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Is Apple's control freakery out of control?

Mike Elgan | July 28, 2015
Apple makes money. A LOT of money.

Apple bans apps from giving purchase alternatives

You may have heard that the federal government is looking into the App Store "tax."  The Federal Trade Commission is exploring the fairness of Apple's "agency" model for streaming music. (And, right on cue, grandstanding Sen. Al Franken (D-Minn.) is trying to get in front of that parade.) The model? Apple takes a 30 percent cut of anything users buy while using a third-party iOS app.

This can be an existential problem for music streaming apps, especially since Apple recently launched its own $9.99 per month Apple Music service.

If, say, Spotify matched Apple's $9.99-per-month price for subscriptions bought while in the Spotify app, Apple would get about $3-per-month of that, and Spotify would get only about $7 -- which would mean Spotify would lose money on each subscription. That's why Spotify has to charge $12.99 per month when users sign up in the iOS app.

You might wonder why Spotify doesn't just link to the web sign-up, where Apple wouldn't get a cut and where Spotify can make more by charging $9.99. (Spotify would make more because at the $12.99 price, Apple gets about $4 and Spotify gets about $9.)

This is precisely where Apple's control freakery comes in. Apple prohibits Spotify and all app developers from linking to -- or even telling users about -- a place to sign up that's outside the app.

This policy isn't new, and it's not restricted to music streaming apps. What's new is Apple Music -- and the FTC's investigation.

That's not the only place where Apple restricts speech in the App Store.

Apple bans reviews for iOS 9 beta testers

Apple last week removed the option to leave reviews for people running a pre-release beta version of iOS 9. The reason is that the yet unfinished operating system won't allow all apps to run perfectly, and Apple doesn't want third-party apps to suffer bad reviews caused by the beta.

That's fair to the app developers. But it's a significant and unprecedented act of controlling the speech of users.

The $700 billion question

(At deadline, Apple's market capitalization was more than $700 billion.)

Apple dominates the consumer electronics and computer industries, at least from a business perspective. Its valuation as a company is higher than Google and Microsoft combined. Out of the 1,000 or so companies that make smartphones, Apple by itself makes 92 percent of the profits.

Today's Apple, and much of its success, can be attributed to Apple co-founder and Chief Control Freak, Steve Jobs.

Does Apple's industry success and insurmountable dominance enable its unprecedented control over all aspects of its stores? Or is the control freakery itself the secret to Apple's success?

 

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