Phil Schiller (left) and Steve Jobs with the first online app store applications promo
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Apple employee Phil Schiller testified in the Australian Federal Court about the origins of the App Store in 2008, in just the latest example of mindless attacks on the company.
Let's be clear – — Apple is clearly cheating its suppliers and its illegal anti-union practices are disgraceful, but it is never criticized for anything. The courts are targeting him for having the temerity to charge 30% on sales made through his App Store.
Apple is also being persecuted for snatching 30% from the hands of every developer, big or small, rich or poor — and of course this is not true.
If you listen to the critics on this, if you listen to the questions Australian reports are asking Apple now, you might think it's something like the end of the world. This Apple is an affront to human decency because it charges fees.
And every attack on Apple on this issue is carried out on behalf of each of us, the individual. Apparently we have been systematically robbed by the trillion dollar corporation Apple, and it is only thanks to corporations like Spotify and Epic Games that we will ever see justice.
You just have to ignore the fact that these other selfless corporations just want you to pay them, not Apple. None of them would pretend to protect the little guy if the money was going into their pockets.
A commission of 30% is normal, even if it was 30% across the board. In 2008, when the App Store appeared, everything was fine, and today everything is fine — although Apple often doesn't charge this full amount.
As has been the case since the beginning, Apple provides free access to any application that is itself free. He gets all the benefits of being in the store without any of the costs.
Otherwise, the 30% figure is just one of several fees Apple charges. For example, if your app is available via subscription, you will be charged 30% for the first year of subscription — but then only 15% for each subsequent year.
Developers can also apply to pay only 15% under Apple's small business program introduced in 2020. A developer is eligible if their app generates less than $1 million in annual revenue.
There are also applications, collectively known as “readers,” in which users view previously or separately purchased media files. So the Amazon Kindle app is free and Amazon doesn't pay any fees, for example.
How we lived
If the developers do not agree with with all this, remove the App Store. Take us back to the days when software was sold in boxes.
These boxes and the CDs they contained cost money to make. Distributing these boxes to stores across the US cost money.
And then these stores had to be paid. They, of course, not only demanded a reduction in the retail price, since this is how their business should operate, but also something else.
Stores had limited shelf space, making it difficult to get product onto them. If something is wildly popular, the store would be foolish not to just list it, but nothing can become wildly popular out of nowhere.
Thus, firms had to pay stores to display their products. This is still happening today — go to a supermarket and those items that are prominently displayed at the ends of the aisles will pay for being there.
If you were a developer selling software before the App Store, you would have been very lucky to get 30% of your set retail price.
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Compare that to the App Store, where there are no placement fees, no finite shelf space and no distribution costs. Plus, the App Store provides instant worldwide distribution, not just in the US, and Apple solves the world's insanely complex tax systems for you.
Every app from everyone. developers of any size have gained potential exposure since the store opened in 2008 — and they would even get it for free if their app was free
.Apple made money when you made money — and according to Phil Schiller, it didn't even matter. Under cross-examination by Neil Young QC for Epic Games, Schiller said: “We knew we were going to generate revenue, [but] we didn't set that as one of the two goals that we set out.”
It's unclear what these two goals actually were, but it's easy to see that Apple was really focused on selling more iPhones. Perhaps the second goal was to ensure that the potentially large costs of running the App Store were paid for out of its revenues.
“Are you telling His Honor that you made the decision without any investigation into what revenue stream would be generated by imposing a 30 percent commission?” – Yang asked.
“Correct,” replied Schiller.
Schiller went on to say that he doesn't remember ever turning to any risk/benefit analysis or any financial estimates when the decision was made to create the App Store. He also said that he did not realize the importance of this decision until it was made and became a success.
The Australian court has a lot to say about this unusual approach to creating a profitable business, and, in particular, about the fact that there is very little documentation from that time. The implication is that the lack of documentary evidence was in some sense deliberate, but Schiller says it was.
“I'm not trying to be difficult,” he once said. “When [Steve] Jobs came back in 1997, he orchestrated this process.”
“At one of the very first meetings… someone was taking notes,” Schiller said. “He stopped and said why are you recording this? You have to be smart enough to remember that.”
According to Schiller, after this, most managers stopped taking notes.
Steve Jobs announces the App Store in 2008. The fee structure drew applause.
Schiller is making Apple look more like the company it was in its early days in a garage than now that it is a trillion-dollar global success. This may have been the case back in 2008 when things were going well, but in reality it was only on the cusp of what it is today.
The App Store certainly contributed greatly to Apple's eventual success, but Apple created the store the same way it created the iPhone. No one needed to buy an iPhone, and no one needed to go to the App Store.
The current existence of countless lawsuits and even entire countries regulating almost imaginary harm to consumers is a waste of judicial time. It's a boon for lawyers, it has the potential to be of great value to competing corporations, and it does absolutely nothing for us consumers.
Apple isn't some flawless hero, not even close, but its shortcomings have nothing to do with the App Store. Pretending that this is the case is simply lining the pockets of other firms that would like to achieve the same success.
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