Did Apple get too big for its own good?

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Hello and welcome to Decoder. I'm Neil Apatow, Editor-in-Chief of The Verge, and Decoder is my show about big ideas and other problems. We're doing something a little different today. I asked my friend John Gruber to come on the show and talk about the future of Apple, and importantly, the App Store. John and I have been friends for over a decade now. His independent website, Darren Fireball, was one of the first Apple blogs around and it remains one of the most influential.

John has more insight into Apple, its culture, and how it does things than pretty much anyone. Everyone at Apple and in the Apple developer community reads Daring Fireball religiously. In 2010, Steve Jobs himself emailed John's analysis of an early App Store rule change to an unhappy developer and called it very insightful.

Basically saying, this is what I think too. Personally, I will always remember a moment early in my career when a very excited Apple PR staffer pointed John out to me at an event like a celebrity setting. This was very funny, also deeply humble.

The reason I want to have John on the show this week is to talk about the most recent ruling in the long-running Epic vs. Apple legal saga. This is the lawsuit about Fortnite on the iPhone and whether developers like Epic can circumvent the App Store's payment system. to avoid paying those 30% fees on in-app purchases.

Well, late last month, Judge Yvonne Gonzalez-Rogers, who has presided over that case for the past five years, effectively banned Apple from collecting any fees on web transactions. and harshly accused the company of purposefully disobeying her original 2021 ruling by creating a series of restrictions and hoops to jump through that would basically make it impossible for developers to send people to the web to buy things at all.

The judge's extreme frustration with Apple is obvious in almost every line of her new ruling. She even referred Apple for further criminal proceedings, saying an executive had lied under oath on the stand. There's a lot of tactical stuff you might talk about in the aftermath of this ruling, about what Apple might do next, how it might impact its revenue, how developers might respond. But I really wanted John to talk about the big picture of you.

and how a company that so often prides itself on doing the right thing ended up so fully on the wrong side of the courts. One theme you're going to hear throughout this conversation is that Apple often presents itself as small. But the company is actually huge in every way. The company now sells nearly as many phones in a single quarter as it did in the entire first three years of the iPhone's existence combined.

Apple now operates in a geopolitical context that binds the United States, China, and Taiwan in ways that you would have never imagined 15 years ago. And most importantly, it has total control over applications on the iPhone, which means it has control over what kinds of businesses can and and cannot exist on mobile phones. That's the context for the other major theme you'll pick up in this conversation. Apple's shift towards digital services.

and whether or not that has fundamentally changed the culture of the company. You see, as Apple kept selling newer and better iPhones, it simply ran out of people to sell them to. So in order to keep growing revenue steadily and keep Wall Street happy, Apple started to squeeze more money from its existing base of customers.

including the very developers that put apps in the App Store. That made some of the most important developers, the company that make mobile games and stream media, very upset. But they had no choice, so they kept their apps in the App Store and continued to pay the fee.

All of that combined with Apple's immense scale created a kind of hubris at the company, and as you'll hear John say, also created a major blind spot for Apple that has pushed it towards these very high-profile and very public legal defeats that could ultimately reshape its business.

And if all that wasn't enough to put the heat on Apple, well, there's also Trump's tariffs to deal with, and a Google antitrust trial that could see Google barred from striking an exclusivity deal for its search engine that currently pays Apple north of $20 billion a year. Apple also has to compete in AI.

with Apple Intelligence and Siri, products which are currently a mess. And John and I got into that here at the end. I wanted to know if there was a connection between the corporate culture that produced the App Store mess and the recent news of Siri delays and dysfunction around AI inside Apple. So yeah, there's a lot going on in this conversation, and there's really nobody better to dig into it than Sean.

I hope you like this one. As you'll soon hear, John and I really enjoy talking to each other. Okay, Daring Fireball's John Gruber on the future of Apple and the App Store. Here we go. John Gribry, the proprietor of Daring Fireball, the industry's leading Apple analysis source. How you doing? busy how are you i'm good there's been a lot of apple news recently i i feel like we're in this state where i don't know two years from now three years from now maybe none of the big tech companies

that we are familiar with look the same, are the same. Google might get broken up. Meta's in the middle of an antitrust trial. Apple's facing one, but it already faced one. There's a big ruling I want to talk about in the Epic case. The Google money might go away from Apple.

So I wanted to talk to you. You and I are texting briefly, and I just thought I should just have John on the show, and we should talk about what Apple is right now, what it has become, and what might be changing. Because you've been following the company closer than anybody for 20-odd years. And it feels like the question of what is Apple right now is more up for grabs than it has been in a long time. Two things I keep coming back to, and it was such an off-the-cuff.

Yeah, sure. Why don't I spend an hour? For me, it turned into three hours. Why don't I spend an afternoon on this sort of seemingly goofy blog post of, hey, how many iPhones can you fit on an airplane? Right, when there was a report when these tariffs came out of, hey, Apple's going to ship six full airplanes of iPhones from India ahead of the tariff.

It is like a fun little question. And my friend Ryan Jones, the guy behind Flighty, had the idea of, hey, you can just look at the weight of a Boeing 747 freight airplane. and figure out how much does a packaged iPhone weigh, and multiply it, and there's your answer, right? And maybe it's slightly off, because maybe the volume doesn't quite fit, maybe, you know, but as a baseline, the weight works.

And it's like a lot of iPhones. Right? In a certain sense. Like if me and you had to spend the afternoon doing the manual labor of loading pallets of that many iPhones onto a Boeing 747, we would agree. That's a lot of iPhones. But then you look at how many iPhones Apple sells in the United States in a typical April, and it was like 12 days of suck.

It gave me this palpable sense of just how big a business the iPhone is. I don't see how any company could not become distorted by that level of success. These are $1,000 bricks. A brand new iPhone comes in a little brick of a package. And they're $750, $800, $900, $1,000, $1,200, whatever, depending which one you get. They just send all of them, all the time, non-stop out of China and India for $1,000 each with famously 35-40% margins.

It is hard to fathom, and I feel like we're hitting the point where the unfathomability of the iPhone's success is We're seeing the ramifications of it. You know, I needed an excuse to buy a new Mac Studio when they got announced the M4s. And the tariffs were a good excuse. I think a lot of people just took the excuse. I might as well buy one. And I did a little, like, custom configuring. made sure it had the right amount of storage and RAM and all this stuff. And then I watched it.

get manufactured to my specifications in China. go through customs in China, get on DHL, come across the ocean on a plane, presumably, and then get to my house in a matter of days. And we don't think about that very often. But that is Apple's success. Right, that that whole system exists. One thing I've been saying a lot recently is Tim Cook probably has more responsibility for world peace over the past several decades than anyone wants to give.

Because it's his company that binds the United States and China, and to a large extent, Taiwan together now, from the chips from manufacturing to the global trade, to the fact that the platform...

Unlike most other tech companies operates in both countries and is a huge success both countries and consumers want the products in both countries and he has had to play statesman with Donald Trump with Xi Jinping with Joe Biden to whatever extent this whole time and it feels like Apple is more of that company than the big swing product company.

Yeah. Well, and the other thing that came out of my thinking about the scale of the iPhone's success and this being Tim Cook's company is just how unlikely it was. And I truly do believe there was only one path. for the iPhone to meet demand at the prices they've been selling iPhones for the last 15, 18 years, however long it's been. But when the iPhone became... SENSATION

Right. And famously, it's such an interesting way to think of it, but they sold more. The second gen was the 3G. They sold more than the original. And then the 3GS sold more than the 3G and the original combined. Then the iPhone 4 sold more in one year than the 3GS, 3G, and original combined. And that kept going for a couple of years, where each new model not only outsold the previous model, it outsold all the previous models combined.

Now, obviously, that had to end eventually, and it ended, I don't know, 2013, 2014, because the planet ran out of people. The mechanism of that, just to be very clear for the audience, is Every year, Apple would add new countries and new carriers. So you would have all the people on AT&T in the United States, and then you would add Verizon.

And then you triple the market. But if you really think about it at an operational level, the only way that they could make that many iPhones and that many more new ones each year was through China. There was no other mechanism, no other way, no other country had anything vaguely like the capability to expand a supply chain that quickly.

to these incredibly tight, high-precision specifications than China. That's the only way. And in some ways, if you just go back a little bit, even like a decade before the iPhone, just go back to the 90s, It seems very iffy for China to be the path for an American company to be able to... build this sort of business from, the most profitable business in the history of capitalism. Yeah, Steve Jobs famously wanted to build his own automated factories in California.

And he did for some of the Macs, right? And then he hires Tim Cook. and Cook is the one who moves. all the manufacturing to third-party contractors like Foxconn moves them all to China and begins to scale. Right, and even going back to Next, I mean, and again, Next... for like the decade or so that they were an independent company. They were only selling hardware for about the first half of it. But at that point,

They had a Steve Jobs-driven dream, not just to make the computers in America, but to have computers build the computers. And so there's a lot of people out there, I think casual people, who don't need to know this. who probably think like, oh, an iPhone, that's probably mostly made by robots. right? It's not. The factory line

It really is human beings screwing tiny screws into phones, putting tiny, you know, just keep putting this one component into a phone. Here comes another phone. Put that tiny component in perfectly. It is very labor intensive. The next dream was to build a factory in California where it really was just like something from the Jetsons, right? Where it's all robots and robotic arms. you know, a human being just delivers the box to you. But it obviously didn't work out.

I'm going to come to the manufacturing piece of it. I do feel like our own Commerce Secretary, Howard Lutnick, is very confused about what it takes to build an iPhone, but we'll come back to that. I just want to stay focused on this big Tim Cook change for one second. Tim Cook helps Apple expand, without a doubt.

Something like the iPhone cannot scale to the volumes of production at Apple's quality level in particular without Tim Cook, master of the supply chain. And that's the role he plays for Steve. Steve Jobs has these very big ideas he has incredibly tasteful, incredibly exacting in his demands, Tim Cook is the person who says, okay, I can build you the machine that will make millions, hundreds of millions of these products a year to your specification.

Tim Cook becomes CEO. And you see, over time, the company gets even bigger. It's much bigger now than it ever was as a company under Steve Jobs. The scale of that operation has increased.

But they've also, and I think the Cook era will be, I think, remembered for this as much as the scale. they ran out of people, as you said. So they moved the iPhone's revenue from selling more iPhones every quarter to extracting more money from the people using their iPhones, in particular in services, right? That's the...

the line they call it in their quarterly earnings services. And services has it has a lot of celebrities as the face right it has severance it has silo it has all these other shows ted lasso fantasy all of music really all of music But what it really is, and this comes to the big court decision, what it really is is in-app purchases, particularly in-app purchases in games.

Apple's services revenue is people buying stuff on their iPhone, and Apple takes whatever percentage, between 15% and 30%, depending on the style of app and the subscription. That's the thing that's under threat now, right? Well, but I know you know this. The other thing, and it is a lot of money and it all goes into services, is the traffic acquisition costs from Google Search with the deal with Safari, which is...

We keep talking about $20 billion a year, but I'll bet it's closer to $25 billion a year right now. Yeah, so Apple has a deal where Google pays to be the default search provider in Safari. Google lost that trial. We're in the remedies phase. Google does not want to give up the ability to make these exclusive deals. It feels like that's going to be the first thing to go, no matter what the judge decides.

So that's 20 billion, 25 billion off from Apple. And then there's this ruling in Epic versus Apple where the judge is furious. with Apple, for ignoring her earlier instructions, for lying on the stand, she says, one of the executives lies on the stand, and she says, in a variety of ways that I want you to explain, now you have to go compete with purchases on the web. We're done. We're done playing games.

that feels like oh the services revenue is gonna drop right no matter what happens now the amount of money you're gonna take from in-app purchases in games and other apps is going to go down because Amazon is just going to kick people to the web, right? It's already happening. Spotify is going to kick people to the web. It's already happening.

They're not losing money from Amazon or Spotify, though, because they weren't making money from Amazon. It's the games, and where the games are really going to do it is by prompting the whales. Hey, you, a guy or a woman who spends $500 a month on tokens or chips or coins or whatever you call it for this game. We'll give you a 40% discount if you just tap this button and reload your account from the web.

And if you're spending, you know, $200, $300, $400 a month on a game, which, you know, like 1% of players do for some of these games, which is where... an enormous amount of the money that the most profitable games make their money from. It's exactly like a casino. It really is. But that's, I want to be clear that the services revenue line for Apple, the face of it is severing.

The face of it is Jennifer Aniston in The Morning Show. The reality of it is Candy Crush Wales. And that has been true for a long time. So you're just looking at a company where the manufacturing excellence is under threat with tariffs and trade wars for all of Cook's efforts to hold it together. And now... the revenue pressure on what the iPhone has become in services.

is extremely real from regulators not in Europe, which are also mad at Apple, but from the courts in the United States, which are saying, well, maybe we're going to take the Google deal off the table and maybe we're going to take all this Candy Crush money off the table. Is Apple ready for all of that?

There's a part of me that for years now has been looking at some of these things, and I've been thinking, I don't know. Maybe they know something I don't know because they don't seem panicked, right? And I would say with their compliance, Gonzalez Rogers' original injunction with the Epic case in 2021, which was a case, and I think you'll agree with me, The Epic versus Apple case. Apple almost entirely won. Epic lost. Apple won. But on what I would call a side note,

she issued this injunction coming out of it that, oh, you win almost all these points. Epic, you lose almost all these points. But there's all this nonsense about the anti-steering provisions and apps being forbidden from even telling people famously, most famously, like with Netflix. If you're a new Netflix user on iOS, you get the app. There's no way to sign up. And it says something like, we know this isn't convenient.

We're sorry about that. And I did a story years ago where they have a number you can call. You can actually call a phone number and make a real phone call and talk to a human being at Netflix. And I pretended like I didn't know how to sign up. And they're like, oh, you have to go to our website. Go to a computer and go to Netflix.com. And then you'll sign up there and enter your credit card information there. And you can't do it in the app.

So they're allowed to put a phone number that you can call where a human will tell you that, but they can't just tell you that on the screen. I mean, imagine how much money they're just wasting by having people answer the phone. to do that, right? I mean, at this point, I doubt there are that many people calling every day, but somebody is, right? And it costs real money. And they could just put it on a screen. It's just information.

And she, you know, I think rightly so, you know, just said you can't do that anymore. And they just kept doing it and instituted this quote unquote compliance with it that was almost And I'm very resistant to the whole malicious compliance argument, especially with their EU stuff. I think that term gets overused. But in the case of this injunction... It was almost

And the way that her new injunction, her new decision that came out a week or two ago is just dripping with anger because it was so clear. But for the last four years, I've been thinking, does Apple know something about her opinion on this? that I don't know? And you're the lawyer. You tell me. But my understanding, you know, I'm married to a lawyer.

My wife has said to me, no, if it's not in the injunction, it's not there. There are no like backroom deals and handshakes between lawyers and judges. Like the decision comes out and it's in writing. and you can just read it, and it's there. And there was nothing in that injunction that made it seem like Apple's goofy 27% commissions and you have to open up your books and let us audit all of your transactions and track people for seven days and everything they buy.

after leaving your apps for seven days, you owe us 27% for. There was nothing that made it seem like that complied with the injunction. It was very strange. I don't see how they thought it was compliant or how they thought it would fly. we need to take a quick break we'll be right back Support for Decoder comes from Shopify. When you're starting your own business, it can feel like you're a one-man band. Too many instruments and not enough arms to play them all. Shopify says they can help.

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We're back with During Fireballs, John Gruber. Before the break, John and I were talking at a high level about Apple's success. and how the sheer scale of the iPhone's business has had some pretty distorting effects on how the company views the markets it operates in and its responsibilities to customers. Now that's really come to a head in two major ways that threaten the company's services business, which has become the company's main revenue driver as iPhone sales have plateaued.

As we mentioned, the first is that the latest turn in the Fortnite lawsuit saga might shift a meaningful amount of mobile game revenue to the web. out of the reach of Apple's 30% cut. The second is that mounting antitrust pressure here in the United States on Google might in turn harm Apple too, because Google pays Apple more than $20 billion a year to be the default search engine in Safari.

So now I wanted to talk to John about the specifics of Apple's App Store policies, and to really dig into exactly how we got here. From Apple being one of the best things to ever happen to software developers after the launch of the iPhone, to a company some developers now view as a major villain. So much so that Epic Games spent many years and more than a billion dollars to go to war against the App Store.

You know, I've been thinking a lot broadly about the image the big companies want you to have of them, and then what they have to be in order to be as big as they are and successful as they are. Google, I think, still wants you to think of them as beanies and slides in the office. They're a ruthless advertising company. We have all these emails from all of these trials. You can see the internal deliberations of these companies. I think Apple...

to its credit, still wants you to believe that it is the company that puts the customer first and user experience first and design first. And then you see, from the emails in this case, that they had no reason for 27%, except they knew that no one would use it. And there's just this gap. And I think a lot of the danger for these companies is that these regulatory efforts expose that gap.

And I think there's reasons for the gap, right? To be a company of this scale, moving this much money around, you got to have some sharks. Like, that's just the way it goes. You just don't want the sharks to be exposed to the public in this way. And if you go too far, the judge is like, you know what, I'm going to have a second hearing because I think you've been lying to me. You're going to produce all of the evidence so I can see your decision making. And here are the sharks.

And there's just something about that with Apple in particular that I think is just fundamentally surprising to people and damaging to its brand in a way that I think if I said to you Amazon is full of sharks or Meta is full of sharks, you'd be like, yep. Yeah, and there's something in there with the Upton Sinclair line. It's slightly not quite applicable, but it's the same sentiment that it's very difficult to make a man understand something that his job depends.

upon him not understanding it. And there is something to that with Apple on this front where everybody I know and have any relationship with at Apple, but especially higher up, you know, the sort of people that we get press briefings with, people with big titles. Not necessarily the very highest, but people who get featured in keynotes, people who are on the videos.

They really do believe, they really do. They're not feigning it. They really do believe that Apple is a good company and that they do the right thing and that they really do put the user first and that they are a fundamentally honest company. And because they believe that, I feel like their actions On this particular issue with the App Store, they can't see it. It really is a blind spot.

where they just cannot believe that they keep losing these cases. They really can't. That's what I think. But all the rest of us, everybody else, whether you are a zealot like a Tim Sweeney... the guy who actually instigated the case, or just a developer, you know, or somebody who really believes in open source and that all of these closed platforms are fundamentally wrong. And here, see, this is why.

Or if you're just trying to observe it neutrally, everybody's looking at them and they're like, how do you not see how this is not going to fly? And it makes you look terrible. It looks bad legally. It looks bad regulation-wise, you know, in places like the EU. And it absolutely looks terrible to whether you're a developer who's actually writing the code or you're just a business person from a company who wants to have an app in the store and you're looking at these terms.

It looks terrible. Nobody wants to... build on a platform where the starting point is a 70-30 split in 2025. Yeah, and you see all of the biggest new apps in the world debut as web apps on desktop. Right. right? ChatGPT most often expressed to people as a web app on the desktop, right? And there's something about that that I

you would not have predicted at the dawn of a mobile age. In 2007, when the iPhone comes out, in 2008, when the App Store comes out in particular, you would not say, okay, run it forward 15, 20 years, All the hottest new apps are going to come out as web apps and desktop computers. You would not predict that but for Apple's App Store policy. which have prevented big sustainable businesses from being built in the App Store.

You know a lot of developers. A lot of developers read during Fireball. How would you characterize the reaction from developers after this ruling? Actually, what would you say was the general sentiment towards Apple leading up to this ruling? Because it has really changed a lot over the years, right?

I think the reaction now is sort of finally, right? And I think there were a lot of people who read Yvonne Gonzalez Rogers decision which I think also I think you're going to agree she wrote she wanted it to be right But you get the feeling a lot of judges are issuing decisions right now. They want to have read by regular people, and this is like a highlight of that class.

And there's like a very slight, it's just a bit of lingo. It's just, you know, it's a little formal. But when a ruling says the court and the court is uppercase, that means the judge. And every time you see her write the court, you can just see it. Yeah, she's like,

fuck you for thinking you could do this in my court. Who do you think you are? And I think a lot of developers read that, and they were like, finally, finally, a court is just calling this out for what it is, which is just sort of preposterous. and It's been a long time, and it has been a sort of very, you know, how long can the frog boil in the pot before it's dead, right? It has been a very long time.

It really did shift from a scenario when the App Store came out in 2008. I mean, and everybody who was around at the time, me and you writing about this stuff at the time, we remember the first year of the iPhone when there were no third-party apps.

And for a couple of months, Steve Jobs was saying, we don't want third-party apps. And they had their first WWDC when the iPhone came out, I guess right before it came out. And they were like, we've got a sweet solution. It's called web apps, which would have been. It wasn't a way to make the apps that Apple itself was making for that first iPhone, right?

So at an artistic level, developers weren't happy about it because they're like, no, no, no, we want to use these Cocoa-like APIs. We want to use Objective-C. Because those 2007 phones were relatively slow and memory was so concerned, we want to do what you guys are doing and pack as much into as little code as possible to make it efficient and make something as beautiful and cool. and smooth as what you're making. But what they were saying...

If you just put aside the technical nature of it was, hey, you could just build free apps. and ship them however you want on the web the way you want. Which, again, here we are in 2025, and that is how developers are mostly choosing to launch new apps to consumers. Very much so. But now it's not...

The technical differences are very different. It's sort of switched around, but it's really about the business differences. But when the actual app store opened the next year, And the pitch was, and again, it's all very simplistic compared to now. Subscriptions weren't a thing. It was really just paid apps where the app cost. $5 or it was a free app. And if it was a free app,

You didn't have to pay anything other than your $100 a year developer account fee, and Apple would take care of distributing the app. And if it was a paid app for $5, the split was 70-30. And that came from the music store, which was the deal over there. and compared to every other mobile platform of the time, a 70-30 split where the developer got the 70. compared to the carrier stores and all the other lock distribution.

So, like, if you were writing on one of those Java platforms from 2006 on the then smartphones, 70-30 might be what you're getting, but the carrier was taking 70, and you were getting 30, maybe. So 7030 was a great deal. It was like, holy crap, we can write software for phones and people can use them wherever they are. They're in their pocket. This is a great deal. And...

the idea that here we are 18 years later and that's still the deal. And I know there's the small business platform. And if you have a subscription, it drops from 30 to 15 after a year. And some of the, you know, there have been some slight loosening of those terms. But for the most part, it's a 70-30 split. 18 years later, with all of the, you know, two decades practically of

innovation in online payments, right? Stripe wasn't a company in 2007. This isn't the world. And I know you've mocked this in your writing. I think they've sort of dropped this angle. Who knows? Maybe their retort to YGRs decision is going to go back to it. Just a couple years ago, they'd still come out with the whole buying software in boxes in retail stores and talking about the margins that developers got.

when people would go in a store and pick up a box and come home and put a disc in a computer to install software. And it's like, I remember that. You remember that. A lot of people listening to the show remember that. But that was a long time ago. You know, what's interesting is I feel like...

That was a happier time for software development. It was over. There was no subscription fee. You had the product. You could use it however you want. If you wanted a new one, you could go buy it. And now everything is this relentless series of subscriptions and upsells. And I do feel like that is also...

Apple saying what we want you to do is turn your apps into subscription services so we can collect the revenue every quarter. So we can continue growing the services business where we're doing very little. I don't think at this point, maybe in 2008, 2009, you could make a big argument that Apple was earning its 30%. They had the credit cards on file. They were doing the distribution. They had massive app store marketing campaigns.

Every new iPhone owner was a potential new customer in a way that that is totally saturated now. I think it's basically impossible to make the argument that they're earning their $30 million. But they are demanding the business models of the app provide them with that 30%. And there's no one point between 2008 and today where you could say, here's the point, this decision in 2012 or 2014 or whatever, that's where it happened. No, there's no one point.

But the fact is they never budged, right? And there is At one point, it was in the Epic trial, but there was some old email from Phil Schiller, circa 2010, where he ran up the flagpole internally, the idea that, hey, once our run rate, Apple's cut. of the App Store reaches a billion a year. How about at that point, we'll just keep lowering the commission to keep it at, you know, we'll make a billion a year from the App Store and go from 70-30 to...

75 25 then to 80 20 and if it keeps growing and we keep making a billion we'll go to 80 you know just keep lowering it

And it didn't seem like anybody, there was evidence in there of anybody writing back, nah. But it sure seems like the answer was, nah. Well, so here's my question. Actually, it's about Phil Schiller, who is, As a character in Epic vs. Apple, in this case, talking about the services line, talking about these commissions for rates, keep showing up as the one person who is saying what you are saying everyone else can see, that Apple can't.

hey this is bad hey we shouldn't start charges commission hey we shouldn't play these games In these compliance meetings that Apple is having, which by the way, they started calling them Project Wisconsin, and I'm from Wisconsin, personally insulting to me, but Project Wisconsin was how do we comply with the judge's ruling.

and they landed on this, literally, reverse-engineered 27%. When they decided it was 27%, they went and hired a consulting firm to come up with some reasons, and the judge sees right through it and says, this is garbage, you just came up with this number.

In that process, Phil Schiller is saying we should just not charge a commission on the web. Why do you think he's the character inside of Apple who had that realization, who could see the problem so clearly? I think there's a couple of things. I mean... And just to put the stakes on for the audience, I should say there's a meeting.

in which Apple's CFO is arguing for commissions, and Bill Shuler is arguing against them, and Tim Cook is the tiebreaker and picks commissions. He picks wrong. Right. Literally, the ruling says Cook chose poorly. Yeah. That is a direct quote. Cook chose poorly. It's exactly like the line from Indiana Jones and the Last Crusade where the guy drinks out of the wrong chalice. Although Tim Cook didn't.

didn't age 50 years and five seconds afterwards. The second Trump got elected, I think he did. But anyway, go ahead. Why do you think Schiller is the character here? I think that It's a couple of reasons, but I think that because Schiller was there for so long, he's the only executive who was there when Steve Jobs and the next reunification, he was already there when they came back.

and obviously thrived it was like oh he got along with Steve but therefore remembers vividly what it was like when Apple was an underdog and You know, so many other people, Jaws has been there for just as long. I think Jaws has been there for like 35, 40 years. So it's like Jaws remembers it, but Jaws doesn't seem to be a character in this story, right?

Jaws is whatever, as Senior Vice President of Product Marketing, he's obviously very influential at Apple, but it doesn't seem like he's got anything to do with this App Store stuff. There are a lot of people who were there then, but when the people remember being an underdog, I think they... They just have a different mindset of the only way we're going to win is by making great stuff that people want to buy and that developers want to use. And I think that...

Two decades of this iPhone success has filled Apple's ranks at a certain level with people who really just feel we can do this because What are they going to do, not make an iPhone app? We don't have to compete. And I'm sure they don't say it that way. I'm sure they don't say we don't have to compete, but they can say, why should we lower the rate? They have to come to us.

And I think Shiller remembers what that's like. And Shiller, in between stints at Apple, he'd been at Macromedia and a couple of other companies. He knows what it was like. to be an outside developer building for Windows and Mac. And I think he gets, at a fundamental level, the sort of virtuous circle. The flywheel of if you make a great platform that users and businesses want to pay for.

and that developers want to build for because they see the appeal of it, and they see those users who are buying the product. and that developers are happy and keep making great stuff. And if you can get them to make stuff, if you can keep the platform going forward in an innovative way, And Apple can invent things and do things and have features that other phones and other ecosystems don't have. Things like AirDrop, right? the continuity features between devices.

These things are coming up in the EU as controversial. But if you can do these things and they're exclusive to the platform and you can get developers to build on them, then the users see, oh, I'm going to keep buying this platform because I don't want to lose these features that I can't get anywhere else. And then you make new ones, and then developers support those, and users are like, oh, I'm going to keep buying this. And it just keeps going.

for years and you're making money and it just keeps working and when you inject something in this that creates resentment has entire fields of developers thinking, how do we get out of this? How do we not pay Apple this exorbitant 30% cut? And how do we scheme? Maybe what we do is we'll build, instead of building native Mac apps for the desktop, we're just going to go all in on the web and have people go through a browser And now they're not building anything that is exclusive to your platform.

And you can use any computer with a version of Chrome or Firefox or any leading browser and get the same experience for it. And if your top three or four apps that you use, all work exactly the same no matter which brand computer you're using. That whole flywheel is broken.

And I think Schiller sees that. that you don't have to squeeze every penny out of it, right? And Apple, this is what's so crazy about this, that people who are really angriest at Tim Cook over all of this, think that because he comes from operations and has his mind on the finance and he's not a product person and has never, to his credit, has never pretended to be a product person, that he's a penny pincher, right?

Now, Luca Maestri, the ex-CFO, he might be a penny pincher by all accounts, but Tim Cook isn't, right? And Apple... doesn't He doesn't pinch pennies in so many other ways. You can tell that they'll go through dozens and dozens of hardware revisions to get the corner radius on the phone just right. They have metal engineers to create new custom versions of titanium to make the sides of the iPhone look the way they want using titanium and to do this.

They have great customer service still in the retail store. They do all these things that other companies don't do that cost money. clearly cost money. and do it because of the idea that, well, if we keep doing things as well as we can to make people happy, this will all work out in the end, and it seems like we're making enough money.

But here on this App Store thing, they just want all the money. And there's no other way to look at it. Our friend Jason Snell has been sounding the alarm on services and App Store revenue for a long time. He's written about it a lot at Six Callers, his site. I know you've talked about it with him, but I just have a quote from 2024 that I found.

Here's Jason. He says, services can never, ever take precedence over Apple's hardware. If Apple ever begins to see its hardware as merely a vessel for selling more subscription services, the game will be over. I look at this and I say Apple put up an executive. to perjure himself in front of a judge about where the fake 27% came from and got caught. And that person is now going to refer to the DOJ for criminal prosecution.

Apple invented this 27% rationale, this fake compliance. Maybe not malicious compliance, but certainly fake compliance. Apple looked at a corn corner. that said you will not restrict buttons and links and came up with the most restrictive policy over what those buttons and links could look like such that no one could ever possibly comply with them in a way that was good.

There was a report that there were only 37 developers. I don't know if this is true or not, but there's a report the other day. I think MacRumors had it. Somebody's filed a lawsuit that only 34 developers actually used those links. Out of like hundreds of thousands of developers. I've never encountered one in the wild. Have you? I use a lot of apps. The nature of my gig is I try new apps.

I have never seen an app in the United States that uses one of these link-out things. Right, because you would take the discount from $30 to $27, and then you would immediately pay Stripe or whoever more. And sign up to have Apple auditing your books and all this stuff.

Right. So I'm just saying, I look at this line from Jason, who's been signing this line for years, right? Your dependency on a services line of business makes you a toll collector, right? You're the taxman now. And maybe the phones are great, but your priority is collecting the tax. And then you look at this court case, and I can't help but say, oh, they became the tax collector. If they lose this, then maybe the whole game is up and they can't keep funding the great customer service.

in the retail stores. By the way, I think some people might disagree with you. My wife would disagree with you. But whatever. They can't keep funding their huge retail presence and all of their real estate investments. They can't keep funding larks like the Vision Pro. The game is in this tax. This is the money because the iPhone isn't growing and there might never be another product that scales like the iPhone. Right. And my big point earlier was about the scale of the iPhone.

and how distorting that unfathomable success must be, even to a company that I think was naturally resistant to that sort of... the perverse effects of that sort of profitability that they really were fundamentally driven by just making the coolest things not by making the most money but when you do make the most money it just shifts your priorities but the other factor was that point About 10 years ago.

where, you know, I think it was around 2013, famously, where Samsung was having a couple of good years. Steve Jobs had died like two years prior, and people were starting, you know. starting to call out the CEC, they can't do it without Steve Jobs. And...

And yeah, look, it's going to happen, you know, same thing happened to the Mac versus the PCs happening with the iPhone. I think it was the same year where the Mac Pro came out and Phil Schiller said on stage, you know, can't denervate anymore, my ass. which is that they were irritated by what people were saying about them. And that's when Tim Cook started promoting this idea that we're going to grow a very serious services business.

And it was a message not to consumers, right? Customers don't care. They're not telling customers, come into Apple and we're going to charge you. Every time you look at your iPhone, that'll be 30%. Yeah, we're going to get you to give us money every month. But he was telling Wall Street we're going to build this business.

And there were a lot of people, and I had an open mind about it, but there were a lot of people who were extremely skeptical about the idea that Apple could do services, that they had any proficiency to build any kind of service, whether it was media services like selling...

Apple TV, which wasn't a thing yet, or the music or whatever, or charging people for iCloud and email and stuff like that. But lo and behold, over the last... you know 10 plus years they have built and Snell's been documenting it every single quarter and that is a graph that does not fluctuate it doesn't go up and down Sales go up and down based on things like when COVID happened and there were supply chain shortages over the years.

Sales of iPhones and other hardware products sometimes fluctuate in places like China, which is the second biggest market for Apple. But the services number is just like 5% up, 5% up, 5% up, 5% up. And now it's this big thing. You know, you don't have to be a Wall Street expert to know that what investors in general, that if they don't really care about the fundamental nature of the business,

Lots of people buy a little bit of Apple because they're like, I believe in the company. I think this is a company that I want to support. I think they have a good future. I understand that they make what they're doing, and I believe in the mission and think... It has a bright future for a decade or two decades to come at least. I'm going to invest in them. A lot of other people, though, just want to invest in companies that they think are growing.

That's it. And again, at a superficial level, you can say, well, they can make iPhones that start falling apart quicker, right? But that doesn't, nobody at Apple thinks that way because they know that if you get irritated, like, hey, I used to own my iPhones for like four years and they work.

great four or five years and they were still great just a little slow and then I'd get a new one it's like wow the camera's better it's a lot faster and now I bought this phone two years ago and it's falling apart That makes people think maybe I should try a different brand.

Apple knows that, so they're not going to do that. But with these long-lasting iPhones and with diminishing returns on chip performance at this point, and we see it with Apple Silicon in particular, right? The whole M1 series of Macs that... started coming out at the end of 2020. They're still great computers. I have an M1 Pro MacBook Pro and I have no idea when I will ever have to That is a real feather in the company's cap that these devices last long and the performance is great like that.

But how do you keep making the overall number keep going up? And the answer's been services and... That has twisted the company's priorities. Clearly, they won't admit it. I think you could hook Tim Cook up to a lie detector and he could pass it as saying, no, our number one priority is not making services go up. But look at their actions, and I think it is. We need to take another quick break. We'll be right back

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We're back with Daring a Fireball's John Gruber. Before the break, we were discussing what John referred to as Apple's massive blind spot, its inability to see just how badly its response to the Epic lawsuit was perceived. and how its insistence on taking so much money from developers year after year was warping its reputation from a legendary product company into one of a greedy toll collectors.

But as you'll hear John and I get into, this isn't an isolated incident for Apple. It might be evidence of a deeper problem at the heart of the company, and it's really starting to undermine its efforts to keep innovating in all sorts of other most visibly in AI with the announcement that the next generation of Siri will be delayed. I want to draw a line from that and that attitude. to your criticisms of how Apple launched Apple Intelligence.

and the big Siri demo, which was totally a concept video. And then recently they had to walk that back. I think you actually broke that story that Apple was going to walk that back, not launch those features this year. I don't expect to see any new Siri features at WWDC. I think it's beyond even that, right? That's coming up in the next month or so.

But I don't think we're going to hear a lot about it. No, I don't think so either. The big agentic Siri that they promised is really far in the future. And the reason I want to make this connection is one, just hubris. Is this all just hubris?

But secondly, to make that Siri work, They need a lot of goodwill from app developers. Right. Because what they're promising, essentially, is you will talk to your phone, and then Siri will go use a bunch of your apps for you. And I cannot, for the life of me, figure out why developers who are this frustrated with Apple will let that happen.

Like beyond the technical difficulty of this, there's just a, hey DoorDash, will you let Siri just like order a sandwich on your platform without anyone ever opening your app? And I don't, there's not enough goodwill to broker that negotiation. And so it just seems to me like, yeah, there's hubris. This is a company that thinks people have no choice, as you've been saying. And then there's, well, is anyone going to let this happen?

Right, and it comes back to... some of those things that I think Phil Schiller is keenly aware of, of getting developer buy-in for things that are specific to your platform. And these App Intents APIs are very specific to Apple's platforms. I was going to say iOS, but they're probably on the same APIs on macOS too. But let's just say for the Apple platform.

these app-intense APIs. And it doesn't mean that if your company, Uber Eats or whoever, or DoorDash buys into it and... supports these APIs, all of them as best they can, and puts all of the stuff that they could do through App Intents and supports them. It doesn't mean that their Android app or their web version loses anything. But it is a resource allocation of engineering to...

Well, these features though are only for the people who are using our apps on Apple platforms. How much time do we want to spend on this versus engineering effort that when we... spend this effort on our own APIs on the web, they apply to everybody everywhere, right? We can do it once and it applies on the web and Android and iOS. How much effort do we want to put into something that is only for Apple's efforts?

In terms of the size of the audience, that's still there. There still are a billion very desirable or over a billion very desirable iOS users out there. I think this is what you were hinting at. There's the trust issue. Hey, they seem pretty greedy. How much information that we consider competitive, you know, and I don't think they're lying about the private nature of this, of App Intents, and that Apple would be seeing and hoovering up.

the collective data so that Apple can analyze it. But in the aggregate, it doesn't really matter. If Apple can see that this is popular, they don't need to take the private information from people's DoorDash orders. and analyze it. but they could see that maybe Apple should get into the food delivery business.

and it should be Apple food, like Apple Pay. You laugh, but who would have thought 15 years ago that they would have a credit card? It's not that crazy to think that there could be an Apple food. And do you want to support a thing where they might become your rival, right? And I guess that's really it. That's where, and I think that's what Schiller sees, is that

For almost all of these companies, Spotify is an obvious counterexample because they're up directly against Apple Music, but almost every other developer on the platform. There's zillions of apps in the App Store. should not in theory see Apple as their competitor. They should see Apple as their partner.

And they should be like, yeah, this is a partner we really like working with. They should be saying, I'm not saying they are, but they have great software development tools. We really like their APIs. Our engineers who work on these platforms are really happy to be doing it. It's really hard to hire engineers for this because it's so competitive and that the talented engineers for the platform...

can go work anywhere they want. Users really value the native apps for this platform. We're really happy to be here. And we feel like we're getting a great deal from them. That's the part that's just missing now. What company thinks they're getting a great financial deal from Apple right now with the App Store as it stands? I don't know of anybody. Maybe some games, right? Because games is, you know, the game industry is sort of 70-30 everywhere.

Maybe. Well, I think games because, again, like you said, it's just gambling. They're just happy the buttons are there. You can get big distribution. I mean, look at the game economy. The games companies are hiring celebrities to make TikTok ads. for free-to-play tower defense games. That's a whole other episode of this show. The money there is a little out of control, and it is the thing that powers all of it.

It's not big business. I think Adobe and Microsoft, the apps Microsoft, were the big examples. right Microsoft famously the first developer for the Mac the first version of Microsoft Word comes out for the Mac Adobe and Photoshop. Excel was invented on the Mac. You just see these big classes of applications on desktop computers with the operating system. as a very responsible layer that creates capability.

But if you'll recall, when Microsoft went to cross-platform interface elements, in the early days of a word. the Mac community rebelled and said, no, we want a bespoke version of Microsoft Word for the Mac. And that used to be... It was Word 6. And it took them years to recover from this self-imposed stain of ugly interface elements.

all of that's gone, right? The culture around Mac development and Apple development used to be, this is the best. We're going to make something at Apple's level of quality. And what you're pointing out is it's shifted, really. There is a small community of Apple indie developers, which are amazing, but it's still shifted really far. I think that's recoverable.

I do think it's recoverable, but I think it should have become a red flag issue at least five plus years ago within Apple. We need to turn this around and make it more of a thing. And you can kind of see it on iOS. And this would be my existence proof that it's recoverable. Say what you want about the aesthetics of the iOS 7 flattened redesign. Now, I guess, what, about 10 years ago, 11 years ago. But part of that wasn't just...

Johnny Ive wanting to get rid of those quote-unquote skeuomorphic leather and texture and brushed metal and 3D buttons and stuff. But part of it was a concerted effort to get apps to stop making apps. that the entire brand of the app looked like the brand of the company and kind of get apps that all look, oh yeah, that's an iOS app.

And you see that more now. I think there's a lot more, oh, this, you know, you still see some apps that don't look iOS-y at all. But for the most part, most apps on iOS are very consistent with the platform. It's the Mac that's lost that to a large degree. And there are a lot of native third-party apps, but it isn't a growing market. And Apple should see that as a five alarm fire, in my opinion. Not because the Mac is that particularly...

big compared to iOS, but because it is the platform that makes the platforms, right? It's all iOS apps are made on a Mac. And... it doesn't seem to be of concern to apple right and to me that's it is unusual it's why i love chat gpt because the chat gpt mac app is actually a really good and clever mac app that does really interesting Mac things like it knows about BB addicts.

And so if you're using BBEdit while you use ChatGPT, they're like, hey, do you want me to hook up to this script that you're writing in that front BBEdit window? Yes or no? And if you do, then it's like, oh, and now you can just type commands like, how do I make this script do... and ChatGPT can do that. You can't do that through the web connected to a native Mac app. And it knows about all the other popular text editors on the Mac, too.

OpenAI does a lot of work with Johnny Ive and Johnny Ive's new design firm. And you can just see how some of this DNA is coming through. When I say it's recoverable, there's the, is it recoverable? Can you make an interesting platform? Can you attract the trust of developers? Then there's the, Can you deliver on what you say you're going to deliver?

And to me, that comes back to hubris, right? That's the concept video at WWDC showing off of Siri that I think even the Siri team had not known was going to be to shut off. Yeah, so we've learned since, right? What do you think that says about Apple right now? I mean, you've written about this at length, that heads should have rolled.

Well, and I think they kind of are, but in a very Tim Cook quiet-ish way. He does not like, I don't think, external drama. I don't think Steve Jobs did either, but I don't think Steve Jobs cared. And I think when he got emotional. They just got emotional. I still don't know. And there's been so much reporting that's come out in the last, I guess it's about two months now.

But Wayne Ma at The Information had a bunch of good stuff. Mark Gurman always has lots of little nuggets here and there in his reporting at Bloomberg. I still don't know. what they were thinking in June when they announced it. In the back of my head, I kind of feel like it's another case where, and again, I'm not saying that the guy should be... fired for Tim Cook, but I kind of feel like the buck stops there, and Obviously, some number of people at Apple are like, yes, we can build this.

these Siri features and ship them by next year. It would be insane. And some of the pushback I got to my piece, the Something's Rotten in the State of Cupertino, was on the grounds of insinuating that they were dishonest about it, that this was fraudulent, and I didn't mean to imply that, and I don't quite see Like, I guess I didn't explicitly state

that they weren't lying about thinking they could ship it because it seemed so obvious to me that of course they weren't lying. Of course some number of people there thought they were going to ship that within the next eight months. Because it would look terrible if they didn't. And then they didn't, and it looks terrible. So of course they didn't. And famously, Apple's leadership is extremely stable. Everybody there has been there for a long time. It's not like it... A fly by night job.

where there were people pushing for, yeah, let's lie and save Siri, we'll do X, Y, and Z by next year. because I won't even be here by next year. I'll cash out in April and go work at Meta or Google or whatever. No, they're all still there. So of course, Some number of people believed it was going to ship.

But there also had to be other voices in the company saying, I don't know if we're going to be able to ship this in the next year, or I don't think we're going to be able to ship this in the next year. And at the very least, I don't think we should... Tell people in June of 2024 that we're going to ship it in the next year. Let's get closer. to shipping it before we announce it. Like, we don't have to wait until it's ready, but we should be a lot closer to ready before we tell people that.

I don't know. I think that maybe, you know, I know it's an overused phrase, but that they're sort of high on their own supply, where for so many years, they've said, you know, and when they've gotten a little bit out over their skis, This isn't quite ready. But I think there were people inside the company who were effectively willing to bet their careers, but we can make this work.

So like with these advanced Siri features, why in the world in June last year, when they clearly, at this point, we now know they weren't even within a year of being able to ship? So I don't know what their most optimistic scenario was then. But why wasn't the internal discussion, well, let's table this for now, and maybe if over the summer we get closer, maybe we can announce this at the iPhone event in September.

Which, I don't know if you know, a lot of people pay attention to. I will point out that a lot of people have announced agentic AI systems that can click around their websites and do it for you. None of them work. to any great effect. Amazon announced Alexa Plus. Approximately zero people have it. They launched it. They said it was out. From what we can tell, 100,000 no-ones have it.

Like, there's some number of people who have it, but it's no one that anyone knows. So it does seem much harder than it looks.

but you know what i would connect this to and i think we should end here this is like where does apple go right here's all of this pressure on manufacturing, on supply chains, on revenue, right? The only growing line of revenue, like you said, it's just a linear lineup. 20 billion, 25 billion is going away. Maybe we prompt the whales to come to the private rooms and take a little bit of that money away, too.

That's a lot of pressure. But it seems like where Apple has been good for years, decades now, is relentless linear improvement. You once wrote a very famous press called The Sound They Roll, right? Yeah. And they just... relentless improvement every year it's a little bit better and if you can start somewhere and you can get to the finish line Apple's gonna get to that finish line and it seems like what they've missed is any disruptive

And I think to whatever extent AI is a disruptive change, it's a disruptive change to the interface of computers. You can just talk to the computer. and then the computer will tell you to leave your wife. And that is going to change how you think about computers. I don't know if they're alive or conscious or whether they're going to AGI, but the idea that we can just, like, have a conversation with a computer, or maybe it's going to do some stuff.

That's the change. And here, Apple, instead of understanding the technology, Announce. what it might do, instead of saying, okay, here's how we can get from A to B and from B to C. I think you can see it with the Vision Pro, too, right? They wanted to build true AR glasses.

And they couldn't. They didn't have the capability or the technology in there, so they built this big VR headset. And it hasn't taken off, because you can't see how that thing improves in a relentless linear way to the actual... And I'm just wondering if you think the Tim Cook apple, all this relentless optimization, all this relentless increase of revenue, Whether you think culturally, it can make a big disruptive change.

I think they can. I think though that it's very odd to me that they seem... I'm sure every single person involved, if they jumped into this podcast with us, would say, we didn't panic at all. We weren't panicked. But it looks to me like last year's WWDC was a panicked announcement of

We keep hearing AI, AI, AI. We're going to announce that we can do all these amazing things that nobody else can. And it turns out nobody can do that, including Apple, right? So why announce them? And I feel like it's so early... early days for AI. I know that it's so exciting and these models keep improving and there's so much going on, but I think when you zoom out and look at how is it really, what are the products that are driven by this?

We don't see them yet. It may just be a handful of years, but the product is not going to be the ChatGPT app. ChatGPT app isn't going where. That's like the terminal. So running programs in a terminal app is still a thing today. Exactly, you know, would be very similar to somebody from 1973 at Xerox PARC. You know, they could sit down in front of the terminal app and be like, oh yeah, still got VI and, you know... lots of stuff is similar. It's like, oh, wow, look how much faster this is.

Chat GPT is like that. It's not going anywhere. We'll have it forever for doing the things where you actually chat to somebody. Chat turns out to be a great interface, right? This is how I'm... Me and you, 98% of the year, like two days a year, we see each other and we pal around and we have lunch and we're in meetings together or a podcast together. And then the other 97% of the days, me and you are friends by text. Right? It's a great interface. It is.

But it's limiting. There are going to be interfaces that are to chat. to interface with AI, what graphical user interface apps are to command line. I don't know what they are yet. Nobody does. I don't think we've seen them. I think the one that's obvious people talk about it, I don't know why people laugh. It is obviously going to happen. We want robots. We want C-3PO and R2-D2 style robots in our life.

who can walk around our house and go get us drinks from the refrigerator and go answer the doorbell because I'm expecting a FedEx package and the robot will go down there and answer. We want these things. What's the interview? We're going to talk to them.

Apple can make physical devices. better than anybody right that's part of the play right like that so to me the thing that i i don't see why apple's panicked is that the real play is going to come when ai informs the fundamental physical nature of certain devices. It's not going to be these slabs of glass, the phones and the tablets. It's not going to be laptops. We have the interfaces for them. and now they're all decades old.

There will be new physical devices that you buy that are AI first. And again, they're not going to be pins that you wear on your laptop. But that's where that entire class of devices came from, right? People thought, okay, voice is the dominant interface. I redesign the phone. to be voice first maybe i'm going to throw the screen away and pin it to your chest right Get on that. But the AI wasn't ready. Those products just didn't work.

That's where Apple should just have the quiet confidence and to start noodling on those ideas of what can we build? Can we build a robot that can go up and down stairs? What else can we do? Can we do... Something, you know, there's so many different ideas, you know, that are possible. And I think we'll start seeing them soon. But Apple should be thinking that. Like, what are the physical devices that are informed by this and how can we build them? as quickly as possible.

I mean, that's probably why they had that experiment with the car. The car was, and by all descriptions of Apple's car project, was sort of... Some people within Apple apparently only wanted to do it if it could be entirely self-driving. That it was an AI product in a certain sense. and i don't even know that it was wasted money i think you have to you know if you don't have failures you're not trying hard

Yeah. If every single thing you try to do you succeed at, then you're not trying hard enough. You need, I don't know what the right batting average is, but you need to have a couple, you need to be pushing so close to the edge of what's possible that sometimes it's not going to pan out. And Apple should get back to that. But promising things that you don't aren't within months of shipping.

shouldn't ever be part of the recipe. And I don't think, it's going to be a long time before they recover from that. And then the other thing they should be thinking about recovering is getting developers outside Apple. to want to make software for Apple devices, to be dying, to be begging their boss, like, let us make a native app for this, whatever, whether it's the iPhone, the Mac, or a new device or something.

And having the boss say, well, what's in it for the company? And say, oh, it's a great deal. And have it actually seem like a great deal. Or it's something we can go tell our customers about that we can only do it.

or only do on the iPhone, which at this point is pretty limited. I'm going to wrap this up. First of all, I just want to say one thing. Every time I think about the Apple car, I think about the fact that the most popular Cars in America are mid-sized crossovers, and imagining Johnny Ive trying to design a mid-sized crossover is just the funniest No wonder that project failed. Johnny, I was going to compete with the Mazda CX-5. Get out of here. It's just not happening.

But that piece about developers is really important. And I'm just curious. I mean, we're coming up on WWDC. Do you think they're going to acknowledge these missteps and apologize and try to reset this relationship? Well, maybe on the developer terms. And I don't have any inside information about it. And if it is going to happen, I'll bet that there are...

I bet you could fit them in a mid-sized crossover SUV. The number of actual people involved who know what Apple's going to announce would fit in a Mazda CR whatever. Not even the three-hour run, the two-hour run. But I think that they could.

I think, and you know, and it's a very Apple way. Steve Jobs was the master of this, of saying, you know, they'd say, hey, do you think anybody ever wants to watch a video on an iPod? And he'd say, no, that's the stupidest idea I've ever heard in my life. And then the next year, the video, you know, iPod plays video. and come out and say, hey, we had this great idea. How about we cut the rate of the App Store to 85.15? It just popped into our head, and we thought, you know.

and some kind of Apple explanation for why now's the time to do it without acknowledging that they lost a court case, without acknowledging any regulatory pressure from other countries around the world. just act like it popped into their head and it'll make a certain segment of the internet's heads explode because they're pretending that they just came up with this original amazing idea.

of only taking 10% of digital transactions or whatever the number would be and acting like they invented it. But that's Apple. And that's the Apple. They could do it. There's nothing that's stopping them from doing it. And I do... Just one quick point. I'm sure you remember this guy, Arthur Laffer. He's still around, but he's the guy from the Laffer curve that fueled the whole supply-side economics idea.

And the idea is that if the government charged lower tax rates, they'd make more money because the economy would grow. At a certain level. Republicans sort of took it to an absurd degree. But at a certain level, it is true. It has to be true. Because if the government taxed your income 100%, well, nobody would work. Why would you work if they're taking 100% of your money?

and if the government taxed you at 0%, the government would make no money. So there has to be a magic number in between 0 and 100 that is about the optimal amount of money that people are inspired to work the most, and then the government... makes the most money because the economy is growing. The number for Apple has to be different than 70-30. But they've somehow gotten into it of why would we lower it at all? We'll lose money.

They've lost so much money because people aren't building for the platform and they don't see it. It's banana. I would tell you, having talked to a number of antitrust regulators in the show, the idea that we would take tax policy and apply it to a company is the problem that they see. They're like, Apple's a state. Apple has government problems. Apple has tax policy problems. The market should be setting the rate.

Apple should say, our developers are leaving and going to develop for Microsoft or Google or whoever, and that is bringing the rate down, not us, the regulator. Now we've just entered into pure Decoder land. What is the optimal tax rate for a platform in the Laffer curve is deep.

Right. We're going to have to come back after WWDC and talk about it because I'm very curious what they do here, especially, and we don't know yet, if more developers take advantage of this moment when a judge has said, you're not doing this anymore. And they're adding the buttons, right? They're adding the buttons to take people to the web. But Apple's appealed that rule.

There's this weird A-B test that is about to happen. The most innovative thing to happen so far in May 2025 is that the Kindle app now has a Get Book button. Innovation be like. You see what I'm saying. This is what they would say the problem with the Monopolys are. But, John, you're going to have to come back. I'm dying to see what happens with developers. I'm dying to see what happens with WWE. And it seems like, like I said at the top. Whatever we think of these big companies right now

The status quo is not holding. Things are changing. In particular for Apple. The soul of the company is either going to persist and win or something. So from our perspective in the media, they have done their job of making this year's WWDC something that seems like it's going to be dramatic. I hope so. We'll see. All right, John, thank you so much for being on the counterwatch. Have you back soon.

I'd like to thank John Gruber for taking time to join me today, and thank you for listening. I hope you enjoyed it as much as we did. If you'd like to let us know what you thought about this episode, or really anything else, drop us a line. You can email us at decoder at theverge.com. We really do read all the emails.

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