David Heinemeier Hansson

August 31, 2021

South Korea just killed the 30% app-store cut

Apple and Google knew from the start of this fight that they couldn't afford to lose even once. That's why they pulled out all the stops stops to intimidate the Senate in North Dakota. That's why they spared no expense on the backroom deal to kill the Arizona bill. But now they've finally met a legislature they couldn't bully or buy: The National Assembly of the Republic of Korea.

The National Assembly just passed an amendment to the Telecommunications Business Act that'll prohibit app store operators from forcing developers to use a specific payment method. This change will most likely take effect within a fortnight, and when it does, it'll herald the end of the 30% app-store cut as we know it. Apple and Google will now have to compete for the business of developers on the merits.

Such competition is bound to cost Apple and Google billions. Operating these app store tollbooths are some of the most lucrative revenue streams flowing from the Android and iOS duopoly. They require little to no innovation to operate, just dominant market power, which both companies have in excess. Now that power has been countered in South Korea.

But as much as South Korea is an important market, particularly for Google, it's not the fifty million people there that truly scare either of these companies. It's the crack in the dam. The one that'll soon flood their scarecrow arguments on app-store payment mandates around the world.

South Korea just made it a lot easier for every other country in the world to pass their own laws outlawing anti-competitive app store payment mandates. These countries will be able to point to South Korea to show that allowing developers to use Stripe, Square, Braintree, PayPal, or whatever to charge their customers won't bring about app armageddon. Reality is going to refute the fear that Apple and Google have been working so hard to stoke.

This is a watershed moment that'll force Apple and Google to actually have to work for their cut. Yes, of course the cut is going to come down, and probably massively so, but there's still plenty of space for an integrated, low-friction payment solution for developers where they can charge a premium. Only that premium is likely to land somewhere between five and ten percent, not an outrageous thirty!

But I wouldn't even assume that Apple or Google is going to have the best solution in the long term! When you look at the innovation going on in payments at the moment, like Stripe's integrated sales-tax solution, it's likely that developers will soon have many excellent app-optimized payment choices to choose from. All competing with better features, better terms, and better rates.

That's how capitalism is supposed to work!

Anyway. Wow. It always seems impossible until it's done. When I gave my first testimony before the House Antitrust Subcommittee eighteen months ago, I knew this wasn't going to yield immediate results. When I testified in front of the North Dakota Senate earlier this year, I recoiled at seeing the political sausage get made with intimidation in real time. When I testified before the Arizona House of Representatives, I barely dared to hope it would be different, but still felt sucker punched when it wasn't.

And yet now it's done! The first, real, substantial loss inflicting upon this monopoly app store regime that nearly cost our new email service HEY.com its life last year. It's still "just" South Korea, but that's lit the light at the end of the tunnel. We're going to get there.

But why did it have to take so long? I mean besides a billion benjamins worth of short-term reasons. Couldn't there have been a long-term vision for these monopolists to see that this level of extortion was never going to stand the test of time?

Apple and Google set fire to their relationship with developers to forestall the inevitable. I hope they don't let it burn to the ground out of spite or more short-term profiteering. Time to accept the South Korean change universally.

Vote tally from The National Assembly on the app store bill.png

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.