News Information and Media Site: Byers Market: Tim Cook's App Store fight, and Apple's reputation

August 17, 2020

By DYLAN BYERS in Los Angeles &

AHIZA GARCÍA-HODGES in San Francisco

Good morning. 🇺🇸 The Democratic Convention, a pared-down event mixing live and prerecorded speeches, kicks off today. Joe Biden accepts the nomination, virtually, on Thursday.

🗳️ State of the Race: Biden leads President Donald Trump by 50 percent to 41 percent, per Sunday's NBC News/WSJ poll.

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🍎 Moving the Market

Tim Cook's App Store fight, and Apple's reputation

Epic Games' move to challenge Apple over its App Store commission fees has drawn the public's attention to longstanding frustrations that businesses large and small have with the iPhone giant, a move that threatens to chip away at the largely positive reputation Apple has built for itself over several decades.

• The big picture: Apple's problem isn't that Epic Games sued it (others, most notably Spotify, have sued Apple). Its problem is that Epic is mobilizing 350 million "Fortnite" players against it, creating a bandwagon for other companies to jump on, and doing all this while Apple faces antitrust scrutiny in Washington.

Forget, for a moment, that Tim Cook could mount a logical defense of the 30-percent fee that Apple charges some developers. That's the industry standard. The problem is that several popular companies — Epic Games, Spotify and even Netflix — have all said in one way or another that they're not willing to play by those rules.

• Even Facebook has jumped on that bandwagon. On Friday, it accused Apple of hurting small businesses by refusing to forego its fees. Tech insiders and media can debate how much moral leverage Facebook has with the American consumer, but the accusation is out there and, in the context of all the above, it doesn't look great.

• To be sure, the vast majority of Netflix, Spotify and Facebook users don't care about any of this. But now that "Fortnite" is no longer available on the App Store (or Google Play), there are a lot of Epic Games' players who do care about it. Search for #FreeFortnite on your preferred social media platform, and you'll see what I mean.

• Now, combine this Fortnite army with the criticism of powerful companies like Spotify and Netflix, as well as the mounting scrutiny in Washington, and you're beginning to see a public relations battle that could start to do some not-insubstantial damage to Apple's larger reputation not just with developers, but with consumers.

• "Reputational damage" is uniquely important for Apple, and not just because it touts some of the highest customer satisfaction ratings in hardware. Apple leadership genuinely believes that it is moral, virtuous, even incorruptible, and that it always puts the consumer first. As importantly, it markets itself this way.

What's next: Apple isn't going to roll over and lower App Store fees or change its policy because of external pressure from Epic Games, much less Facebook. (Oh, to be a fly on the wall for the private conversations that Cook and his colleagues have about Tim Sweeney and Mark Zuckerberg.)

• However: At some point, Cook is going to have to look at the rising tide of protest — from an army of gamers, from Sweeney, Daniel Ek and Reed Hastings, from all the developers who want something better than the status quo, and from Washington — and ask himself what the moral and innovative response would be.

• Maybe Cook believes the 30-percent fee is the moral and innovative response, insofar as it allows Apple to maintain a business that creates opportunities for developers while protecting consumers. If so, he will still need to offer a more forceful articulation of that view. (As of now, Apple isn't looking to give this any oxygen).

• Alternatively, Cook will decide Apple can do better. Because if it is the moral and virtuous company it believes it is, and the one that always puts the consumer first, then merely going along with the status quo — and a status quo that is increasingly being criticized — doesn't make a whole lot of sense.

Market Links

• Mark Zuckerberg's QAnon problem gets real (NYT)

• David Shipley says Facebook shouldn't pay for news (BV)

• President Trump sets deadline for a TikTok sale (WSJ)

• Melinda Gates calls for greater leadership (NYT)

• Ben Smith bids adieu to Old Hollywood (NYT)

⚽ What's next: Sports. People are watching, per LAT's Stephen Battaglio: "Viewer response to the return of live sports on TV can be summed up in a paraphrase of the famous line from 'Field of Dreams' — if you build it, they will come."

See you tomorrow.