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> Apple under Tim Cook is more concerned about being profitable through rent seeking than making products that people are willing to pay a premium for. This ju

> Apple under Tim Cook is more concerned about being profitable through rent seeking than making products that people are willing to pay a premium for. This just does not match any available data. Look at where Apple gets the bulk of its revenue and profits: hardware products and optional services. Look at their investment: the bulk of it goes toward developing new products and acquiring new technical capabilities. Look at their pay services, none of which are required. You don't have to buy apps from the App Store; many apps are available for free, including almost all of Apple's own apps. You don't have to subscribe to Apple Music. You don't have to use iCloud for backups, for photo management, for anything, really. You don't have to use Apple Pay. Look at their open access to the Internet. You can load any website you want in Safari... don't want the Facebook app? Just go to facebook.com, it works great. Look at their most popular service, iMessage, which is still free. Look at their required software updates, which are all free. New iOS? Install it for free. New version of Garage Band? Download it for free. I think people are getting confused about what "rent seeking" actually means. Apple's paid services are upsells. Rent payments are not optional (just like paying rent for real estate--you have to live somewhere). Microsoft made tens of $billions charging for non-optional OS updates and application updates... that was rent seeking. Again: note that Apple does not charge for their software updates!

ballenf 8y ago
You may be strictly technically correct, but it doesn't reflect reality: - iCloud free tier is 5gb -- not enough for even a casual phone user with 1 minute 4k 60fps video (option on iPhones for 2-3 years now) takes 400mb. - The alternative to "paid" apps are ad-supported apps. You're paying either with your bank account or your data and attention. I don't think we should call this optional and otherwise encourage ad-based ecosystem. (And, side note, I argue Apple should also tax ad revenue to prevent the current artificial advantage ad revenue has over IAP.) The rent seeking point from Stratechery is taken directly from Apple's own earnings calls where they are now measuring their success based on revenue from this rent-seeking instead of on devices sold. Whatever is measured will drive the company focus. To sell more devices they have to innovate and increase excellence. To increase rents they have to wring more and more $$ from existing users (with a secondary focus on increasing the hassle of switching). Apple themselves explain that they have shifted their focus from the former to the latter.
- scarface74 8y ago
  And to add on, many of the “free apps” make money via in app consumables - mostly games. There is a reason why the top grossing apps are games like Candy Crush and Clash of Clans.
- votepaunchy 8y ago
  > - iCloud free tier is 5gb -- not enough for even a casual phone user with 1 minute 4k 60fps video (option on iPhones for 2-3 years now) takes 400mb. To note, there are a plethora of apps offering to backup users' photos and videos ... Google, Dropbox, OneDrive, etc.
- IBM 8y ago
  >The rent seeking point from Stratechery is taken directly from Apple's own earnings calls where they are now measuring their success based on revenue from this rent-seeking instead of on devices sold. I don't follow how talking about it on earnings calls makes it "rent seeking". The App Store cut has only gone down since it was launched (for subscriptions after a year).
- snowwrestler 8y ago
  > The rent seeking point from Stratechery is taken directly from Apple's own earnings calls where they are now measuring their success based on revenue from this rent-seeking instead of on devices sold. I challenge you to find one instance of Apple describing their own strategy as “rent seeking”. Again: people are getting confused. Optional paid services are not the same thing as rent seeking.
  - scarface74 8y ago
    Rent seeking is the amount that Apple charges for media it sells.
jeremy7600 8y ago
It matches this available data: Apple sure as hell gets rent from their patents. And you don't even have to buy Apple to give them this rent.
- vlozko 8y ago
  I'd like to see any significant report indicating that Apple is making serious money off its patents and is trying to push more into that business. Besides, patent agreements aren't exclusive to Apple; I'm sure a portion of my iPhone purchase is going to Microsoft.
  - scarface74 8y ago
    And Google bought Motorola basically for its parents and then sold all of it off but it’s patrntd.
Y7ZCQtNo39 8y ago
Removing the 3.5mm headphone jack was pretty rent seeking-- they hoped you'd buy the AirPods instead. It wasn't deliberately stated, but it would be in poor taste for them to state it as such. The headphone jack removal wasn't comparable to past deprecations, like removing the CD drive from laptops -- which provided a significant new amount of space in the chassis.
- scarface74 8y ago
  Or you could buy any other Bluetooth headphone, use the adapter they included for two years or use the included headphones.
  - Y7ZCQtNo39 8y ago
    The hope is that you'd buy the Apple-branded one. Obviously Bluetooth is an open standard -- but that was the business intent. An adapter is less convenient to use than having the Headphone jack on the device. Is it really that farfetched to think they removed the Headphone jack to increase profits? Clearly, I'm arguing for it, but if this absolutely out there, I'd like to be brought back more sensible thought processes. Not even the included earbuds with an iPhone purchase come with a 3.5mm jack. It's Apple's proprietary port, so you can only use Apple's wired earbuds with Apple products.
    - scarface74 8y ago
      You mean a company desires for you to buy more stuff from them...amazing. But why would you think that removing the headphone jack, and including lightning headphones, including an adapter for two years, and supporting standard BT would entice someone to spend $150 when they go to the Apple Store instead of buying wireless headphones?
      - Y7ZCQtNo39 8y ago
        It actually has a different result, for someone like myself: it makes me not buy a new iPhone at all. I like the ability to charge my phone and listen to music simultaneously, without having to worry about my headphones also dying. Usually this is in a travel scenario.
clairity 8y ago
> "> Apple under Tim Cook is more concerned about being profitable through rent seeking than making products that people are willing to pay a premium for." > "This just does not match any available data. Look at where Apple gets the bulk of its revenue and profits: hardware products and optional services." you seem to be looking backwards but the statement you rebut is forward-looking. yes, apple historically made its profits on hardware, but the point the parent and the article is making is that apple's business model is changing toward services and rent-seeking through its platforms like the app store. > "Rent payments are not optional..." the 30% apple charges for apps is not optional. as implied by the article, apple could charge 50% and developers would have no choice but to eat that cost.
- zepto 8y ago
  Services are not rent seeking.
  - clairity 8y ago
    sure, but totally beside the point.
    - zepto 8y ago
      “the point the parent and the article is making is that apple's business model is changing toward services and rent-seeking through its platforms like the app store.” If you take out the mention of services, this statement becomes false.
- snowwrestler 8y ago
  Apple’s gross margin is typically around 37% or 38%. I don’t see how charging a 30% service fee is going to improve profitability. Apple is trying to grow profits via paid services like Apple Music or Apple Pay, but those are optional upsells, not rent seeking.
aetherson 8y ago
You're misunderstanding what the phrase "rent seeking" means. It doesn't have to do with how essential a product or service is. The point of a rent, in economic terms, is that the person who is selling it does not add substantial value to the product or service. They just leech value. The analogy is to someone who holds ancestral lands and rents them out unimproved. They get some chunk of the economic value that the land produces, without ever having put their own labor or their own capital into the transaction. The argument is that the 30% fee that Apple charges on the app store is a rent in the software produced by other parties, with Apple adding little to the transaction.
- tptacek 8y ago
  Besides the app store itself, and the process by which Apple grooms apps for suitability for that store, and the payment processing system that enables people to buy apps without busting out a credit card?
  - aetherson 8y ago
    Yes, I agree that the argument is not watertight. The counterargument is, "Okay, so let there be multiple app stores on iOS, that compete with each other, and let the market price that package of services." But regardless, let's not talk about whether Apple is providing luxuries or necessities -- that's not what rents are about.
  - eridius 8y ago
    And besides all of the work Apple does to develop and maintain the APIs and frameworks that apps use?
  - solarkraft 8y ago
    What if I don't want these "services"?
    - tptacek 8y ago
      Whether you want them or not has little to do with the question of whether the App Store is rent-seeking, which is the question I was addressing. Rent-seeking isn't another term for "I don't like it".
ksec 8y ago
How much does it cost to run, from Programmers to Hardware infastructure for iMessages ( Free ), App Store ( Free ), iCloud 5GB per account ( Free )? I am betting less than $2B a year. Apple gets $9 Billion from Google just for being default search engine. And people continue to mix this "Services" Revenue from App Store as investment to Software, Garage Band, iWork, iOS Development etc.... They had been part of the product cost for YEARS before the 30% cut. Apple didn't need App Store revenue to continue developing OSX when iPhone didn't exist. It is what makes software as an industry so profitable in the first place, the cost of making the same software is the same regardless of 100 customer of 100 million customer. And now Apple has 800 million iPhone customers, or 250M customer every year. I say this again, most developer aren't really concern with the 30% cut as it is, people not happy because they are not getting enough value from it. If Apple had offer additional developer services from that 30% cut it would have made them easier to swallow. Instead Apple is just happily collecting cash and do nothing.

ballenf 8y ago

You may be strictly technically correct, but it doesn't reflect reality: - iCloud free tier is 5gb -- not enough for even a casual phone user with 1 minute 4k 60fps video (option on iPhones for 2-3 years now) takes 400mb. - The alternative to "paid" apps are ad-supported apps. You're paying either with your bank account or your data and attention. I don't think we should call this optional and otherwise encourage ad-based ecosystem. (And, side note, I argue Apple should also tax ad revenue to prevent the current artificial advantage ad revenue has over IAP.) The rent seeking point from Stratechery is taken directly from Apple's own earnings calls where they are now measuring their success based on revenue from this rent-seeking instead of on devices sold. Whatever is measured will drive the company focus. To sell more devices they have to innovate and increase excellence. To increase rents they have to wring more and more $$ from existing users (with a secondary focus on increasing the hassle of switching). Apple themselves explain that they have shifted their focus from the former to the latter.

scarface74 8y ago
And to add on, many of the “free apps” make money via in app consumables - mostly games. There is a reason why the top grossing apps are games like Candy Crush and Clash of Clans.
votepaunchy 8y ago
> - iCloud free tier is 5gb -- not enough for even a casual phone user with 1 minute 4k 60fps video (option on iPhones for 2-3 years now) takes 400mb. To note, there are a plethora of apps offering to backup users' photos and videos ... Google, Dropbox, OneDrive, etc.
IBM 8y ago
>The rent seeking point from Stratechery is taken directly from Apple's own earnings calls where they are now measuring their success based on revenue from this rent-seeking instead of on devices sold. I don't follow how talking about it on earnings calls makes it "rent seeking". The App Store cut has only gone down since it was launched (for subscriptions after a year).
snowwrestler 8y ago
> The rent seeking point from Stratechery is taken directly from Apple's own earnings calls where they are now measuring their success based on revenue from this rent-seeking instead of on devices sold. I challenge you to find one instance of Apple describing their own strategy as “rent seeking”. Again: people are getting confused. Optional paid services are not the same thing as rent seeking.
- scarface74 8y ago
  Rent seeking is the amount that Apple charges for media it sells.

jeremy7600 8y ago

It matches this available data: Apple sure as hell gets rent from their patents. And you don't even have to buy Apple to give them this rent.

vlozko 8y ago
I'd like to see any significant report indicating that Apple is making serious money off its patents and is trying to push more into that business. Besides, patent agreements aren't exclusive to Apple; I'm sure a portion of my iPhone purchase is going to Microsoft.
- scarface74 8y ago
  And Google bought Motorola basically for its parents and then sold all of it off but it’s patrntd.

Y7ZCQtNo39 8y ago

Removing the 3.5mm headphone jack was pretty rent seeking-- they hoped you'd buy the AirPods instead. It wasn't deliberately stated, but it would be in poor taste for them to state it as such. The headphone jack removal wasn't comparable to past deprecations, like removing the CD drive from laptops -- which provided a significant new amount of space in the chassis.

scarface74 8y ago
Or you could buy any other Bluetooth headphone, use the adapter they included for two years or use the included headphones.
- Y7ZCQtNo39 8y ago
  The hope is that you'd buy the Apple-branded one. Obviously Bluetooth is an open standard -- but that was the business intent. An adapter is less convenient to use than having the Headphone jack on the device. Is it really that farfetched to think they removed the Headphone jack to increase profits? Clearly, I'm arguing for it, but if this absolutely out there, I'd like to be brought back more sensible thought processes. Not even the included earbuds with an iPhone purchase come with a 3.5mm jack. It's Apple's proprietary port, so you can only use Apple's wired earbuds with Apple products.
  - scarface74 8y ago
    You mean a company desires for you to buy more stuff from them...amazing. But why would you think that removing the headphone jack, and including lightning headphones, including an adapter for two years, and supporting standard BT would entice someone to spend $150 when they go to the Apple Store instead of buying wireless headphones?
    - Y7ZCQtNo39 8y ago
      It actually has a different result, for someone like myself: it makes me not buy a new iPhone at all. I like the ability to charge my phone and listen to music simultaneously, without having to worry about my headphones also dying. Usually this is in a travel scenario.

clairity 8y ago

> "> Apple under Tim Cook is more concerned about being profitable through rent seeking than making products that people are willing to pay a premium for." > "This just does not match any available data. Look at where Apple gets the bulk of its revenue and profits: hardware products and optional services." you seem to be looking backwards but the statement you rebut is forward-looking. yes, apple historically made its profits on hardware, but the point the parent and the article is making is that apple's business model is changing toward services and rent-seeking through its platforms like the app store. > "Rent payments are not optional..." the 30% apple charges for apps is not optional. as implied by the article, apple could charge 50% and developers would have no choice but to eat that cost.

zepto 8y ago
Services are not rent seeking.
- clairity 8y ago
  sure, but totally beside the point.
  - zepto 8y ago
    “the point the parent and the article is making is that apple's business model is changing toward services and rent-seeking through its platforms like the app store.” If you take out the mention of services, this statement becomes false.
snowwrestler 8y ago
Apple’s gross margin is typically around 37% or 38%. I don’t see how charging a 30% service fee is going to improve profitability. Apple is trying to grow profits via paid services like Apple Music or Apple Pay, but those are optional upsells, not rent seeking.

aetherson 8y ago

You're misunderstanding what the phrase "rent seeking" means. It doesn't have to do with how essential a product or service is. The point of a rent, in economic terms, is that the person who is selling it does not add substantial value to the product or service. They just leech value. The analogy is to someone who holds ancestral lands and rents them out unimproved. They get some chunk of the economic value that the land produces, without ever having put their own labor or their own capital into the transaction. The argument is that the 30% fee that Apple charges on the app store is a rent in the software produced by other parties, with Apple adding little to the transaction.

tptacek 8y ago
Besides the app store itself, and the process by which Apple grooms apps for suitability for that store, and the payment processing system that enables people to buy apps without busting out a credit card?
- aetherson 8y ago
  Yes, I agree that the argument is not watertight. The counterargument is, "Okay, so let there be multiple app stores on iOS, that compete with each other, and let the market price that package of services." But regardless, let's not talk about whether Apple is providing luxuries or necessities -- that's not what rents are about.
- eridius 8y ago
  And besides all of the work Apple does to develop and maintain the APIs and frameworks that apps use?
- solarkraft 8y ago
  What if I don't want these "services"?
  - tptacek 8y ago
    Whether you want them or not has little to do with the question of whether the App Store is rent-seeking, which is the question I was addressing. Rent-seeking isn't another term for "I don't like it".

ksec 8y ago

How much does it cost to run, from Programmers to Hardware infastructure for iMessages ( Free ), App Store ( Free ), iCloud 5GB per account ( Free )? I am betting less than $2B a year. Apple gets $9 Billion from Google just for being default search engine. And people continue to mix this "Services" Revenue from App Store as investment to Software, Garage Band, iWork, iOS Development etc.... They had been part of the product cost for YEARS before the 30% cut. Apple didn't need App Store revenue to continue developing OSX when iPhone didn't exist. It is what makes software as an industry so profitable in the first place, the cost of making the same software is the same regardless of 100 customer of 100 million customer. And now Apple has 800 million iPhone customers, or 250M customer every year. I say this again, most developer aren't really concern with the 30% cut as it is, people not happy because they are not getting enough value from it. If Apple had offer additional developer services from that 30% cut it would have made them easier to swallow. Instead Apple is just happily collecting cash and do nothing.