Clearly this is a topic thats spanned more than a few episodes of the show so its going to difficult to break up my thoughts. This is why it’s important for this to work I need to do a better job keeping up with the show, the news just moves too fast. So I’m trying to re-listen to them and see what sticks out to me.
The big thing that stood out to me in this episode is Ben’s comment that “The Cloud is a threat to an app based model”. Everyone’s so focused on the idea that this is just about apples 30% commission but its so clearly much bigger than that. I’m with John that I don’t think Apple would have allowed this even if they got 100% of the money.
Just take a look at the numbers: $5 a month is their 30% commission of Xcloud gaming’s $15 a monthly fee. Thats exactly the same amount they make on the $5 a month for Apple Arcade and they dont have to share any of that with anyone else. That and xCloud isnt really a threat to Apple Arcade since they plan to offer a completely different kind of came. I’m the kind of person who would gladly pay for both services and theres no doubt in my mind that I’m not alone in that. That means that they are actually LOSING money by rejecting Microsoft here.
This is all rooted in Apple’s history, specifically the time right before Steve Jobs returned to the company. After Steve came back, Apple had to beg Adobe, and Microsoft to continue developing for their next generation operating system. They knew that, at the time, those applications were more important to the platform than OS X was. If Adobe stoped updating Photoshop there’s no way they could keep selling the Mac. Apps like Office and Photoshop were just too important, they were the reason to buy a mac so without them. No one likes not being in control of your own destiny and Apple is even more paranoid than most.
So if its about control what is it about the xCloud system that is so scary to them. I’ve written about this a bit before but in some ways xCloud is its own operating system. By design it doesnt matter at all if you run it on android or iOS, not even the hardware specs matter. All that matters is internet bandwidth and maybe a bit of industrial design.
With all that in mind its easy to see a world where if this catches on that it turns mobile OS’s into commodities. Sure you could say but these are games that would never run natively on iOS, they need the cloud. Even if thats true today Apples strategy is clearly focused on continuing to push what’s possible in a mobile form factor performance wise and all that effort is completely lost in a world where you rent your compute from the cloud.
Putting aside the cloud aspects theres another aspect thats also threatening to Apple and thats that xCloud is also its own App Store. If any app in the store can also sell its own apps what’s to keep people coming back to apples App Store for anything. If other app stores can do whatever they want how quickly before Apple loses any control at all over what people do with their phones.
Look no further than WeChat to see this reality in action. I haven’t used WeChat much but I know even on iPhones it has what is essential its own App Store with its own rules. So why does Apple allow WeChat to do this but not anyone else. The answer is simple, theres simply no way that they would be able to see much of anything in china without it. WeChat was already so dominate in China that by the time Apple got there they had no other choice. So its clearly wrong to say that Apple doesnt make exceptions to the rules. But in this case access to the Chinese market was just to important to ignore.