The Six Five team discusses Apple makes changes based on DMA.
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Transcript:
Daniel Newman: Apple … a big European moment. Pat, are we going to side load this app onto our phones or what?
Patrick Moorhead: Let me give a little bit a background on it. The EC issued what was called the Digital Market Act, hence DMA, that they say will ensure fair and open digital markets. One of the premises of it is that there were these gatekeeper companies, I’ll call them monopolists for short. By the way, it’s not against the law to be a monopolist, it’s against the law to use monopolistic power to decrease competition or, as we’ve seen, the theory of you could sometimes tenure in the years in the future to it, but who’s a gatekeeper? Strong economic position, big impact on eternal market, very active in EU companies. That’s one. Strong intermediation position, large user base to a large number of businesses and third, an entrenched and durable position market that’s stable over time. Boy, that sounds like Apple, Apple and the app store there.
What this means, and we saw this with Meta which, I don’t know, maybe we’ll talk about in the next episode. They had to unlink different properties between WhatsApp, Instagram and Facebook but essentially, they wanted Apple to be more open market with the app store, meaning they wanted companies to be able to offer applications that users didn’t have to pay 30% because Apple has a 100% monopoly position in that right now. The second thing of it was payment: have an alternative payment methodology here. There’s a couple more, but essentially what that meant is that Apple … you will be able to sideload applications. They’ll have third-party stores.
Now, it’s interesting. Apple is … you can just read in their press release how angry and bitter they are on this. They’re finding ways that I think some people would say is slimy, which is adding side loading … new commissions structures. Essentially, you have to use a certain scale of bank if you want to put an app store in there. On one side of it, I can see that keeps slimy companies from coming in there, but it looks like Apple, instead of opening it up, it actually just put up a smaller wall. I know here in the United States they’re talking about even if you make a transaction … Dan, listen to this: on a Safari browser, you will get hit if you’re a developer with this.
Here’s my final comment. People bellyaching about any of these changes in the spirit of security and I don’t know, some people like censorship … we wouldn’t be here if Apple hadn’t been so greedy. Think about it. If you’re a developer … not just a developer, 30% to buy the software but, if you’re a video streaming company, a music streaming company, I have a subscription for 10 years to an health app. Pay you 30%? Apple, what were you actually doing for that 30%? You had some edge networking, you have servers that put, I don’t know, 100 megabytes of code that you can download. You have a payment facility that’s in there. For some apps, you even have to pay extra if you want to put the data on Apple servers. 30% across tens of billions of dollars in revenue. There’s a reason, folks, that Apple never disclosed gross margins for the app store and that’s because they were huge. By the way, nothing wrong with making money but at some point, you have to align value with your pricing, otherwise, you’re going to get into a mess like you got in here.
Apple, I hope you learn a lesson here. US regulators, you’re wasting time on Amazon buying a vacuum cleaner company. I know you’ve opened up a ton of investigations on this, but you need to bring this to the US and you need to also stop these smaller walls, like charging 10% for me buying something if I’m using an Apple browser.
Daniel Newman: All right, I want to move quick because we’ve still got another topic and I’ve got a call at the top of the hour. Sorry, everybody.
Patrick Moorhead: We’ve got 12 minutes, Dan.
Daniel Newman: Being on all day … this is a good one, though. First and foremost, I think you covered a lot of the specifics of it, Pat. Here’s the reason I don’t think it’s bigger news is because Europe. All right, I’m just going to pause there. Europe is the ultimate tax for any technology company and by the way, when it comes to things like privacy and security, they tend to be more on the right side of where I think we need to be going. Having said that, they’re also notorious for just loving to tax companies for innovation. There’s always a grain of salt taken when the first fines come down from Europe. Look, Apple plays dirty, it’s always played dirty, but it has great technology that people like to use and for the average user, they don’t really care.
I think this is one of those things where you have to separate the consumer harm and the competition harm. From a consumer standpoint, I don’t think most users care about having more marketplaces, I just don’t. From a innovation and from a competition standpoint, it’s problematic. Apple, like you said, I think you put it really well, Pat, very, very greedy. I think along the way, had they been a little less greedy, they probably could’ve kept the monopoly because they could have said, “Look, I get it, but we’re only charging 18%, not 30%.”
Patrick Moorhead: Well, they threw out some bones to smaller developers and we now know based on the disclosure between Google and Apple they cut special deals with some of the bigger companies, but not with others.
Daniel Newman: The bottom line is … it’s weird because here in the US, I know it’s a different case, but the Epic/Apple thing fell on its face. I hear what you’re saying. “Let’s bring it here.” I don’t think Lina Kahn has the gall to take it on. She’s batting .000, so she’s spending all her time trying to figure out any case she might be able to win which now, she’s shutting down the Roomba. “Oh, God, I can’t get my vacuum from Amazon.”
The bottom line, Pat, is what’s going on here is really complicated. You’ve got multiple ecosystems. If you actually read through this thing, I just feel like Apple’s just going to find new ways, because there’s no way they’re just going to walk away from all this revenue, they’re going to find new ways to… Hey, you were talking about the smaller walls and the smaller fees. It looks like they’re just finding new ends to charge rather than this very blunt, big fee that they charge all the developers and all these different transaction costs. They’re going to find new ways because there’s no way they’re going to just let this revenue run away.
Having said that, Pat, I think it’s a good start. I think it’s a good start. I think it’s good to see somebody had the guts to take them on and win. Then, the other thing, Pat, is if they don’t do enough, there’s a lot of risk out there for them. They could have to pay up like 10% of their annual turnover potentially if the EUEC says, “This is not enough,” Pat, but this is good. Here’s what I say about this: this story ain’t over. This is not over yet. This is going to be a continued story but, until the US actually takes meaningful action, I think it’s always going to be a bit of a sideshow in Europe. Let’s see what happens, Pat, but it was a step in the right direction to finally make Apple at least have to chew its own cud and swallow it. You could see in that press release it came out, it came back out in a less than a desirable way. All right.
Patrick Moorhead: Hey, just to loop back, the EU has 448 million people, the US has 300 and change. It’s a sideshow for B2B, but not a sideshow for B2C.
Daniel Newman: Here’s where it-
Patrick Moorhead: Or maybe I completely misunderstood your point.
Daniel Newman: … No, you’re right. What I guess I’m saying is that, when Europe comes and slaps a big tech company now with a fine and makes them change something, everyone’s like, “Yeah, they do that four times a year and they make people pay.” What I’m saying as a whole … Wow, you got some fan. Secret fan.
Patrick Moorhead: A lot of fans today, we’ve got-
Daniel Newman: …yeah…
Patrick Moorhead: … but I don’t even know who it is. We must not be connected, but Matt Hamblin, John Hedgwick, and Mohammed is a dedicated watcher. We appreciate you, Mohammed, coming in every single week. Thank you.
Daniel Newman: You know what, Pat? I’m not downplaying it, I’m just saying Europe … it’s like a merry-go-round: Google, Microsoft, Qualcomm. Every year, it’s a merry-go-round of just…
Patrick Moorhead: They’re very similar to China in that they do a lot of the taxation, but the difference is that China’s very open about it. We saw the documents on China with Qualcomm and they’re like, “You’re charging too much. We need you to charge this.” Qualcomm did and everything was fine.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
