Show an ad over header. AMP

Apple's fight to separate online from IRL

Apple's longstanding rule for calculating its cut of transactions enabled through its iOS App Store depends on an apparently simple principle: If a good or service is digital, Apple takes 30%. If the good or service is physical, Apple doesn't.

The catch: Life doesn't divide neatly that way any more.

The big picture: Even before the pandemic, the line between our daily activities and the online world had grown fuzzy, as apps enabled rides, meals, payments and more.

  • Then COVID-19 pushed office work, school work and so much else online, and the distinction between "real life" and digital life became even harder to draw.

Why it matters: Apple's effort to maintain a consistent policy could turn into a treacherous tarpit for the iPhone maker, the way misinformation and content moderation have for Facebook, exposing the company to criticism from many directions and sullying its reputation.

How it works: If you sell most anything digital in the App Store, Apple takes 30% of the price.

  • For years, Apple has told app makers that if they are giving away an app free and then using that app to sell users physical goods and services — like rides (Uber and Lyft) or meals (Grubhub and Doordash) — Apple wouldn't take a cent.Apple likes to point to how much of the app economy is business done this way.
  • But if an app sells users digital goods and services, the 30% fee kick in.
  • More recently Apple added a wrinkle, exempting a class of "Reader" apps from the 30% cut. "Readers" are apps users employ to access digital-only goods they've paid for elsewhere — think Netflix, Spotify, or Kindle.
  • Even more recently, Apple dropped its commission fee for recurring subscriptions to digital products to 15% after the first year.

Driving the news: Apple's recent legal war with Fortnite maker Epic Games seized headlines, but that conflict doesn't push the limits of Apple's rules.

  • The features and goods that Epic wants to sell commission-free in its games are inarguably digital in nature.
  • Other recent spats over App Store policies that involved well-known software developers WordPress and Basecamp hinged on more subtle category distinctions. Mostly, they showed that Apple's rules have become so complex that the company is making high-profile mistakes.

One case that shows the long-term risk in Apple's digital/physical policy involves Airbnb.

  • A few years ago the rent-out-your-room app started a new line of business called Experiences, allowing its hosts to sell classes, tours and other in-person events.Apple took no cut since these were "physical world" offerings.
  • After the coronavirus pandemic forced these entrepreneurs to move these Experiences online, Apple started asking for its 30%.
  • ClassPass, an app for booking exercise classes, found itself in the same boat when the pandemic hit and teachers shifted to virtual instruction.
  • The New York Times reported both incidents and said Airbnb and Apple are still trying to negotiate a settlement.

Apple's defense: The tech giant argues that...

  • Running the App Store costs money.
  • It has the right to establish the ground rules for its platform.
  • Those rules keep users safe from malware, porn and spam.

It also points to the cornucopia of commerce and developer growth the iPhone has enabled.

History lesson: When the App Store launched in 2008, Apple's 30% cut looked like a steal compared with what wireless carriers and others charged software developers and the higher share that brick-and-mortar retailers took.

  • Today, as direct-to-consumer distribution has become the norm in many markets, more companies want the option to go it alone.

Yes, but: Apple already sits on an unrivaled hoard of treasure at a moment when millions of small businesses and individuals are hurting financially.

  • 30%, even if it is in line with what other platforms claim, is a very large cut.
  • Apple is in the middle of a major push to find new revenue in digital services as growth in the smartphone market tails off.
  • The power Apple wields over App Store developers has already piqued the interest of antitrust regulators at the Department of Justice, the Federal Trade Commission, and many state attorneys general, and CEO Tim Cook took heat from Congress at a recent House hearing. (A virtual event, yet one with high real-world impact.)

Our thought bubble: Apple is the only one of today's tech giants to make most of its profits producing and selling physical goods, so it may have faith in the enduring distinction between hardware and software, physical and digital. But these categories aren't as concrete as we think.

  • Who's to say that a yoga class beamed out through an app is a purely digital experience?
  • The teachers are moving in their physical space. The students are having their own physical experiences. All that's digital is the channel that connects them.

What's next: The rise of augmented reality apps, which use VR-style technology to overlay the real world with digital information and enhancements, promises to further entangle the digital and physical categories.

Trump and Xi to give dueling speeches Tuesday at UN General Assembly

President Trump and China’s Xi Jinping will address the UN General Assembly just minutes apart on Tuesday morning — with Russia’s Vladimir Putin following soon thereafter.

The big picture: Trump has promised a “strong message on China.” Xi, meanwhile, is expected to laud global cooperation — with the clear implication that it can be led from Beijing.

Keep reading... Show less

Trump meets with Supreme Court frontrunner Amy Coney Barrett

President Trump met with Judge Amy Coney Barrett Monday afternoon at the White House, days before he is set to announce his pick to fill the Supreme Court seat vacated by Justice Ruth Bader Ginsberg, two sources familiar with meeting tell Axios.

Between the lines: Barrett, a U.S. circuit court judge who has long been seen within Trumpworld as the frontrunner on the president's short list, is known widely within the White House and well-liked.

Keep reading... Show less

Federal judge extends deadline for Wisconsin ballots postmarked by Election Day

A federal judge in Wisconsin on Monday extended the state's deadline for counting absentee ballots until up to six days after the Nov. 3 election if they are postmarked by Election Day, AP reports.

Why it matters: The ruling, unless overturned, "means that the outcome of the presidential race in Wisconsin likely will not be known for days after polls close," according to AP.

Keep reading... Show less

Trump's Supreme Court plans create major opportunity for Kamala Harris to go on offense

President Trump's Supreme Court plans have created a major opportunity for Sen. Kamala Harris to go on offense.

Why it matters: A confirmation fight puts Harris back in the spotlight thanks to her role on the Senate Judiciary Committee.

Keep reading... Show less

McConnell: Senate has "more than sufficient time" to process Supreme Court nomination

Senate Majority Leader Mitch McConnell (R-Ky.) said in a floor speech Monday that the chamber has "more than sufficient time" to confirm a replacement for Supreme Court Justice Ruth Bader Ginsburg before the election, and accused Democrats of preparing "an even more appalling sequel" to the fight over Brett Kavanaugh's confirmation.

Why it matters: Senate Minority Leader Chuck Schumer (D-N.Y.) has said "nothing is off the table next year" if Republicans push ahead with the confirmation vote before November, vowing alongside Rep. Alexandria Ocasio-Cortez (D-N.Y.) to use "every procedural tool available to us to ensure that we buy ourselves the time necessary."

Keep reading... Show less

House Democrats file legislation to fund government through Dec. 11

House Democrats on Monday released their proposal for short-term legislation to fund the government through December 11.

Why it matters: This is Congress' chief legislative focus before the election. They must pass a continuing resolution (CR) before midnight on Oct. 1 to avoid a government shutdown — something both Hill leaders and the White House have claimed is off the table.

Keep reading... Show less

Trump announces new Iran sanctions in effort to maintain international arms embargo

President Trump signed an executive order on Monday that would impose sanctions on any person or entity that contributes to the supply, sale, or transfer of conventional arms to or from Iran or is engaged in providing training and financial support related to those weapons.

Why it matters: The executive order is the first step by the Trump administration to put teeth into its claim that international sanctions on Iran were restored over the weekend, one month after the U.S. initiated the "snapback" process under a United Nations Security Council resolution.

Keep reading... Show less

Exclusive: Conservative group launches $2M Supreme Court ad

The Judicial Crisis Network is launching a $2.2 million ad campaign to put pressure on vulnerable Senate Republicans in battleground states to support a quick confirmation when President Trump announces his Supreme Court nominee.

The big picture: "Follow Precedent," previewed by Axios, is one of the first national and cable television ads to run following Justice Ruth Bader Ginsberg's death Friday.

Keep reading... Show less



Get Goodhumans in your inbox

Most Read

More Stories