Apple’s Supreme Court Case is Important for All Developers

Large tech companies being sued usually isn’t interesting, at least to developers. Such lawsuits typically boil down to squabbling about contracts or supply chain woes, a slap-fight between #brands. Apple’s latest lawsuit is different: it’s specifically about developers.

More to the point, it strikes at the core of how developers make money. In this case, currently before the U.S. Supreme Court, Apple is accused of charging too much for apps because it holds a monopoly over the iOS app ecosystem; the App Store takes a 30 percent cut of the revenue from developers. The plaintiffs claim Apple’s take is unavoidable and heavy-handed.

Apple is leaning on a decades-old precedent that started with concrete (of all things). In 1977, the Supreme Court ruled only a company’s direct customer can sue for antitrust violations. It all centered on concrete block manufacturers, which colluded to fix pricing for blocks, which drove the cost of city building projects up. In that instance, the Supreme Court ruled only masonry workers who purchased directly from the concrete block manufacturers had the right to sue.

Here’s what it all means.

Red (The Bad Stuff)

  • Apple is moving the goalposts on who the ‘customer’ is as it relates to software.
  • Developers are being used as a scapegoat of sorts to make an argument.
  • Apple is claiming customers buy apps from developers, and the App Store is simply a conduit to get apps.
  • This won’t ‘kill’ the App Store, but could make it far more restrictive.

Green (The Good Stuff)

  • However this shakes out, we’ll have a Supreme Court ruling on the App Store business model.
  • This could empower developers to charge more, returning a bit of power to the indie dev.
  • The ‘happy medium’ here may be a method to link to an outside marketplace via the App Store.

Mac App Store WWDC 2016

Refactor (Our Take on Apple, Developers, and Monetization)

Apple’s argument: The company is to developers what concrete block manufacturers were to masonry workers in that previous Supreme Court case. The counter-argument: Apple is to customers what concrete block manufacturers were to City Hall planners paying the bills.

If Apple’s argument holds, it means the onus is on developers to sue for better terms, just as the Supreme Court once ruled only contractors could sue manufacturers.

That may prove the worst-case scenario for Apple, and is almost certainly worse for consumers. Although poorly executed, the ‘Developers Union’ showed there’s an underpinning of malaise amongst indie devs and smaller firms. Our own anonymous survey of tech pros shows they’re ready to band together to demand better terms, too. Apple does a great job of courting larger companies, but hasn’t done its diligence with the horde of solo developers trying to make a living via the App Store; they’re clearly going to start pushing for better money going forward.

Another Apple argument: Developers have the option to charge whatever they like, which is both honest and ignorant. Developers can charge any price for any app published to the App Store, but this argument ignores basic principles of economics (wherein low-priced items sell better). Your $100 app is never going to stand a chance in a sea of $0.99 alternatives, and Apple’s 30 percent cut means that developers’ margins are even further squeezed for already low-priced apps.

Should developers do what Apple is essentially daring them to do by suing, it’s hard to see the company winning in the long term. Apple may be forced to allow outside app downloads, or at least allow developers to link to outside sales portals within their own apps (or create apps that are solely for sales of other apps). It may also spur the company to institute app notarization for iOS, which it’s doing already for macOS apps sold outside the Mac App Store, ostensibly to ensure they’re safe.

Such lawsuits would also cause new thinking around monetization. We doubt Apple will relax its 30 percent take for apps sold via the App Store, and jumping through hoops to download an app via the web won’t appeal to the masses. In such a scenario, most developers would probably end up charging more in order to compensate for the App Store’s fees.

Android, the desktop, and web apps all enjoy a fairly open forum for app distribution. But the iOS app ecosystem, as closed as it is, enjoys enviable earnings per user. Apple’s method for app distribution isn’t bad or wrong, but there’s clearly a fight brewing to shape it for future generations.

Apple may very well win this case, and developers will end up charging more for apps. This trend is already somewhat underway with subscription apps, especially since single-purchase $0.99 apps is no way to make a living for all but the largest companies. Apple challenging developers to charge more will be met with a costly response… for users.

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