Show an ad over header. AMP

I am the FIRST

Services push makes Apple a target

Data: Company earnings reports; Chart: Danielle Alberti/Axios

Apple's successful long-term effort to generate new revenue from the services that run on top of iPhones and Macs is also carving out new vulnerabilities for the giant — including antitrust charges, lawsuits by developers and new conflicts over privacy and content moderation.

Why it matters: Apple has been relatively unscathed by the criticisms that dog Facebook, Google and Amazon, but the more cash it squeezes out of its App Store and other services, the more of a target it will become.


Driving the news: Arguments wrapped up Monday in a three-week trial pitting Apple against Fortnite maker Epic Games, which wants to force Apple to open iOS to rival app stores and payment systems.

  • The decision will dictate whether Apple can continue to dominate how apps get onto its phones and shape whether the company can continue to boost its services income.

In Monday's closing arguments, Judge Yvonne Gonzalez Rogers pushed both sides on potential weaknesses in their cases.

  • While Epic is widely seen as facing an uphill legal battle, the judge has expressed skepticism about how much competition Apple faces.
  • At one point Friday she suggested that it was fear of lawsuits or regulation, not competition, that led Apple last year to take a smaller cut from small businesses.

The big picture: One reason Apple has faced less criticism than its Big Tech peers is that its profits depend much less on user-generated content or advertising revenue, which have become Achilles' heels for Facebook and Google. But Apple is facing new vulnerabilities on multiple fronts.

Developers: Apple's emphasis on services revenue has placed it squarely at odds with some key app developers — not just Epic but Spotify, Tinder and others.

  • The Epic trial could be the first of many. Several lawsuits are seeking class action status to sue Apple on behalf of either developers or consumers who contend they have been victims of Apple's anticompetitive behavior.

China: Last week, a New York Times investigation alleged Apple has ceded control of the data of its Chinese customers to the Chinese government.

  • Apple says it's simply obeying local law and has denied compromising the security of Chinese users.

App store reviews: The size of Apple's App Store makes governing it increasingly difficult, particularly with regard to user reviews, where critics say fraud has multiplied.

Privacy: As Apple rolls out new privacy protocols, it faces allegations of monopoly abuse from competitors, primarily Facebook, who argue Apple is trying to undermine competitors' advertising businesses.

What they're saying: Apple's requirement that developers use its app store and payment system "is basically stopping people from finding out they can get a better deal," said Sen. Amy Klobuchar (D-Minn.), chairwoman of the Judiciary antitrust subcommittee, previously told Axios.

Be smart: A recent Axios/Harris poll suggests Apple's reputation among consumers remains strong. But public image is a lagging indicator — and by the time Apple's gets dragged down, it could be too late to remedy.

The bottom line: Apple remains very good at selling beautiful, functional devices — lots of them. But as its hardware business stops growing and services become a bigger part of its revenue, its headaches are likely to multiply.

Go deeper: Apple pivots to media as iPhone sales fall

Why the startup world needs to ditch "unicorns" for "dragons"

When Aileen Lee originally coined the term "unicorn" in late 2013, she was describing the 39 "U.S.-based software companies started since 2003 and valued at over $1 billion by public or private market investors."

Flashback: It got redefined in early 2015 by yours truly and Erin Griffith, in a cover story for Fortune, as any privately-held startup valued at $1 billion or more. At the time, we counted 80 of them.

Keep reading... Show less

Scoop: Facebook's new moves to lower News Feed's political volume

Facebook plans to announce that it will de-emphasize political posts and current events content in the News Feed based on negative user feedback, Axios has learned. It also plans to expand tests to limit the amount of political content that people see in their News Feeds to more countries outside of the U.S.

Why it matters: The changes could reduce traffic to some news publishers, particularly companies that post a lot of political content.

Keep reading... Show less

Scoop: Amazon quietly getting into live audio business

Amazon is investing heavily in a new live audio feature that's similar to other live audio offerings like Clubhouse, Twitter Spaces and Spotify's new live audio platform, sources tell Axios.

Why it matters: As with Amazon's efforts in podcasting and music subscriptions, the company sees live audio as a way to bolster the types of content it can offer through its voice assistant, Alexa, and its smart speaker products.

Keep reading... Show less

Hurricane Ida exposes America's precarious energy infrastructure

The powerful hurricane that plunged New Orleans into darkness for what could be weeks is the latest sign that U.S. power systems are not ready for a warmer, more volatile world.

The big picture: “Our current infrastructure is not adequate when it comes to these kinds of weather extremes,” Joshua Rhodes, a University of Texas energy expert, tells Axios.

Keep reading... Show less

"We must go further": 70% of adults in European Union are fully vaccinated

About 70% of adults in the European Union are fully vaccinated against COVID-19, Ursula von der Leyen, the president of the European Commission, said Tuesday.

Why it matters: The milestone makes the E.U. one of the world's leaders in inoculations, after an initially lagging vaccine campaign, the New York Times notes.

Keep reading... Show less

What Elizabeth Holmes jurors will be asked ahead of fraud trial

Jury selection begins today in USA v. Elizabeth Holmes, with the actual jury trial to get underway on Sept. 8.

Why it matters: Theranos was the biggest fraud in Silicon Valley history, putting both hundreds of millions of dollars and thousands of patients' health at risk.

Keep reading... Show less

Insights

mail-copy

Get Goodhumans in your inbox

Most Read

More Stories