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Australian court is the latest to attack Apple on behalf of rich corporations

Phil Schiller (left) and Steve Jobs with the first online App Store promo

Apple Fellow Phil Schiller has been testifying in an Australian Federal Court about the origins of the App Store in 2008, and it's just the latest example of pointless attacks on the company.

Let's be clear — Apple has apparently shafted suppliers, and its illegal anti-union measures are shameful, but it doesn't get criticized for any of that. What it gets hauled over courts for is the fact that it has the temerity to charge 30% for sales made through its App Store.

Apple is further hounded for how it tears 30% out of the hands of every developer, big or small, rich or poor — and of course it doesn't.

If you listen to its critics about this, if you listen to the questioning that The Australian reports is now being put to Apple, you would think that it's end of the world type stuff. That Apple is an affront to human decency because it charges a fee.

And every attack on Apple for this is being made on behalf of each of us individuals. We have been systematically robbed by the trillion-dollar Apple corporation, apparently, and it is only through the likes of other corporations like Spotify and Epic Games that we will ever see justice.

You just have to ignore that these selfless other corporations simply want you to be paying them instead of Apple. None of them would be pretending to stand up for the little guy if it were their pockets that the money was going into.

A 30% fee is fine, even if it was 30% across the board. It was fine in 2008 when the App Store started and it remains fine today — even though Apple often does not charge that full amount.

As it has from the start, Apple gives a free ride to any app that is itself free. It gets all of the benefits of being on the store without any of the costs.

Otherwise, the 30% figure is just one of several fees Apple levies. If your app is a subscription one, for instance, then you are charged 30% for a subscriber's first year — but then only 15% for each year thereafter.

Developers can also apply to pay only 15% under Apple's Small Business Program, introduced in 2020. A developer qualifies for this if their app income is less than $1 million annually.

There are also apps that are collectively known as reader ones, where users consume previously or separately bought media. So the Amazon Kindle app is free and Amazon pays no fees, for instance.

How we used to live

If developers disagree with all of this, take away the App Store. Take us back to when software came in boxes.

It cost money to make those boxes, to make the CD-ROMs that went in them. It cost cash to distribute those boxes to stores around the US.

And then those stores had to be paid. Not only did they of course require a cut of the retail price, since that is literally how their business has to work, but there was more.

Stores had limited shelf space so to get a product onto them was not easy. If something is wildly popular then the store would be daft not to just put it there, but nothing gets to be wildly popular out of nowhere.

So firms had to pay the stores to display their products. This still happens today — go into a supermarket and those goods positioned prominently at the ends of rows have paid to be there.

If you were a developer selling software before there was an App Store, you would have been extraordinarily lucky to receive 30% of the retail price you set.

Compare that to the App Store, where there is no fee for being on it, there is no finite shelf space, and there is no distribution cost. Plus the App Store instantly gets you global distribution, not just the US, and Apple handles the madly complex worldwide tax systems for you.

Every app from every developer, of any size, got that potential exposure the moment the store opened in 2008 — and they even got it for nothing, if their app was free.

Apple made money when you made money — and according to Phil Schiller, that wasn't even a real consideration. Under cross examination by Neil Young, KC, for Epic Games, Schiller said "We knew we were going to generate revenue [but] we didn't set it up as one of two goals we articulated."

It's not clear what those two goals actually were, but it's easy to see that Apple's focus was really on selling more iPhones. It's possible that the second goal was to have the potentially large costs of running the App Store be paid from its earnings.

"Are you telling His Honour you made the decision without any investigation into what stream of revenue would be produced by imposing a commission of 30 per cent?" asked Young.

"Correct," replied Schiller.

Schiller further said that he didn't recall ever looking at any risk/benefit analysis, nor any financial estimates, when the decision was made to create the App Store. He also said that he had not realised that the decision was a major one until after it was launched and became the success it did.

Much is being made in the Australian court of this unusual approach to create a revenue-generating business, and in particular how there is very little documentation from the time. The implication is that this lack of documented evidence was in some way deliberate, but Schiller says it's just how things were.

"I'm not trying to be difficult," he said at one point. "When [Steve] Jobs came back in 1997 he set this process up."

"In one of the earliest meetings... someone was taking notes," said Schiller. "He stopped and said why are you writing this down? You should be smart enough to remember this."

According to Schiller, most executives stopped taking notes after that.

Person presenting on stage with slide showing app icon and text about app development revenue, fees, and DRM.
Steve Jobs announcing the App Store in 2008. The fee structure got applause

Schiller makes Apple sound like more the kind of company it was when it started out in a garage, than now when it is a trillion-dollar worldwide success. Perhaps it still was, back in 2008, when it was doing well but was really only on the cusp of becoming what it is today.

The App Store was certainly a major contributor to Apple's ultimate success, but Apple made that store just like it made the iPhone. No one had to buy the iPhone, just as no one had to go on the App Store.

Having countless trials now, and even whole countries regulating over practically imaginary consumer harm, is a waste of court time. It is a boon for lawyers, it has the potential to be of great value to rival corporations, and it does nothing for us consumers at all.

Apple is not some faultless hero, not even close, but its failings are nothing to do with the App Store. Pretending that they are is just lining the pockets of other firms who wish they'd had the same success.