Is Apple's control freakery out of control

Apple makes money. A LOT of money.

The company reported nearly $50 billion in revenue for the quarter that ended June 27, as well as $10.7 billion in profit. For a handy comparison, that's about seven times more revenue and profit than McDonald's.

Apple's success gives it numerous benefits and privileges. One of these is that it gives Apple the ability to exert a previously unheard of level of control over both its App Store and its retail Apple Stores.

This has always been Apple's modus operandi. But, increasingly, the more successful Apple gets, the more it seizes control. Or could it be that Apple's control freakery is the key to its success

In the past few weeks, Apple's ever-tightening grip over its stores has gotten even tighter across the board -- let's have a look.

Apple drops Nest Thermostat

The Apple Store was the first retail store where consumers could buy Nest Labs' Nest Learning Thermostat.

When it first went on sale there three years ago, the tech press said it all made perfect sense. After all, the company was launched and the product design overseen by longtime Apple employee Tony Fadell.

Then last year, Google bought Nest Labs for $3.2 billion.

Earlier this month, Apple began selling a thermostat product called the ecobee3, which happens to support Apple's HomeKit platform.

Then last week, Apple pulled the Nest Thermostat out of the Apple Store and its online store. (Nest's Protect and Cam products still remain available in the stores.)

Let's fully grok the control freakery here. The Nest Thermostat was on sale in Apple Stores for three years and, of course, it never supported HomeKit because HomeKit didn't exist. Then, HomeKit happens, followed by HomeKit support in the ecobee3, and suddenly, Apple really, really doesn't want you buying the non-HomeKit supporting the Nest thermostat.

It's just part of how Apple plans to control everything -- everything! -- about what you buy and how you buy it.

Apple insists on designing every package in the Apple Store

In an even bolder move, we learned earlier this month that Apple had been working on a new policy. All third-party products sold in the Apple Store must now have packaging co-designed and approved by Apple.

The apparent reason for this change is purely all about control-freakery. Apple wants the "experience" of buying any product in the Apple Store -- even those not made by Apple -- to be just like the Apple-product "experience."

It's not just the retail Apple Store where Apple is exerting total control. They're doing it in the iOS App Store, too.

Apple bans apps from giving purchase alternatives

You may have heard that the federal government is looking into the App Store "tax."  The Federal Trade Commission is exploring the fairness of Apple's "agency" model for streaming music. (And, right on cue, grandstanding Sen. Al Franken (D-Minn.) is trying to get in front of that parade.) The model Apple takes a 30% cut of anything users buy while using a third-party iOS app.

This can be an existential problem for music streaming apps, especially since Apple recently launched its own $9.99 per month Apple Music service.

If, say, Spotify matched Apple's $9.99-per-month price for subscriptions bought while in the Spotify app, Apple would get about $3-per-month of that, and Spotify would get only about $7 -- which would mean Spotify would lose money on each subscription. That's why Spotify has to charge $12.99 per month when users sign up in the iOS app.

You might wonder why Spotify doesn't just link to the web sign-up, where Apple wouldn't get a cut and where Spotify can make more by charging $9.99. (Spotify would make more because at the $12.99 price, Apple gets about $4 and Spotify gets about $9.)

This is precisely where Apple's control freakery comes in. Apple prohibits Spotify and all app developers from linking to -- or even telling users about -- a place to sign up that's outside the app.

This policy isn't new, and it's not restricted to music streaming apps. What's new is Apple Music -- and the FTC's investigation.

That's not the only place where Apple restricts speech in the App Store.

Apple bans reviews for iOS 9 beta testers

Apple last week removed the option to leave reviews for people running a pre-release beta version of iOS 9. The reason is that the yet unfinished operating system won't allow all apps to run perfectly, and Apple doesn't want third-party apps to suffer bad reviews caused by the beta.

That's fair to the app developers. But it's a significant and unprecedented act of controlling the speech of users.

The $700 billion question

(At deadline, Apple's market capitalization was more than $700 billion.)

Apple dominates the consumer electronics and computer industries, at least from a business perspective. Its valuation as a company is higher than Google and Microsoft combined. Out of the 1,000 or so companies that make smartphones, Apple by itself makes 92% of the profits.

Today's Apple, and much of its success, can be attributed to Apple co-founder and Chief Control Freak, Steve Jobs.

Does Apple's industry success and insurmountable dominance enable its unprecedented control over all aspects of its stores Or is the control freakery itself the secret to Apple's success


Mike Elgan

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