. non. 'reader' apps like music, video, books and news) you had to provide a way to purchase in-app using Apple's system.
Many of these reader apps have played with in-app subscriptions off-and-on, which would make an interesting case study as they have been the category actually capable of deciding whether or not in-app purchasing was worth offering. Other categories are mandated.
> However, it is important (from a capitalism angle at least) to realize Apple has never falsely represented things.
I also feel like Apple has generally attempted to be well behaved, even as their market power has grown exponentially from a couple decades ago.
They are not the devil. But they are have reached a level of market breadth and power, that behavior not problematic even a few years ago is now an impediment for the market as a whole.
They deserve kudos for their success.
If they don't contort and distract themselves from more productive advances, by prioritizing holding onto leverage that has become too heavy handed for those they serve (and partner with), they are likely to become an even better company.
Microsoft has done fantastically well since giving up Ballmer's scorched Earth, Windows only philosophy. Ironically, if they had given up that control obsession sooner, focusing more on improving Windows shortcomings, they might have skipped the stall associated with that era and be even more dominant now.
Businesses should exist in malls to make a profit not to "be competitive". If it isn't profitable or the return on investment isn't worth it then they should not exist at that mall. It's the mall's fault if they charge too much and start to lose businesses to other malls and in turn lose visitors who would rather visit other malls.
I agree with that. At the individual business decision level.
But relatively fair competition is still a necessary component at the scale of an economy. If we are to retain any approximation of equality, equity and not hamper innovation.
If someone somehow owns the only viable commercial water supply for a city block, they can demand whatever they can get from any business on that block that needs water. And each business should make good decisions for itself in that context.
But if someone owns all the commercial water supply for a city, people are going to take political action to alter the economic equation if it starts leveraging that capability to the general cities detriment.
Alternatively someone could start up their own commercial water supply business if other businesses feel their only option is unfair. By acting poorly towards businesses the original company would have messed up their long term market share for a short term profit.
As a result of the way water rights work in most areas, this is likely not true. You aren't allowed to use the water even if it runs right through your property if you don't have water rights.
You could maybe import water through trucks or trains or something from somewhere else, but the costs for that would be brutal. Then the incumbent can bankrupt you instantly by undercutting your price, and then hike it back up as soon as you're gone. The Robber Barons in the 19th century used this very tactic frequently in anti-trust situations to hamper competition
That would make this a poor analogy as anyone can create their own hardware + software ecosystem.
>Then the incumbent can bankrupt you instantly by undercutting your price
This could be mitigated by longer term contracts so you are guarenteed a certain amount of payment to make it worth your time before the other company lowered their prices to start competing.
Obtaining water rights in some other locale, and piping it into a town some way, is probably easier than competing against a trillion dollar entrenched tech ecosystem.
But the water system, or general utility problem, is interesting for many reasons.
Dual sets of infrastructure double the supply costs for a critical input like water, without actually increasing the supply that nature provides.
The solution to keep costs and prices down is then generally to give (or accept) a water supply monopoly, but with price regulation. That is the common solution to avoid price gouging in that monopoly situation.
> Can I publish an application that does not use Apple IP, let’s say something written in ARM assembler?
iOS apps can be written in assembly. I’ve done so myself out of curiosity, and it seems others have done so as well[0].
Of course, I wouldn’t recommend it. It’s excruciating.
That said, isn’t this just a bad-faith argument wrapped in an attempted gotcha? Where your premise is that if you don’t have a choice, then you shouldn’t be charged?
If Apple would say:
“Hey, you can use Swift for free because it’s open source, and you’re welcome to benefit from our contributions to it, and while you’re at it, you’re allowed to use all the basic low-level frameworks that communicate with the OS for free as well. But anything more than that, and we want you to pay us for it.”
Would you then be fully on board with them charging for using the remaining IP they own?
Are IP and ownership rights fluid based on your own moral framework, depending on if one has a choice or not?
Should I just blow past the toll booth of the only bridge here that allows me access to the rest of the country?
How about the only ISP that provides service here? Should they just allow me to use their infrastructure so I can write you this comment?
The other day I saw a nice TV at the local store. It’s pretty much the only place I can get this TV. Do I have your blessing to take it because I don’t have much of a choice?
I make apps for a living, I’m literally the only place on earth where you can get my app. My app saves users a lot of money. Should people just pirate my app and force me on a diet of hardtack?
Where does this fluidity start and where does it end?
I thought, for better or worse (and we can spend hours debating this part alone), we decided that when someone owns something, and especially when they create something, they get to decide who, if anyone, gets to use it and at what’s price if any.
The point is that Apple can't say "this fee is required to distribute out precious IP, and this is a fair price for our IP, look how happy people are to use it", while also saying "oh, and if you don't use our IP, you aren't allowed to publish an app at all". And no, this doesn't entitle others to steal the IP in question. The problem is the second part, not the first.
Writing your app in assembler still means you're using "Apple's IP". You cannot make an iOS app that does not check in with the system and draws to the screen and responds to touch events without using platform APIs.
Maybe so, but I have no doubt Apple lawyers could make a plausible argument — in good faith, even — that you might need a license to link against required iOS libraries.
Streaming services ARE paying TV manufactures for using their IP. Thats why all the TVs are becoming smart TVs - because someone signing up for Max (or Apple TV+) nets them a fairly profitable commission when you see how slim margins are for the bulk of television sales.
This is why smart TVs are becoming increasingly more annoying, because additional revenue streams are so highly desired. Display more in-interface ads, offer first party 'streaming' for the opportunity to display more ads, put movie purchases/rentals ever more prominently in your UI, always start in your menus rather than the last selected HDMI input, take metrics on what people are watching by default - I am surprised we don't have an Uber Eats button on the remote yet.
Interestingly, a TV manufacturer can't do anything to require a streaming service to provide _their_ IP. Netflix seems to have a policy of not allowing their app to run on projectors, keeping them out of the allow-list for downloads and for execution of the android app. Some projector manufacturers will ship a separate Chromecast dongle or the like so that they can say they support Netflix on the box.
By my logic, TV manufacturers can also charge TV app developers for the use of their IP if they so desire, yes.
I don’t see how that’s nonsense or hogwash. It’s a very basic concept since the dawn of men.
You want to use or own something I own or made, then I can ask you to pay for it.
In this instance it’s the frameworks and SDKs that were made and that others want to use.
In a similar fashion, they already extract payment in exchange for them featuring whatever app has decided to pay for that privilege.
Don’t see how that’s somehow morally better, nor do I see a legal hurdle.
Apple’s default construction for getting payments for the usage of their IP is via commission on revenue.
This is by definition a differential pricing strategy because not everyone has to pay for the usage of Apple’s IP.
Many didn’t like the commission structure and made all sorts of arguments against it. It would just be for payment processing, it would just be for distribution, etc.
Apple has always maintained it was primarily for the use of their IP, all the rest is thrown in as a bonus. They have structured it as such in the developer agreement and US courts have wholesale accepted it as such.
One alternative that has been floated around a lot by people that accept that Apple wants payment for their IP but didn’t like the commission structure regardless was to split off the fee for IP into its own thing.
Now they do that very thing in the form of the CTF (at a more competitive rate than Epic does for Unreal mind you).
In addition there’s a separate commission for App Store services and a separate commission for payment processing.
Now the new complaint is that this payment for their IP for first installs on EU iPhones per 12 months in excess of 1M installs in the EU isn’t good either.
So what is the desired outcome? Use Apple’s IP for free?
I don’t see how this disadvantages third party stores. Does it disadvantage Steam when Epic comes knocking on my door for their share of the pie?
Epic charges me 5% of all my revenue above a million, Apple charges me €0.50 of all my EU installs on iOS above 1M installs in the EU.
Apple’s fee is directly tied to my usage of their IP, I pay them €0.50 in 12 monthly installments for each installation that goes over 1M, but they don’t touch anything else I make off of that install.
Epic wants 5% over every dollar I make over $1M worldwide.
Don’t get me wrong, personally I was content with my 30% and the 15% is a steal for what I get out of it.
But if commission of revenue is the big bad, then the only logical thing for licensing IP is an upfront cost for usage whether you earn money with it or not.
This is how it was with consoles. Thousands upfront for the right to publish and using the IP + thousands for every build to be certified + commission over revenue.
Indies later on got a reduced rate in the hundreds, until you got big.