All the times Tim Cook lied in front of Congress
Why Apple thinks it needs to play Hardball with the App Store
We got the ‘pleasure’ of witnessing Big Tech (minus Microsoft) appearing in front of the US Congress. The full transcript and video can be found here.
The ceremony was a partisan political show, almost all questioners have clearly no understanding how Tech works and the following Antitrust rules (if there will be any) certainly won’t be very effective.
Despite the lack of intelligent follow-up questions, we heard Apple’s CEO Tim Cook speaking about his and Apple’s views. To a degree eye-opening. I am surprised that his statements stayed without legal ramifications — it’s too obvious at this point.
List of Lies
Tim Cook Quote:
Sir, we treat every developer the same.
Truth:
They don’t. In the very same hearing documents surfaced that showed that Amazon Prime Video got preferential treatment (only 15% fee instead of 30%). This tier isn’t available to “every developer”. Nor was this openly communicated.
The ATP crew wondered why he would say that. Does he not know any better?
Tim Cook Quote:
Truth:
I’ll let Guilherme Rambo tackle this one:
There’s no other word to describe this other than lie. Just look at how many of their apps in the AppStore have private entitlements and use private API. The Clips app doesn’t even ask you for camera permission, it gets it by default.
If they were operating by the same rules, why would I write a 20 minute essay in which I call for exactly that.
Tim Cook Quote:
84% of the apps are charged nothing.
Truth:
Apple charges $99 per year for one developer account. Accounts are mandatory to submit an App for review.
Of course that’s a tiny amount compared to 30% of sales. But in Apple dimensions even small amounts add up: With 23 million developers it’s a whopping $2,277,000,000.
So $2.3bn is “nothing”?
(I also have questions how the 84% got calculated.)
Honorable Mentions
There are more statements that are not blatant lies per se — but at least very misleading. For example:
There are enormous choices out there. If you’re a developer you can write for Android, Windows, Xbox, or Playstation
If you’re trying to earn a living with a successful mobile app there’s no way around iOS, period. It hosts lots of the thought leaders who can amplify an app and iOS users spend money on apps. If you want to cater to that audience you have precisely one option: Apple’s App Store.
Next quote:
We would never steal somebody’s IP.
This was in the context of Apple being allowed to copy or clone app functionality, while developers aren’t. And yes, I would agree that Apple never “stole” IP. But it has a long history of offering functionality in OS updates that was available as an 3rd party app before. Developers even have a term for that: Getting ‘sherlocked’.
Another one about developer relations:
I mean, this line was in the official review guidelines: “If you run to the press and trash us, it never helps.” Maybe Cook can elaborate on what message Apple wanted to get across with that.
Moving on:
The only apps that are subject to a commission are those where the developer acquires a customer on an Apple device and where the features or services would be experienced and consumed on an Apple device.
The first part is clearly false. The majority of e.g. Spotify’s or Netflix’ customers aren’t acquired on an Apple device — yet they still have to pay a commission. How would you even separate who acquired the customer (attribution problems)?
In the next bit, Tim Cook tells us that an app doesn’t have to be in the App Store…
Cook’s answer is web apps. Which is a bit shameless, given that Apple enjoys the reputation of hampering web apps whenever they can. No, web apps don’t have the same OS access to API’s etc. And Apple doesn’t allow other browsers to drive web app adoption forward (they don’t even allow other browsers).
Additionally, if you ask 100 customers on the street what an app is, I guess not one would describe a bookmark you can set from inside of mobile Safari as an app. Note that this was intended by Apple.
And finally:
We have open and transparent rules.
The chaos around Hey’s rejection showed that rules get interpreted very differently and can change in a moment’s notice.
Why?
After the hearing, many Apple-leaning commentators asked why Cook would go out on a limb like that. It seems unnecessary, considering the pile of cash Apple is sitting on. Why doesn’t Apple show the tiniest amount of grace to their ecosystem?
Often these commentators can’t fathom that their beloved company which they root for, would behave in such a way. You know, just like a ordinary Megacorp.
That Apple is truly different may be the greatest PR spin of all time. You don’t have to hate Tim Cook to come to the conclusion that he’s a company manager like others. And in his position as CEO his job is to maximize shareholder value.
For this he needs Services revenue, wherein the App Store is the biggest contributor.
There are actually three main reasons for Apple’s unrelenting stance from a business viewpoint, plus one driven out of ideology.
Money
To put Services revenue into perspective: It’s more or less as high as the Mac and iPad categories combined.
That’s $13.2bn with a very good profit margin. As a standalone company, Apple Services Inc. would sit on rank 243 of the Fortune 500 list.
The Product Manager in me wants to see of breakdown in nudges: How many millions of dollars in iCloud fees does the storage warning generate? What’s the marketing ROI of Apple Music ad notifications? What percentage of App Store revenue is from shady game IAP’s?
Growth
Critically, the chart shows another important metric of Services. While growth rates of hardware lines are stalling, Services are still growing. Not mentioning the enormous potential I see in bundling Services with hardware.
Technology is evolving, too. Apple Glasses keep getting postponed, but they will come. With AR and Glasses, different and more immerse apps become possible. As Doug Thompson noted, “the world will be an interface”, therefore even more use cases could get the App Store treatment.
Should Apple get a cut if you glance at a pair of shoes and they open up a “buy now” option? Should Apple get a cut if you approach the counter at Starbucks and your Starbucks card pops up above the cash register via AR glasses?
That vision would give AWS, dubbed as a “tax on compute economy”, a serious run for its money. Apple knows that the stakes are high.
Diversification
It’s not only the raw amount of money and how it grows. It’s how it de-risks the hardware businesses.
You see, back in 2016 the Wall Street narrative around Apple was that its business fluctuated in line with the iPhone. A so called One-Trick-Pony. For Wall Street, this is always risky. Say, the new iPhone doesn’t sell because of a hardware defect, what’s left?
You may call Wall Street irrational, but that’s what it priced in. The share price was basically flat at around $120.
The narrative was “broken”. So Tim Cook tried to change it: Services should become the new magic ingredient.
It worked fabulously.
One third of all revenue can today accounted to a combination of Services and Wearables like Apple Watch or AirPods.
If you look close, the underlying issue is not solved. Deciding against an iPhone means deciding against App Store fees, an iCloud storage upgrade and even AirPods. Meaning: Services and Wearable revenues are still tightly coupled with iPhone sales.
Apple spends money to be a modern and green company. None of these altruistic investments diminish the Services share, though. Making the Supply Chain greener makes Services comparatively even more attractive.
Nevertheless, Wall Street bought the narrative change. The diversification is considered a fact. The stock is priced at $450. The P/E Ratio climbed from ~10 to ~34.
Autarky
Because of its history Apple strives towards self-sufficiency. The old Apple — that nearly went bankrupt — was once before dependent on Adobe. Never ever should this happen again. This experience is deeply baked into Apple culture.
The new Apple has become vertically integrated in a dimension not seen before. From the end user experience down to literally the Silicon — everything is controlled by Apple.
For the most part that’s great and enables products that wouldn’t have been possible in a modularised world. By doing that, they focus on making themselves better and ignore or downplay external factors.
But Apple never learned to foster an ecosystem. The new Apple didn’t need to play nice with others to sustain their business. It shows in how they treat their own community — like Apple developers.
Autarky seems like a foremost ideological reason. But for Apple it may seem like a matter of naked survival.
The sad irony about all of it: Like I mentioned before, Apple would actually do better in the long run if they loosened their grip a little.
I don’t see how Apple can uphold their testimony of acting in the best interest of the user, when authors like Lucas Matney argue:
millions of Apple customers, myself included, are actually going to be pissed that their iPhone can’t do something that their friend’s phone can.
The more stuff that’s available on the App Store and economically viable with the App Store, the bigger the cake becomes. Do you want to own a niche sector like Xbox or do you want to own a general computing platform like Windows?
I would prefer a tiny slice from a very big cake to a bigger slice from a very tiny cake.
