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Apple’s WWDC Meeting Caps a tense year for companies, developers



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The annual conference for software developers began Monday. It came with something unusual for the iPhone maker: app developers dissatisfied with the terms of the App Store.

The week-long worldwide developer conference, which began with a keynote speech by CEO Tim Cook streamed on the company’s website, is normally a peppermint for the company and its acolytes.

This year’s event comes on the heels of Apple’s court battle with “Fortnite” maker Epic Games Inc., which put the spotlight on the increasingly tedious relationship some developers have with a company that controls access to the billions plus iPhone users worldwide.

Last month̵

7;s lawsuit, in which Epic accused Apple of inappropriate monopoly behavior, limited a year of rare disagreement among app developers. The period has included public sparring with Facebook Inc.

CEO Mark Zuckerberg and Cook’s defense of Apple’s behavior before Congress.

Documents provided by Epic Games lawyers were brought to court in the fight against Apple last month in Oakland, California.


Photo:

Brittany Hosea-Small / Reuters

At the heart of the developer’s grip is money. Some people dislike new privacy policies that Apple recently passed that disrupted the digital advertising industry. Others loathe the commission, as much as 30%, that Apple takes on digital revenue generated through the App Store.

Apple has denied allegations that it is a monopoly and defended the commission in line with rivals and fair for the value it has created. Apple has said that Epic wants to get around and pay its share to use the App Store.

Apple’s hardware, software and services work so harmoniously that the relationship is often called a fenced garden. The idea is central to recent antitrust investigation and Epic vs. The Apple case. WSJ’s Joanna Stern went to a real fenced garden to explain everything. Photo illustration: Adele Morgan / The Wall Street Journal

“The future of Apple’s developer tariff is the elephant in the room at this year’s WWDC,” said Gene Munster, managing partner of Loup Ventures, a venture capital firm specializing in technological research.

On Monday, it is expected that Apple will unveil the latest operating systems, including iOS 15, which may have more privacy features, notifications changes and new features for the messaging system, which compete with Facebook’s messaging app WhatsApp.

After the Epic lawsuit was filed in August, Apple lowered the commission to 15% from 30% for apps with revenue of $ 1 million or less, a decision that Mr. Cook said was linked to concerns for small businesses.

In a courtroom sketch, lawyers confer with Judge Yvonne Gonzalez Rogers during the antitrust trial.


Photo:

Vicki Behringer / Reuters

A small percentage of apps generate more than $ 1 million. Most App Store apps are free and pay no commission. Free games generate money mainly through in-app advertising, for which Apple does not collect a sales cut.

The year of dissatisfaction began in last year’s WWDC, when Apple said it planned to introduce new privacy tools in its iOS 14 mobile operating system. Developers, including Facebook, complained that it would disrupt their advertising business. In-app ads are often targeted to users based on data about their online activity, which is collected by apps. Developers spent months figuring out new strategies for dealing with Apple’s privacy policy changes, which now require users to agree to be tracked.

Mr. Cook has defended the change as a way to protect users’ privacy and help them control how their data is used. But in January, Zuckerberg said Apple had every incentive to “use its dominant platform position to disrupt how our apps and other apps work.”

In the midst of the complaints, Apple has tried to mark what Mr. Cook has called an economic miracle released by the App Store.

Apple recently released a report estimating that billing and sales through the App Store increased by 24% to $ 643 billion last year compared to 2019, driven by quarantined users who want to avoid personal interaction. Last year, investors were rewarded with shares that almost doubled in value.

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The App Store is a large part of Apple’s so-called service unit, the part of the company’s business Mr. Cook aims to generate growth after previous years of slowing down iPhone sales. Nick Rodelli, head of CFRA Legal Edge, an investment research firm, estimates that app store commissions, along with money generated from making Google the default search engine on the devices, account for 40% of Apple’s pre-tax revenue.

Since the launch of the App Store in 2008, the number of available apps has grown to approximately 1.8 million from 500.

The tensions make this year’s developer conference even more consistent. Apple is spending more than $ 50 million to put on the event, according to forensic testimony from Phil Schiller, Apple’s CEO who oversees the App Store. In a typical year, 6,000 developers would participate in person and tens of millions more would watch online, he said. This year’s 200-plus sessions are held virtually and posted online.

During the epic trial, U.S. District Judge Yvonne Gonzalez Rogers – who is expected to decide the case in the coming months – confronted Mr. Cook with survey data which, she said, indicated that 39% of developers were either very dissatisfied or somewhat dissatisfied with Apple’s distribution services.

“How is that acceptable?” she asked.

As a testimony, Mr. Cook said he was not familiar with the document, but noted that Apple rejects about 40% of the apps sent to the store each week. (An Apple lawyer later pointed to a 2019 internal survey that said 19% of developers reported dissatisfaction.)

“There’s definitely some friction in the system,” Mr. Cook said, adding that the tough standards ensure users have great experiences in the App Store.

The suggestion that 39% of developers are dissatisfied with Apple is a striking figure for those who have followed Apple closely. “Apple is used to having 99% customer satisfaction,” said Ben Bajarin, chief analyst at Creative Strategies Inc.

Epic Vs. Apple

Related coverage of the dispute, selected by the editorial staff

Write to Tim Higgins at Tim.Higgins@WSJ.com

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