From Stratechery:

Yesterday the Supreme Court held a hearing in the case Apple Inc. v. Pepper. “Pepper” is Robert Pepper, an Apple customer who, along with three other plaintiffs, filed a class action lawsuit alleging that App Store customers have been overcharged for iOS apps, thanks to Apple’s 30% commission that Pepper alleges derives from Apple’s monopolistic control of the App Store.

There are three points to make about this case, and they are captured in the title:

• First, the specific antitrust doctrine at question
• Second, the question of whether the App Store is a monopoly
• Third, what the very existence of these questions say about Apple

In my estimation, these three points move from less certain to more certain, and from less important to more important. In other words, whatever the Supreme Court decides matters less than what the very existence of this case says about the state of Apple and its future.

Antitrust and Standing

The question before the Supreme Court is whether or not Pepper et al. have standing to sue Apple for antitrust violations at all; in other words, the case — which was launched in 2011 — hasn’t even started yet. The Clayton Antitrust Act of 1914 stated that “any person who shall be injured in his business or property by reasons of anything forbidden in the antitrust laws” can bring an antitrust action, but in the 1977 case Illinois Brick Co. v. Illinois, the Supreme Court held that only direct purchasers of illegally priced goods had standing to sue.

The specifics of the Illinois Brick case are helpful in parsing out what makes the Apple case complex; specifically, the Illinois Brick value chain was very straightforward: concrete block makers (including the eponymous Illinois Brick Company) were accused of colluding to fix prices for concrete blocks, which were bought by masonry contractors; masonry contractors in turn submitted bids to general contractors for construction projects, which were ultimately paid for by the State of Illinois. The State of Illinois sued for damages, alleging that the higher prices resulting from the price fixing had been passed through to the State of Illinois.

. . . .

In this value chain it is obvious who the direct purchasers were: masonry contractors; to the extent the State of Illinois suffered harm it was indirect pass-through harm. Thus, the Supreme Court ruled that the State of Illinois did not have standing; if every party in the value chain were to sue, the infringing party could be subject to duplicative recovery for damages (and parsing out the share of damages would be extremely difficult).

Apple vs Pepper

The question in Apple vs. Pepper, then, is who is directly harmed by Apple’s alleged monopolistic practices. According to the plaintiffs, the value chain looks the same as the concrete block manufacturers:

In this case Apple is in between developers and customers; the plaintiffs explain in their petition:

Apple charges apps purchasers a 30% commission on each app sale (unless it is a free app). The price paid by purchasers for an app is the amount set by the apps developer, plus Apple’s own supra-competitive 30% markup, both of which are paid directly to Apple, the alleged monopolist, every time an app is purchased. Apple keeps the entire supra-competitive portion of the purchase price for itself and remits the balance to the apps developers. The apps developers do not sell their apps to iPhone customers or collect any payment from iPhone customers, and iPhone customers are the only purchasers in the entire chain of distribution.

The plaintiffs argue that this makes consumers “direct purchasers”, giving them standing to sue:

Since Illinois Brick was decided 40 years ago, courts throughout the nation have had no trouble applying its “direct purchaser” standing requirement to various factual settings, including cases in which some form of payment is made to an alleged monopolist prior to the monopolist’s sale of a product.

Apple’s argument is that this misrepresents the transaction; the company wrote in its petition:

There is no basis for Respondents’ argument that pass-through damages claims are permitted whenever there is direct interaction between the plaintiff and alleged antitrust violator. This argument openly exalts form over substance by turning entirely on the formal identification of a “direct purchaser” and prohibiting any “further inquiry into the specifics of a case.”

Rather, Apple argues that the value chain looks like this:

Specifically, the company argues that “Apple does not buy and resell apps”:

Respondents suggest for the first time that Apple “has adopted the role of a retailer functionally buying from developers as wholesalers and selling to iPhone owners as consumers.” But their complaint does not allege that. And Respondents have repeatedly acknowledged that only consumers buy apps; Apple does not. The Apple developer agreements cited by Respondents confirm this: developers “do[] not give Apple any ownership interest in [their] [a]pplications.” So Apple is fundamentally unlike a traditional retail store.

Rather, Apple acts as an “agent” for developers:

As Respondents note, [the Developer] Agreement confirms that “Apple acts as an agent for App Providers in providing the App Store and is not a party to the sales contract or user agreement between [the user] and the App Provider.” Thus, Respondents concede that the direct sale is actually between developers and consumers, facilitated by Apple as an agent and conduit.

Along those lines, Apple argues that developers set the price of their apps, which determines Apple’s 30% cut, and to the extent developers set prices higher to compensate for that cut they are passing on alleged harm to consumers — which means consumers don’t have standing to sue.

Link to the rest at Stratechery

PG says there’s nothing more bracing in the morning than a bracing dose of antitrust law. It tones up the mind and prepares it for broad gauge analytical work in any field.

From Seeking Alpha:

Amazon is aggressively pursuing market share growth in mobile payments. WSJ reports that Amazon is asking gas stations and restaurants to offer Amazon Pay options to customers. Amazon also will be increasing the presence in brick and mortar stores with whom it does not directly compete for retail sales. On the other hand, Apple also is looking to gain a decisive market share for its own digital wallet platform.

A recent Bloomberg report mentioned that Apple Pay is in second position, behind PayPal in number of active users using the digital wallet. However, Amazon has a significant benefit due to its online retail business, Prime membership and further growth in the brick and mortar space. Amazon also is investing heavily to increase the market share of Amazon Pay in international regions. As the mobile payments market matures, we should see two or three major players grabbing a big chunk of the market share.

. . . .

Amazon Pay has been around since 2007. However, Amazon has only recently started making aggressive investments to increase the market share of its digital wallet. It’s now asking brick and mortar stores with whom it does not compete to allow Amazon Pay options for customers. It’s not clear whether Amazon Pay will use QR codes or NFC technology which is used by Apple Pay. QR codes are generally preferred by smaller business owners as they can print and tape the codes without any big investments in NFC terminals.

Link to the rest a Seeking Alpha

From Fortune:

Finding Apple products on Amazon isn’t easy. Most are either unavailable or only sold through third-parties, a result of the rivalry between the two companies.

But that should change soon now that Apple has agreed with Amazon to directly list more of its products in its online marketplace.

In the coming weeks, Apple will start selling the new iPad Pro, iPhone XR, XS, and XS Max, Apple Watch Series 4, and Beats headphones on Amazon, CNETreported on Friday. The countries included in the deal are the U.S., U.K., Germany, France, Spain, Italy, Japan, and India.

. . . .

The agreement comes after some bad blood between Apple and Amazon. In 2015, Amazon removed Apple TV from its marketplace, though Amazon brought the device back last year after a public outcry.

Of course, Amazon sells its own Fire TV Stick streaming device, which competes with Apple TV, raising questions about what sparked the initial decision to remove it.

Third-parties that currently sell Apple and Beats products on Amazon will have to apply to Apple to become authorized sellers, or their listings will be removed by Jan. 4, 2019, CNET reported. Sellers have already been notified about the change.

Link to the rest at Fortune

PG has been a Windows user for a very long time and an MS-DOS user prior to that.

All of the PG offspring are Mac users.

On many occasions, PG has had the Windows vs. Mac discussion. Several years ago, with the help of one of his offspring, he purchased a lightly-used top-end Mac desktop and appropriate software to see if he had the potential to become a Mac guy.

After about six months of trying, he was feeling no buzz and one of his offspring inherited the Mac.

He won’t go into detail, but, over the years, PG has collected a variety of Windows software programs and utilities, both widely-used and obscure, that, for him, make his use of a Windows computer quite efficient. Every few years, he upgrades his hardware for more speed/memory/storage/virtue. (For computer geeks, PG’s current desktop contains a healthy i7 processor,  32 GB of RAM, 3 TB of internal storage, including a 1 TB SSD and 16 TB of external storage, so you can see he suffers from an advanced case of something.)

OTOH, PG owns and has owned and enjoyed several iPhones, so he’s not constitutionally anti-Apple.

For visitors to TPV who don’t pay attention to such things, Apple introduced a new MacBook Air yesterday, the first refresh of a popular entry-level Mac laptop in several years.

As with many things Apple, the price increased. For $1199 (up from $999) you get a 13-inch hi rez display (nice, but not large), an i5 processor (middling performance), 8 GB of memory (not much) and a 128 GB SSD (teeny, at least by PG standards). Its built-in camera (Skype, Facetime) is 720p (low rez lame, could impair your online image if you don’t buy an external webcam which will impair the sleek MacBook Air’s appearance).

One commentator on all things Apple opined that Apple’s overall strategy is to raise the Average Selling Price (ASP) of all of its products. The latest iteration of this strategy began with the new iPhones introduced a couple of months ago – $100 or so more expensive than last year’s comparable models. The MacBook Air continues the +ASP strategy.

Over the last several years, based on sales, Apple has evolved into a phone company rather than a computer company.

In terms of unit numbers, Apple sold about the same number of phones in late 2017/early 2018 as it did a year earlier. Increased iPhone revenue occurred during that period because of increased prices.

PG read somewhere that cellphone users in the US are keeping their existing phones for a longer period of time than they have in previous years.

Apple’s competitors in the smartphone and laptop/desktop computer markets have been adding features, but not increasing prices like Apple has.

So here’s the question (PG promises to get back to books shortly): Where’s the tipping point for Apple? When are its products going to cost more than they’re worth, technically and as a lifestyle statement?

“How did you go bankrupt?”
Two ways. Gradually, then suddenly.

~ Ernest Hemingway

From Two Cents:

When you purchase music, movies or books from Amazon or Apple’s iTunes store, you might be under the impression that that material is yours to enjoy forever; that’s how CDs and paper books work, after all. Why rent You’ve Got Mail for $3.99 every few months when you can “own” it and watch it whenever, forever, for $9.99?

But you’d be mistaken. Anything digital is temporary, even if you clicked “purchase” rather than “rent.” One unfortunate side effect of that you won’t experience with a physical book or record: Your purchases may just disappear if licensing agreements change.

. . . .

As outlined in the Twitter thread, Apple states the content provider of the movies in question removed them from the store. And that removed them from the user’s library, even though he had paid money to buy them. It’s easy to see why that’s frustrating (especially since Apple wasn’t willing to cough up a refund for the purchases he no longer has).

“This wouldn’t happen in the physical world. No one comes to your door and demands that you give back a book,” Aaron Perzanowski, a Case Western Reserve University law professor, who studied these digital purchases, told the LA Times in 2016. “But in the digital world, they can just go into your Kindle and take it.”

. . . .

For example, Amazon notes in the fine print that “Kindle Content is licensed, not sold, to you by the Content Provider. The Content Provider may include additional terms for use within its Kindle Content.” You also can’t sell or redistribute your ebooks, as you might with a physical copy. Apple’s fine printstates that the licensor “reserves the right to change, suspend, remove, disable or impose access restrictions or limits on any External Services at any time without notice or liability to you.”

. . . .

The best option? If you can, buy a physical copy of a movie or TV show that comes with a digital download. At least you’ll have a backup in case your digital copy disappears—assuming you still have a player to watch it on.

Link to the rest at Two Cents

When PG read the OP, one of the first things to pop into his mind was, “born yesterday”.

The author of the OP apparently discovered licensing of intellectual property shortly before writing the article and assumed at least a portion of the Lifehacker audience didn’t know much about the topic either.

“Born Yesterday” was the name of a Broadway play with two revivals plus three different movies.

Here’s a plot summary of the original Broadway play, Born Yesterday, which premiered in 1946, from Wikipedia:

An uncouth, corrupt rich junk dealer, Harry Brock, brings his showgirl mistress Billie Dawn with him to Washington, D.C. When Billie’s ignorance becomes a liability to Brock’s business dealings, he hires a journalist, Paul Verrall, to educate his girlfriend. In the process of learning, Billie Dawn realizes how corrupt Harry is and begins interfering with his plans to bribe a Congressman into passing legislation that would allow Brock’s business to make more money.

As a general proposition, the creator of intellectual property is its owner. Everybody else who wants to observe, read, listen to, etc., etc., that intellectual property is not the owner of the IP, but only has limited rights created by statute or license to do some things with their copy of the IP.

The owner of a physical book can’t make copies of the book and sell them to others because the book’s owner doesn’t own the IP depicted in the book. He/she is only the owner of the paper, ink and binding of that particular copy of the book. The copyright law (statutory and otherwise) which creates and defines the IP in the first place permits the book’s owner to do certain things with the physical book – read it, lend that copy to someone else, sell that copy to someone else, donate it to a library, deface the book, use excerpts or quotes from the book for various purposes, etc., etc.

The same basic rules, adapted to different media by which IP can be duplicated, transmitted, etc., govern copies of the IP in digital form. Just as making a copy of a book to give or sell to someone else is a violation of the creator’s IP rights, generally speaking, making a copy of a CD, a digital file, a photograph, or other protected medium incorporating such IP to give or sell to someone else is, absent permission from the creator or permission granted via copyright law, a violation of the creator’s IP rights.

Enough of this type of blathering.

The OP caused PG to wonder whether an author self-publishing with Amazon via KDP could make digital copies of his/her ebooks disappear from Kindles everywhere by unpublishing the ebook.

The short answer is probably not.

Here are some excerpts from the current Kindle Direct Publishing Terms and Conditions that describe what rights an author grants to Amazon:

Paragraph 3 Term and Termination (excerpt with PG highlights)

Following termination or suspension, we may fulfill any customer orders for your Books pending as of the date of termination or suspension, and we may continue to maintain digital copies of your Digital Books in order to provide continuing access to or re-downloads of your Digital Books, as well as digital copies of your Books to support customers who have purchased a Book prior to termination or suspension. . . . All rights to Digital Books acquired by customers will survive termination.

Paragraph 5.1.4 Book Withdrawal (excerpt with PG highlights)

All withdrawals of Books will apply prospectively only and not with respect to any customers who purchased the Books prior to the date of removal.

Paragraph 5.5 Grant of Rights (excerpt with PG highlights)

You grant to each Amazon party, throughout the term of this Agreement, a nonexclusive, irrevocable, right and license to print (on-demand and in anticipation of customer demand) and distribute Books, directly and through third-party distributors, in all formats you choose to make available through KDP by all distribution means available. This right includes, without limitation, the right to: (a) reproduce, index and store Books on one or more computer facilities, and reformat, convert and encode Books; (b) display, market, transmit, distribute, sell, license and otherwise make available all or any portion of Books through Amazon Properties (as defined below), for customers and prospective customers to download, access, copy and paste, print, annotate and/or view online and offline, including on portable devices; (c) permit customers to “store” Digital Books that they have purchased from us on servers (“Virtual Storage”) and to access and re-download such Digital Books from Virtual Storage from time to time both during and after the term of this Agreement

It appears to PG that Apple’s agreement with the owners of the copyrights to some iTunes movies did not include anything like the language in the KDP T&C’s and that the movie owners could force Apple to terminate rights of its customers who had paid for licenses to those movies.

It appears to PG that an author or publisher operating under the KDP T&C’s or something similar can’t force Amazon to terminate a customer’s rights to access an ebook they bought through Amazon. Amazon can decide to do so, but an author can’t make Amazon pull a digital move like iTunes did.

As usual, PG is a lawyer, but nothing PG posts on TPV is legal advice. If you would like to obtain legal advice, you need to hire an attorney to give you that advice, not read what a lawyer might post on a blog.

PG invites comments that agree or disagree with his half-baked (or fully-baked) blatherings on this topic.

From Gizmodo:

The world’s most valuable company and a business run by the richest man in modern history have been engaged in an irritating cold war for years, and they need to knock it off.

When I say that Amazon and Apple are engaged in tech’s most annoying feud, I don’t mean it’s the most important battle in tech—it’s not. From a business perspective, Amazon and Apple’s squabbles make a certain amount of sense, but that doesn’t mean the whole thing isn’t obnoxious. I’m referring to the little ways these two giant companies have tried to kneecap each other over the years just to slug their users instead.

Today, one glaring example of these obscenely rich companies giving everyone a headache is the fact that Amazon apps for iPhone won’t allow you to buy e-books or audiobooks from the apps themselves. You can browse Amazon’s Kindle or Shopping apps and have a comfortable mobile experience on iOS—everything is laid out nicely and is easily accessible—but as soon as you decide on the perfect e-book, you’re forced to go to a browser to finalize your purchase. This isn’t an issue on Android.

I have two Kindles, but I usually end up reading books using the Kindle app on my iPhone just because it’s always with me. The first time I realized I couldn’t purchase a book on the Kindle app, I moved over to the main Amazon app where I was foiled again. Eventually, I had to navigate to the Amazon site in my mobile browser and go through the whole process of logging in and checking out. A few months later, I tend to forget about this annoyance and repeat the process. This being 2018, I also tend to spend more time buying books than reading them because the world has broken my brain.

. . . .

Amazon doesn’t disclose how many Kindle devices it sells, but in 2013, research firm Consumer Intelligence Research Partners estimated 20.5 million Kindles were in use in the U.S., and those sales have declined while reading on a phone or tablet has become more common. Let’s just say 20.5 million people have spent five minutes bumbling with the checkout in a browser every year. That would mean people waste over 1.7 million hours in a year because of this problem. This isn’t so much a blood feud in which these companies are trying to mortally wound each other, it’s more like a competition to inflict paper cuts that only hurt users.

The primary reason for this spat is that Amazon apparently doesn’t want to cough up the 30-percent cut that Apple demands from in-app purchases, which includes e-books through Amazon’s apps.

Link to the rest at Gizmodo

PG buys lots of stuff from Amazon using his iPhone, but never realized that he couldn’t buy books on the device.

If Apple had put 10% of the effort Amazon expended in selling books, iBooks wouldn’t be an asterisk in the book business. After Steve Jobs and the Price-Fix Six got caught, Apple evidently didn’t want to get cooties by actively competing for the book business. Evidently, Apple doesn’t understand that it can compete in the book business without violating antitrust laws.

From The Wall Street Journal:

Apple Inc. sought to head off customer complaints about defective keyboards on its latest MacBook models, saying it will offer free repairs for qualifying devices in the latest overture to users concerned about the performance of one of the company’s signature products.

The company on Friday said it would replace the keyboard or keys on some MacBook and MacBook Pro models released since 2015 if those devices had letters or characters that didn’t appear when pressed, felt sticky or didn’t respond consistently to typing. Prior to the offer, Apple was quoting customers with out-of-warranty keyboards a cost of $300 to $475, according to the company.

. . . .

The MacBook issues can be traced back to 2015 when Apple introduced a new keyboard system with a “butterfly mechanism” that it said was 40% thinner and more responsive. The butterfly system, which has been used in MacBook updates since then, uses V-shaped underpinnings rather than an X-shaped scissor connection, a change Apple says allows it to bounce back “with a crisp motion that you’ll appreciate the moment you start typing.”

However, customers have complained that dust and debris, such as crumbs of food, cause the keyboards to stop working on devices with starting prices ranging from $1,299 to $2,399.

Link to the rest at The Wall Street Journal

PG expects he is not the only writer (legal stuff and blogging) who has a close and intense relationship with his keyboard. He wishes he had found some type of software to record his cumulative keystrokes since starting with personal computers. It would be a very large number.

His first love was a clicky Northgate keyboard which, with the function keys on the right left side, was an ideal companion for WordPerfect software.

Alas, WordPerfect was acquired by Novell and promptly ruined.

After holding out for as long as possible with his doddering Northgate and increasingly outdated WP software, PG switched to MS Word and tried a variety of ergonomic keyboards before finding the Microsoft Ergonomic Keyboard. It was not love at first sight, but PG’s fingers and wrists came to appreciate this experience after a few days of interaction.

Remembering his earlier Northgate experience, PG has stashed a few MS Ergo keyboards in a closet so he can have a transition period on his schedule rather than Microsoft’s if things change again.

PG still wants to be able to talk to his computer and have really usable results appear on his screen and tries the latest dictation options from time to time, but hasn’t found that nirvana yet.

From The Wall Street Journal:

Contrary to popular belief, Apple isn’t a hardware company. Nor is it a software company. Apple is, fundamentally, an ecosystem company—one that, with the help of millions of developers world-wide, has created a vast web of software and services that run on its 1.3 billion active devices.

Apple revenue has been dominated by the iPhone, but thanks to the services side of its business, the company is proving to be more durable than any single iPhone generation.

The trouble is, as Apple increasingly emphasizes device prices over volumes for revenue gains, it confronts a fundamental tension—between charging people more for hardware and, simultaneously, more for services to access through it.

The former puts profit margins ahead of prevalence, while the latter emphasizes maximizing the number of gadgets in customers’ hands.

. . . .

Just as Chief Executive Tim Cook predicted in 2016, Apple has increased revenue from its intangible services into a Fortune 100-size business. In the 2017 calendar year, Apple reported $31.15 billion in revenue from services including Apple’s music (both downloads and subscriptions), video sales and rentals, books, apps (including in-app purchases, subscriptions and advertising sold by Apple), iCloud storage and money Google pays Apple to be the iPhone’s default search engine.

Another way to think of it: Apple is on track to take in about $26 a year in revenue from each of its 1.3 billion active devices.

. . . .

Mr. Cook says by 2020 he wants Apple’s services revenue to double from its 2016 level. Between now and then, if revenue from iPhone sales holds steady or declines, which would be a natural consequence of people holding on to their devices longer, then growth in services could become the primary driver of Apple’s overall revenue growth—or even the one thing that keeps it from declining. Services, and the millions of developers and thousands of companies behind them, are the reason the iPhone is so sticky, says Horace Dediu, an Apple analyst.

. . . .

When iTunes was king, the bulk of Apple’s services revenue was music and movie downloads; with the arrival of the iPhone, it soon became apps. As Apple rolls out more gadgets, its services revenue will continue to diversify.

. . . .

Apple already offers an upgrade program, where users can pay off an iPhone after 24 months or trade it for a new one after a year. Imagine a service where you simply subscribe to a regularly updated iPhone, Apple Watch, AirPods or some subset of these devices. Mr. Dediu estimates that for every Mac or iPhone, the average Apple customer spends on average a dollar a day on hardware plus services.

Link to the rest at The Wall Street Journal