I got most of my thoughts about Apple’s financial results and comments on its quarterly call with analysts in my Macworld column this week, but having slept on it, there’s one Tim Cook comment that I think is worth highlighting.
Cowen and Company analyst Krish Sankar asked Cook “a big picture philosophical question” about a risk to Apple’s business that isn’t as easily analyzed as traditional business risks: regulation.
One of the concerns many investors have is about the overhang of regulatory risks. And I understand it’s very hard to handicap that, but I’m kind of curious, do you think giving more public disclosure on a services business like App Store would help alleviate some of those concerns?
Sankar’s approach to the question is a bit odd—would Apple being more transparent about the App Store really reduce the chances of it being regulated? But it generated this answer from Cook:
I think with the regulatory questions and scrutiny, we have to make sure that we’re telling our story and why we do what we do. And we’re very focused on doing that. If we feel that more disclosure would help, we would obviously move in that direction. The App Store and other parts of Apple are not cast in concrete. And so we can move and are flexible with the times. For example, on the App Store, just a couple of quarters ago we lowered the commission rate for small developers to 15%. So that was an example of moving with the times and we’ve gotten a great, great reception to that. And so we continue to learn and I think it’s very important that we’re very clear about why we do what we do. The idea behind curating the App Store in order to get the privacy and security that our customers want, I think is very important. And we have to convey that in a very straightforward manner.
Why did it take until fall 2020 for Apple to cut the App Store percentage to 15% for most developers? Most likely because until fall 2020, Apple didn’t feel quite as much pressure from regulators, politicians, and major app developers, all of whom are suggesting that Apple’s App Store policies are anti-competitive and rent-seeking.
I’m happy for all my indie developer friends, all of whom are going to get a lot more money from the App Store now that they get 85% of revenue. But that move wasn’t made by Apple out of charity or compassion—it was made out of self interest. Once it made the cut, Apple has been able to cite it repeatedly as an example of how it’s changing to be more fair to developers.
In Cook’s statement Wednesday, he referenced the move again, and then said that Apple’s App Store policies “are not cast in concrete” and “can move… with the times, while the company “continue[s] to learn.”
In some ways, I think that might be one of the most truthful statements Apple has made about this issue. You could read Cook as saying, essentially, that Apple knows its policies can change, and if “the times” (read: sentiment toward Apple by people with the power to force it to change its business model) warrant it, it will change as needed.
I’m glad Sankar asked this question because I think sometimes this issue gets lost or downplayed when people consider the health and future of Apple’s business. At this point, one of the biggest risks to Apple’s business is that a regulator, judge, or political body will force the company to tear its business model (or itself) apart. For years, Apple’s attitude to criticism of its policies, especially regarding the App Store, was essentially “if it ain’t broke, don’t fix it.”
This statement by Cook reads to me as if he’s signaling that Apple will make more changes to its policies if it needs to do so to “move with the times.” He’s not talking about fashion there, he’s talking about the regulatory environment.
It remains to be seen if the company can get away with making enough limited changes to its policies to avoid the being forced to make wholesale changes by an outside body. That’s something Apple will continue to learn.
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