Apple has turned its walled garden into a labyrinth

Apple has been waging a policy war against regulators around the globe to defend the App Store’s 30% commission, and last week it took a particularly ugly turn in the Netherlands. It was Apple’s most brazen attempt to defend against an anticompetition challenge to the App Store to date, and it illustrates the extensive lengths to which the company will go to defend the iPhone’s walled garden.

This fight is about dating apps, but the implications are universal. After the Dutch competition regulator, the Authority for Consumers and Markets, began slapping Apple with weekly 5 million-euro fines for its failure to comply with a new law that allows in-app payment alternatives for dating apps, the iPhone-maker proposed a new solution.

• Instead of a 30% commission, Apple would take one that’s 27%, but it would make the process of qualifying and implementing that lower commission so onerous that it would effectively cost an app-maker the same, if not more, than sticking with Apple’s built-in option.
• “You can just feel how much they despise having to do any of this. They’re making non-App-Store payments as painful, expensive, and clunky as the regulators will tolerate,” wrote app developer Marco Arment, who said Apple’s solution here provides a roadmap to how it will likely try to skirt similar regulations in other markets for more than just dating apps.
• Outspoken Apple critic and developer Steve Troughton-Smith called it “absolutely vile,” adding, “Everybody on their executive team should be ashamed, and some of them should not be here when it’s all over. We all see you.”

Dating apps are lucrative, but mobile games are the gold mine. Apple has steadfastly defended its App Store policies and restrictions for years, and it’s done so more publicly of late in the antitrust lawsuit from Epic Games and in the many small concessions it has made to keep regulators at bay in the months since the Fortnite trial last May. At stake are its App Store revenues, which mostly come from games.

• Apple paid out roughly $60 billion to developers last year after taking somewhere between 15% to 30% of all in-app spending on digital goods. According to Sensor Tower, mobile gaming makes up roughly 67% of all in-app spending, with Apple generating close to double what Google does in store revenue.
• Apple has cited security concerns and privacy risks for its rules against sideloading and its restrictions on allowing alternative payment options. But Tim Cook, during his testimony in the Fortnite trial, also characterized Apple’s approach as a way to recoup R&D investment and help it maintain control over the iOS app ecosystem.
• Although Apple largely won its case against Epic, the company proceeded to successfully fight a court order that would force it to loosen restrictions on alternative payment systems. The order is now on hold pending ongoing appeals.

Apple may drag out App Store fights for years. The Netherlands and South Korea have so far attempted the most direct strikes against the App Store model to date, and Apple has responded by trying to circumvent regulations and make the lives of developers more difficult.

• South Korea is still awaiting a proposed solution from Apple, and Dutch regulators said they were “disappointed in Apple’s behavior and actions.” The ACM will continue to fine the company weekly until it comes up with a solution it deems compliant. (Meanwhile, Apple is appealing the ACM’s decision.)
• The U.S. is trying its own form of app store regulation with the Open App Markets Act and the American Innovation and Choice Online Act, both of which seek to limit Apple and Google’s power over in-app purchasing and other restrictions on third-party developers.
• Apple responded to the Open App Markets Act by sending a letter last week to the Senate Judiciary Committee saying the bill, which would permit sideloading, would allow social media companies to violate user privacy and security.

You may be wondering why a company that earned almost $100 billion in profit last year is fighting so vigorously for what is one of the smaller parts of its business. But as the Fortnite trial made clear, Apple sees the App Store and its control over the iOS app ecosystem as paramount to the iPhone experience and a vital sector of its services business, which has become one of Apple’s fastest-growing and most profitable divisions. Central to those healthy margins is the Apple Tax, which the company seems more determined than ever to defend to the death.

— Nick Statt

Overheard

“We’ve been playing catch-up against Web 2 for 10 years, cleaning up the fact that we didn’t have child safety in our minds… That will happen again with Web 3 unless we push the creators of those environments to do it differently.” —Sarah Gardner, vice president of External Affairs at online child safety nonprofit Thorn, spoke to The Washington Post’s Will Oremus for a report on the threat of child exploitation in Meta’s Horizon Worlds platform, which lacks rigorous safety systems to protect minors from abuse.

“Don’t believe what you read on the internet. HoloLens is doing great and if you search said internet they also said we had canceled HoloLens 2... which last I checked we shipped with success.” —Alex Kipman, a technical fellow at Microsoft overseeing its mixed reality division, pushed back against a report from Insider, which quoted anonymous employees expressing concern for the HoloLens’ future. Microsoft has lost nearly 100 employees to Meta as the AR and VR race heats up.

A MESSAGE FROM SAMBA TV

Samba TV operates the world’s largest independent source of first party connected TV data helping brands, agencies and content owners to plan, buy and measure all in one place. The State of Viewership report offers the industry’s most accurate insights into television viewing and advertising engagement. Download the report at www.samba.tv

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In other news

GameStop formalizes its NFT plans. The retailer is launching a token marketplace with blockchain firm Immutable X, along with a $100 million crypto fund the company plans to invest in NFT content creators and tech providers.

The Nintendo Switch became the company’s bestselling home console, with more than 103 million units sold over the last five years. Nintendo executives also dismissed the idea it would acquire a big game-maker of its own to compete with Microsoft and Sony.

Sony’s live service dreams. The PlayStation said on its earnings call last week it plans to use its acquisition of Destiny developer Bungie as a stepping stone to launch more than 10 live service games by 2026.

Google is trying to salvage Stadia. The search giant’s cloud gaming service has had a rough year, and now the company is trying to pivot the platform to an enterprise offering for other companies to license the tech, Insider reported. The consumer platform, on the other hand, has seemingly been left to wither.

Games-as-a-service may be consuming the industry. The live service model in the game industry is pressuring celebrated single-player developers like PlatinumGames. Newly appointed CEO Atsushi Inaba told Famitsu the studio is now looking at the model as a necessity for survival.

This is how war in AR looks. A first look at the U.S. Army’s mixed-reality helmet.

Firefox Reality is becoming Wolvic. Mozilla is winding down its AR/VR browser, but the project will live on under the stewardship of Igalia.

Rockstar finally confirms a new Grand Theft Auto. The next installment in the famed open-world series is “well underway,” Rockstar Games announced last week. There hasn’t been a new GTA game since 2013.

A MESSAGE FROM SAMBA TV

Samba TV operates the world’s largest independent source of first party connected TV data helping brands, agencies and content owners to plan, buy and measure all in one place. The State of Viewership report offers the industry’s most accurate insights into television viewing and advertising engagement. Download the report at www.samba.tv

Learn more

Sifu strikes a chord, in more ways than one

One of the hardest games I’ve played in recent memory is French studio Sloclap’s Sifu, a love letter to Chinese martial arts that was released this weekend. The game forces you, through excessive repetition, to become a master of its fine-tuned combat system until you’re deftly dispatching entire crowds of thugs, all with an array of blunt weapons you scavenge from your surroundings alongside your trusty fists and feet. It’s beautiful and a blast, when you’re not dying repeatedly to the same foe.

But Sifu is not without its share of controversy. The game is dredging up a familiar debate around video game accessibility. There are no difficulty settings, and large swaths of casual gamers, not to mention those with disabilities, may find the game impossible to complete. It’s also a setting and story mired in Asian tropes and stereotypes that's made by an all-white Western team, leading to some deserved and thoughtful criticism.

Sifu is by no means perfect, and many of its flaws it does wear on its sleeve. But it’s also a rare indie gem that manages to blend style, substance and unique game mechanic twists into an experience that lives up to the hype. I haven’t managed to beat it yet. But the more I play, the more determined I am to succeed and the more confident in my abilities I become. For that, I’m grateful for games like Sifu.

— Nick Statt