David Heinemeier Hansson

September 2, 2021

Japan bends Apple another inch on the App Store

Is there a country anywhere in the world without an open investigation into Apple's monopoly abuses with the App Store? It seems like we can barely go a month, let alone a week, between announcements of new inquiries, new laws, new settlements, new scrutiny. Change comes slowly, then all at once, eh?

Now it's Japan's turn. The Japanese Fair Trade Commission just got Apple to let developers of the arbitrarily-defined-bucket-of-apps known as "reader" apps have ONE GOLDEN LINK to an off-app website where users can purchase digital goods or subscriptions. This is great news for Netflix, Spotify, Kindle, et al, and their users who won't have to decode oblique statements as to why the app doesn't do anything when you download it.

But – and of course there are buts! – despite the fact that this is a mere policy change, it may well be six months before it takes effect. Apple is saying it'll take until "early 2022" to... ehhmm... update their website with the new rules? Talk about dragging your feet.

And of course they are dragging their feet! The App Store is generating somewhere between ten and twenty billion dollars in profit for Apple per year, according to independent estimates. Let's just say it's a billion dollar a month in profits. Whatever threat to that tollbooth cash stream that can be delayed even just a week is potentially worth hundreds of millions of dollars. For a week!

The sums involved are just staggering. Yet what's even more staggering is that the App Store is not even Apple's main business! Yes, it's a highly profitable one, but Apple generated $274 billion dollars in revenue in 2020. The iPhone alone is half of that. And off that revenue, they made $57 billion in profits. That's more than a billion dollars in profit per week. So despite their enormous scale, the App Store taxes are probably less than a fifth of Apple's total profits.

Which echos Gruber's point that it's astounding Apple let things get this far. Why are they risking the antitrust scrutiny of regulators and lawmakers around the world, as well as setting fire to their relationship with developers, over a minority part of the business? Has there ever been another monopoly in the history of the world that got into this much legal and repetitional trouble over a side hustle?

Anyway, back to the Japanese deal. The first interesting thing is that Apple's press release stresses that they'll only let these reader apps have ONE GOLDEN LINK. From the press release, my emphasis: "Apple agreed with the JFTC to let developers of these apps share a single link to their website to help users set up and manage their account". How petty can you get? Why does it have to be a single link? Why can't the Kindle app link to buy another book by the same author when you finish the one you were reading, without having that mean the general link to the store on the Home Screen has to disappear?

Clearly Apple's press releases are written very carefully, so when they stress the singular here, it's because they mean it. I'm curious whether the Japanese Fair Trade Commission is going to see things the same way. They wanted to release developers from the monopolistic gag order, and help consumers find the goods they are looking for, and this only barely does that.

But that's been Apple's tactic in all of this: Do barely better than nothing. What's the absolute least we can get away with? Do that. And from the perspective of a single battle, I guess that makes sense. But I think they're missing the forest for the trees here. Every time they give barely an inch, they prolong and intensify the overall struggle. Rather than simply getting out of this morass entirely.

What's so fascinating about this exact morass is that Phil Schiller predicted it a decade ago in an internal email. Even then it was obvious that this was a dangerous route for Apple to take. One that could alienate customers, developers, regulators, and lawmakers. And it did just that.

The only real bright stop to Apple's submission to the Japanese authorities is that the deal will be made global, once it's eventually rolled out. That's an interesting concession given that it's not something the Japanese could force Apple to do. They're choosing to do this, because I suppose it's both a real hassle to manage rules country-by-country, but also because it's a really bad look that Japanese developers would get a better deal than the rest.

That gives us hope that once other new laws and rulings come out, they'll be applied globally. The big test to that theory will be what happens with the new law from South Korea that essentially says developers must be free to chose how to process payment entirely. Will that go global too?

Either way, this is just getting started. There are litany of pending lawsuits, bill proposals, regulatory inquiries, and other fights in the pipeline. Apple is probably going to keep trying to win every battle while they continue to lose the war. There's just no way the current regime, even with the latest concessions, is going to stand long term. The gag orders, the retribution, all of these abuses are going to have to end before Apple gets peace.

I wish they'd just accept the inevitable now.

About David Heinemeier Hansson

Made Basecamp and HEY for the underdogs as co-owner and CTO of 37signals. Created Ruby on Rails. Wrote REWORK, It Doesn't Have to Be Crazy at Work, and REMOTE. Won at Le Mans as a racing driver. Fought the big tech monopolies as an antitrust advocate. Invested in Danish startups.