Why Amazon got out of the Apple App Store tax, and why other developers won’t

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Apple and Amazon very, very quietly unveiled a monumental app deal this week, without fanfare or, sadly, much in the way of transparency. Out of nowhere, buttons to buy or rent movies appeared in the Amazon Prime Video app. It’s difficult to express how strange this is: for over a decade, Apple has stuck to the rule that all digital goods sold in iOS apps must use Apple’s payment methods, including Apple’s 30 percent cut.

Suddenly, that rule appears to apply to all developers except those who have the leverage to cut a special deal with Apple. That’s the most damning way of putting it and the truth is perhaps a bit more nuanced. But if you wanted to cast that nuance aside and rail against metaphorical smoke-filled rooms where giant companies cut deals that aren’t offered to anybody else, well, I wouldn’t argue with you too much.

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I want to get into some of the details here — much of which is based more on reasonable assumption than confirmed information (see the note about transparency above). I think it’s interesting in its own right, but I also think it’s important context for the real question: what does this mean for everybody else in the App Store ecosystem? (I’ll disclose here that my wife works for Oculus on its app store, but I recuse myself from reporting on it so I have literally no idea what Oculus’ policies are.)

Apple provided us with a statement about the change. You may have read it already, but there’s enough detail in the wording to give us a fuller picture of what’s really going on. (An Amazon spokesperson confirmed the change and some of the features without giving a formal comment.)

Here’s Apple:

Apple has an established program for premium subscription video entertainment providers to offer a variety of customer benefits — including integration with the Apple TV app, AirPlay 2 support, tvOS apps, universal search, Siri support and, where applicable, single or zero sign-on. On qualifying premium video entertainment apps such as Prime Video, Altice One and Canal+, customers have the option to buy or rent movies and TV shows using the payment method tied to their existing video subscription.

There is quite a lot to unpack here.

Firstly, I just want to point out that Apple calls this an “established program,” one that already applied to those smaller cable companies. But it was completely new news to me and also to longtime Apple reporter Mark Gurman, who definitely would have remembered such a thing!

To be clear, Apple says this an an established program. Amazon Prime is new today and most significant partner. I have never heard of this program until today and we all know I’d know about it — Mark Gurman (@markgurman) April 1, 2020

Anyway, you can suss out the outlines of the deal that was struck. Amazon gets buy buttons inside its app for current Prime Video subscribers, Apple gets Amazon’s complete and total participation in the Apple TV features it cares about the most. Instead of just being yet another icon in the home screen grid, Amazon’s services are now deeply integrated into the user experiences Apple wants to move everybody towards.

Nilay Patel made this point quite strongly in today’s Vergecast podcast — give it a listen. Apple has long wanted to make the TV app the primary interface on the Apple TV box, but it needs more services to integrate into that UI.

Apple also very much wants to get consumers to sign up for other channels like HBO or Cinemax through its Apple TV app. And that’s where the second Amazon concession comes in.

Over at Daring Fireball, John Gruber did the work of punching the subscribe and pay buttons on all the possible permutations of subscribing to Amazon Prime Video in and out of Apple’s TV app. What he discovered is something that isn’t mentioned in Apple’s statement: if you’re not already a Prime Video subscriber, the sign-up flow in Amazon’s app ends up getting routed through Apple’s payment system.

There are some hidden caveat words at the very end of the statement. I’ll just emphasize them here: “customers have the option to buy or rent movies and TV shows using the payment method tied to their existing video subscription.”

Which means that Apple is getting a cut of the new subscriptions that start in Amazon’s app. Perhaps it’s the standard 30 percent in the first year, 15 percent after that. Perhaps it’s something better. Bottom line, new customers have their payments routed through Apple, existing Prime customers don’t.

Apple has clear incentives to cut a deal with Amazon

All of the above is why I’m comfortable saying that Amazon had leverage on Apple: Apple has clear incentives in the form of getting more participation in the Apple TV app and in getting a cut on the new subscribers it drives to Amazon. Amazon has the incentive of not paying more money to Apple.

Most of all, you can tell it’s about leverage simply because the Amazon Kindle app hasn’t changed. You can’t buy a Kindle book directly in the Kindle app, nor is Amazon even allowed to link to or even hint at the possibility that it has a whole damn Kindle store on its website where you can make one-click purchases.

Last but certainly not least, let us turn our attention to my favorite part of Apple’s statement, the one that defines what kind of companies are apparently able to get this sweetheart deal: “premium subscription video entertainment providers.”

Last time I checked, Netflix is a “premium subscription video entertainment provider.” Also, last time I checked it had zero interest in giving up its own UI just to have its shows mixed in with everybody else’s in the Apple TV app. Actually, I haven’t technically checked — but Nick Statt is doing so with Netflix and a whole host of other companies as I write these words. Keep an eye out for his report.

Take that phrase and add the word “games” to it and you’re pretty much describing Fortnite. Epic’s CEO Tim Sweeney has been incredibly outspoken about App Store taxes. He’s taken Fortnite off the Google Play Store and would dearly love to find a way to not have to give Apple a cut on iOS devices. Does he have a personal stake in that fight? Obviously. But he’s also one of a growing chorus of voices pushing back against the so-called “Apple Tax.”

When the Amazon news hit, the very first thing I wrote in our Slack was “Tim Sweeney is going to lose his shit.” Sweeney did not, but he did post a “congratulations” tweet so thick with schadenfreude you could wedge a Fortnite pickaxe into it.

Congratulations to Apple on their move towards opening up the iOS App Store to payment competition, and congratulations to Amazon for launching the first app to support developer-provided billing for digital goods on iOS!https://t.co/oMt83H2q4c — Tim Sweeney (@TimSweeneyEpic) April 2, 2020

Epic is not the only company pushing back against Apple’s App Store fees. Spotify has filed a formal antitrust complaint in the European Union. Apple’s pushback is that fewer than 0.5 percent of Spotify users are charged Apple’s 15-percent fee, but that argument disingenuously leaves out the fact that Spotify hasn’t offered a direct way to subscribe in its iOS app since 2016.

I recently rewatched the House Judiciary’s July 2019 hearing on “Online platforms and entrepreneurship” on C-Span (how I choose to spend my self-isolation is my business). In it, Apple’s corporate law & chief compliance officer Kyle Andeer repeated the claim about Spotify. He also pointed out that 84 percent of apps in the App Store pay nothing to Apple because they’re free and that a decade ago, app developers were paying quite a bit more than 30% to retail stores for the physical distribution of their goods. (The relevant question from Rep Jamie Raskin starts about 90 minutes in.)

All of these arguments are old hat. And though the Netflixes, Fortnites, and Spotifys of the world are surely vexed by Apple’s policies, I think that for many smaller developers the 30-percent fee is simply not at the top of their list of concerns. Higher priorities likely include prices being driven down, market dynamics being corrupted by free-to-play games, upgrades made difficult because of limited pricing models, review-bombing over subscription fees, and just making payroll.

If there’s a moral and rhetorical force behind my opening line about smoke-filled rooms, it’s this: developing mobile apps is hard and succeeding is even harder, but at least you could tell yourself that even gigantic companies like Amazon have to deal with the same rules you do. The question is whether Apple needs to be held to a standard of fairness and transparency for the app ecosystem it fully controls on iOS or not.

Because Apple has such strict control over what apps can appear on iOS, it bears a higher burden of responsibility to treat iOS developers fairly and consistently. Note I didn’t say “equally,” because it’s unrealistic to expect that a first-time dev could get the same accommodations as massive companies.

But if the rule is you pay Apple a 30-percent cut of your app’s cost unless Apple really needs something from you to bolster its own subscription business, that’s neither fair nor consistent. I asked Apple if there was something other developers could do to qualify for a deal that’s similar to what Amazon now has. The company referred me to its original statement.

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Intel and Nvidia’s new lineup

Big news in laptop land: Intel and Nvidia dropped their new stuff on the world. I’m particularly interested to see how Intel’s 10th Gen chips stack up against AMD. Sadly, “10th Gen” isn’t a very descriptive term these days, what with the 10nm vs 14nm models and other complications in the roadmap. The chips we’re looking at today are for gaming laptops, mainly.

And so, there are also a handful of new gaming laptops. My favorite, in case you’re wondering, is Asus’. It’s not only a member of the Keyboard In The Front Club, I think it is now the president. It was voted into office by unanimous consent after showing that its bottom screen flips up. It’s ridiculous and I love it.

┏ Intel’s new 10th Gen chips bring 5.0GHz clock speeds to gaming laptops.

┏ Nvidia’s RTX Super GPUs for laptops have arrived — here’s where you’ll see them first.

┏ MSI announces new laptops with Comet Lake H and new Nvidia GPUs.

┏ Razer’s new Blade 15 has powerful specs and an improved keyboard.

┏ Gigabyte’s latest gaming laptop supports Intel’s most powerful 10th Gen Core i9 processor yet.

┏ Asus’ ROG Zephyrus Duo 15 is a gaming laptop with two screens.

Amazon’s inchoate pandemic responses

A little more than a week ago, Casey Newton called for a daily coronavirus briefing from Amazon. I agreed then and agree even more now, if only because it would be a forcing function for senior executives to present a coherent response strategy,

More than many companies, Amazon can make the case that it’s an essential businesses. And yet for all of the thinking, effort, robotics, and software that has gone into its warehouse logistics, precious little of that disciplined, organized approach is apparent in its efforts to protect the workers in those warehouses.

Yesterday, it belatedly did the right thing by pledging to provide temperature checks and masks in all warehouses. I also applaud the decision to stop selling N95 and surgical masks to the public and even the virtual SXSW film festival.

But at the same time, Amazon’s general counsel privately insulted a warehouse worker that had been fired. Amazon contends he had broken social distancing rules, but that doesn’t excuse the memo in the slightest. And then, as is his wont, Amazon SVP Jay Carney popped off on Twitter with the following, easily one of the top five self-owns in the history of corporate PR:

I wonder if folks on Twitter who respond to facts and ideas they don’t like with ad hominem vitriol ever pause to wonder why they’re not very good at winning people over to their point of view. — Jay Carney (@JayCarney) April 2, 2020

Indeed.

Meanwhile, though this next story isn’t technically, it’s certainly related. Jeff Bezos’ space company is pressuring employees to launch a tourist rocket during the pandemic. Loren Grush has the inside story on what’s going on at Blue Origin and their attitude to the pandemic seems really shortsighted to me. Which is ironic, given the company’s long-term vision of securing the future of humanity.

In a meeting with the New Shepard team on Wednesday, April 1st, Blue Origin leadership talked about ways to do a trip to Van Horn with a smaller group than usual and suggested that employees should keep a low profile while in town, according to a recording provided to The Verge. In the meeting, numerous employees voiced concerns about the trip, and one manager said there may be employment repercussions if they didn’t agree with management’s decisions. “I would say that you should ask yourself, as an individual, are you acting as a toxin in the organization, fanning discontent, or are you really trying to help our senior leaders make better decisions?” Jeff Ashby, a senior mission assurance director at Blue Origin and a former NASA astronaut, said to employees during the meeting.

More from The Verge

┏ Zoom freezes features to focus on security and privacy for its 200 million daily users. Given what I would characterize as a spotty history of responding to security concerns with the appropriate level of seriousness, I was pleasantly surprised to see Zoom rise to the occasion yesterday. It has already begun issuing fixes and it seems like there’s more to come.

┏ Google donates free Chromebooks and 100,000 mobile hotspots for rural California students.

┏ eBay is waiving seller fees for new businesses to help shuttered retailers move online.

┏ The show must go on: here’s how Twitch streamers are handling quarantine. Bijan Stephen talks to a bunch of streamers as their numbers are ballooning:

Twitch is bigger than it’s ever been before. The site’s viewership increased a full 31 percent between March 8th and March 22nd, growing to 43 million hours watched from 33 million hours

┏ Plastic bags are making a comeback because of COVID-19. A lot of stuff you used to take for granted, like that reusable bags are obviously better than disposable ones, is suddenly a lot more complicated. Justine Calma looks at one of those issues.

Like pretty much everything else right now, reusable bags should probably be handled more carefully to minimize the risk of transmitting disease to other people. At the same time, there has been no evidence so far that using reusable grocery bags have been responsible for spreading the novel coronavirus.

┏ New York finally legalizes electric bikes and scooters. Good. As Andrew Hawkins notes, this rule disproportionately hurt delivery workers and was especially punishing for immigrants.

┏ Spotify now works with Siri on the Apple Watch. This is nice, but Google and Amazon just let you pick your default music service.