Matt Washchuk

It’s probably unfair to compare the new Apple Vision Pro to any of Apple’s prior product releases. After all, it represents an entirely new computing platform. But it shares many similarities to the 1.0 versions of Apple’s existing platforms:

• the original 1984 Mac, with only 128k of RAM and a single 400KB floppy drive, was slow and underpowered to do all the amazing tasks Apple showed off in its introduction. (Apple quadrupled the RAM just nine months after the Mac’s introduction with the release of the 512k model.)
• The first portable Mac (the Macintosh Portable) weighed nearly 16 lbs. It was the equivalent of having to carry six MacBook Airs with you, in order to get Mac Plus performance. (It wasn’t a hit.)
• The original iPhone shipped in June 2007 with the incredibly slow 2G EDGE network, five years after the USA adopted 3G technology. (The inexpensive model had 4GB of storage, and it was quickly discontinued, in favor of 8GB models.)
• The OG Apple Watch was too slow to run third-party apps natively on the device and required its iPhone companion to send screen data—incredibly slowly—over Bluetooth. (Within 18 months, Apple released a significantly faster model that was also $200 cheaper.)

Apple has had many first-generation products that are cutting-edge technology, priced too high for most consumers, that are more like technological demonstrations of the future. The Apple Vision Pro is no exception. While far more powerful and sophisticated than the Meta Quest 3, it’s also far from the dream of powerful AR glasses or featherlight VR goggles. It reminds me of an earlier Apple product: the original MacBook Air.

When Apple released the MacBook Air in 2008, I was blown away. I wanted it. Badly. I even fell in love with the song Apple paired it with: Yael Naim’s “New Soul.” (My wife and I even included the song in our wedding.)

But when Apple released the MacBook Air, it was expensive. Apple was already making MacBook and MacBook Pro computers: a MacBook started at $1,099, and MacBook Pros started at $1,999. When the MacBook Air debuted, it cost $1,799, but if you wanted it with the 64GB SSD—which is what made the MacBook Air the incredible computer it was—you needed to spend an additional $999. At $2,800 (which is nearly $4,000 in 2024 money), you’d be buying a computer which, compared to the $1099 MacBook, had a slower processor, half the storage, no optical drive, and fewer ports.

Why would you spend $1,700 extra to have seemingly less of a computer? Two reasons: it was light, and the SSD made it blazingly fast. While the processor was still slower than a MacBook Pro, the computer felt faster because the SSD was a revolution in random and sequential disk access. You couldn’t believe how much faster it was, until you tried it for yourself. The MacBook Air’s SSD was no fad, either: in 2012, Apple released the retina MacBook Pro, and, for the first time, all Apple laptops shipped with SSDs. It took 4.5 years to get the price of SSDs low enough to become standard on all Apple laptops (Apple made SSDs standard in MacBook Airs in late 2010).

Today, it’s hard to imagine using a hard drive as primary storage for a computer, and for users old enough to remember when computers shipped with hard drives, it’s sad to think about how much slower computers were because of their storage medium. But, in 2008, spending $2,800 to use a paltry 64 GB of SSD storage meant sacrificing in order to be cutting-edge. Today, you can spend $3,500 to be on the cutting-edge of AR and VR computing. Sure, the headset is too heavy, the incredible cameras are still not perfect representations of the real world, and it’s not ready for all-day use. But there’s a reason it’s blowing so many people away: the future is coming, and you can wear it right now.

Apple announced its plans to comply with the European Union’s DMA last week. This comes nearly two years after Apple changed its payment-processing rules in the Netherlands in order to comply with a Netherlands Authority for Consumers and Markets order, changed its same rules in South Korea in order to comply with the country’s Telecommunications Business Act, and implemented a worldwide change in how “reader” apps can link to external websites, thanks to a Japan Fair Trade Commission investigation.

These regulations achieve three goals: 1) provide developers additional choices for distributing their applications to iOS users, 2) provide developers choices with how they process payments for purchasing their apps and physical and digital goods within their apps, and 3) provide developers the ability to notify users of ways they can pay the developers, outside Apple’s (and Google’s) App Stores.¹

All the regulations tinker around the margins of what developers really want: to pay Apple less money. That’s it. Sure, large developers would appreciate the opportunity to capture customer data through direct sales, and, yes, it might be nice to market existing apps² in alternative app stores, which may provide better visibility to users who install these app stores. But developers only want to do these things if it allows them to receive more money in each transaction than they currently receive from Apple.³

At this point, it does not appear that these regulations from Europe and Asia force Apple to accept less profit from each digital transaction, even if regulators intended and developers hoped it would. For developers, sadly, it appears Apple has no interest in garnering good will or improving developer relations.⁴ And Apple has made clear it has no interest in reaping fewer profits from iOS developers.

Here’s the cynical take (at least from 2020): Apple’s App Store is highly profitable because 10% of iPhone users are spending so much money on in-app purchases in games, such that the profit Apple makes from these gaming purchases account for more than 10% of the company’s yearly profit.⁵ Gaming, in general, accounts for 70% of App Store revenue, and because only 20% of apps generate any revenue from the App Store (id.), the vast majority of revenue the App Store is generating comes from a small number of highly profitable games. It’s no wonder that the loudest voice against Apple so far (Epic) is a high-revenue gaming company.⁶

The CNBC article covering the Epic vs. Apple trial also revealed that 80% of apps on the App Store make zero revenue because they are free apps. But there’s a difference between truly free apps and apps that are free to download but require purchases or subscriptions at the developer’s website. For example, Netflix’s app is “free” to download, but it doesn’t do anything, unless a user signs up for a subscription on Netflix’s website. Netflix does not want to pay Apple for in-app subscriptions, so users cannot sign up for Netflix from within the Netflix app. I have no data for how many “free” apps fit into this category, but the category includes nearly every app that is a native front-end for a digital service accessible via the web.

But What About the Consumers?

Apple isn’t going to give up 15-20% of their yearly profit or even be willing to cut it in half. Can they afford to? They don’t need the cash in order run the company. But would the stock market accept permanently reducing profit by any amount to placate developers? Only if the alternative is that huge developers, en masse, leave the App Store. And while all developers would benefit by Apple taking less profit from them, most of the profit Apple already generates from the App Store comes from big gaming companies, and most of the money for digital transactions left out of the App Store come from huge companies like Meta, Google, and streaming services. All these regulations set the rules of engagement for the world’s largest companies, not small developers, and certainly not consumers.

There are three ways App Store deregulation could help consumers: 1) to lower prices of in-app purchases, 2) to simplify in-app purchases, and 3) to offer consumers the ability to install apps Apple doesn’t allow in the App Store.

First, I would note that I have never seen a consumer advocacy/watchdog group complain publicly that Apple’s App Store policies hurt consumers. Developer advocates, free capitalism advocates, anti big-business advocates, sure. But most consumers seem pretty happy, or at least not unhappy, with using the App Store. Consumers spend more and more money, every year, in the App Store. Apple and developers make more money, every year, in the App Store. From a consumer’s perspective, the App Store is working.

It’s theoretically true that, if an costs $10 in the App Store, and Apple takes $3 of that purchase (leaving the developer with $7), selling that app directly to the consumer could be done for less than $10, while still allowing the developer to keep $7. But would developers do that? They wouldn’t have to. And, if the developers want to be more profitable, that means they want to keep more than the $7 they earn from the sale with Apple. Does that mean they sell the app for $9 and keep $8? Maybe. Or, more likely, they continue to sell the app for $10 and keep $9. Why wouldn’t a developer want to have the same profit margin from an in-app purchase as it does from a web purchase? They would, and that’s fine. But that doesn’t help the consumer. It maintains the status quo.

In-app purchasing with the App Store is pretty darn easy. But it’s possible third-party developers could build even easier and more secure payment methods than Apple. Having competition in this area could benefit consumers. Or not. Forcing a consumer to enter billing information into a web page within an app is not as easy or as nice as Apple’s in-app purchasing system, and it may be less secure. It also forces the consumer to deal directly with the developer, and/or the payment processor, for refunds or resolving issues. For the consumer, that is not better or easier than dealing with Apple, which, much to developers’ chagrin, has been incredibly generous in refunding purchases.

Apple’s customers, however, are at a disadvantage with developers who refuse to use Apple’s in-app purchasing system. Netflix won’t let Apple customers sign up for a subscription directly in the Netflix app because Netflix doesn’t want to give Apple a percentage of the revenue. For an iPhone user who wants to download the Netflix app and sign up for Netflix, this makes the experience worse. Whether you want to view this as Apple’s fault for being greedy, or Netflix’s fault for being greedy, the consumer suffers. I assume nearly all developers would include a way to purchase a subscription/digital good within their app if Apple didn’t demand a cut of the revenue. For consumers looking to in-app purchases in apps that currently offer no in-app purchasing, regulation here could help the consumer.⁷

Finally, there’s the reality that Apple rejects some apps and categories of apps that consumers want. I don’t consider it anti-consumer for Apple to exclude these kinds of apps from the App Store. Best Buy and Gamestop aren’t required to sell any app or game that wants to be there. But it is anti-consumer to not let developers give or sell these apps directly to customers. Gruber has a good analysis of Apple’s position regarding third-party distribution, namely that Apple decided the DMA’s use of “or” is exclusive when it says gatekeepers must allow installations from third-party developers “or” third-party marketplaces. Apple decided this meant it could limit sideloading to third-party marketplaces, i.e. alternative app stores and not have to allow developers to directly sell or give away apps to consumers. Apple requires anyone who wants to create a third-party marketplace to 1) be a company and 2) post a letter of credit for €1M. Even for free apps, you’d have to pay Apple for installs over 1 million per year. It’s hard to imagine a marketplace of free emulators existing if it has to fulfill those requirements. This is Apple saying it is not giving consumers the ability to add any apps they want, but Apple will give developers the opportunity to sell apps differently, if there’s money in it for Apple.

Governments around the world can craft regulations that give consumers more choice, but they haven’t done that here. While I have sympathy for a small business developer who needs another 20% in revenue and has no other way to get it than from Apple’s 30% cut, I’m not sympathetic to Spotify, Meta, or any of the big gaming companies. I’m not especially sympathetic to Apple, and if Apple wanted to help its customers, it would start taking steps to curb how financially addictive its platforms’ games are.

All I want is for Apple to offer a developer account to anyone who wanted to distribute free, non-revenue-generating apps outside the App Store and a way for Apple’s customers to download those apps directly from developers.