WEBVTT - The 13 Million Nerds That Apple's Counting On

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<v Speaker 1>Thank you, thank you. You've got to picture it. This

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<v Speaker 1>massive stage. Apple CEO Tim Cook up there in front

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<v Speaker 1>of five thousand people, an audience full of software developers.

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<v Speaker 1>You are a part of everything that we do and

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<v Speaker 1>everything that we will do going forward. It's called the

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<v Speaker 1>Worldwide Developers Conference or w w d C. Software Engineers

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<v Speaker 1>from all over the world come to the San Francisco

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<v Speaker 1>Bay area to find out what Apple has in store

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<v Speaker 1>for them over the coming year. At last year's conference,

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<v Speaker 1>Christmas came early. The iPhone makeup promised to double the

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<v Speaker 1>cash you could learn if you made an app, put

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<v Speaker 1>it on the App Store and convince customers to subscribe

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<v Speaker 1>for a whole year. That's like a huge, huge, dramatic move.

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<v Speaker 1>It increases the revenue by by twenty something percent. Uvalkamenka

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<v Speaker 1>was listening in the audience. He had traveled from Israel

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<v Speaker 1>to be that it is a game changer of showing

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<v Speaker 1>what the strategic shift is UM that Apple is going through,

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<v Speaker 1>because it's not like it's not something that they would

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<v Speaker 1>do UM without you know, a very good cause. You've

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<v Speaker 1>always right, Apple probably wouldn't do this unless it needed to.

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<v Speaker 1>After all, it's the world's most highly valued company, the

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<v Speaker 1>creator of the Mac, the iPod. It literally changed the

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<v Speaker 1>world with the iPhone. But last year Apple's revenues dropped

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<v Speaker 1>for the first time in fifteen years. Investors started to

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<v Speaker 1>worry that everyone who wanted a small phone and already

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<v Speaker 1>had one. Now Apple had to prove it was more

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<v Speaker 1>than just the iPhone company. All of a sudden, the

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<v Speaker 1>app store was at the heart of the new growth strategy.

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<v Speaker 1>I even had a sense that all the people around

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<v Speaker 1>me that were most of them were engineers coming from

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<v Speaker 1>from um all the different developer companies. I had a

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<v Speaker 1>sense of not even grasping the extent of of the change.

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<v Speaker 1>The change might seem small from the outside, but in

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<v Speaker 1>fact it was the first move from Apple in a

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<v Speaker 1>bigger effort to sweeten its relationship with some thirty million

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<v Speaker 1>software developers. You see, Apple needs them. They make most

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<v Speaker 1>of the apps that people use on their phones. Well,

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<v Speaker 1>the developers also need Apple to sell the apps and games, right,

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<v Speaker 1>But for too long, Apple hasn't really prioritized its relationship

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<v Speaker 1>with them. In the heady days when iPhone sales were

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<v Speaker 1>going gangbusters, Apple assumed that of course people would make

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<v Speaker 1>apps for the iPhone. Now, with a saturated global market

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<v Speaker 1>for smartphones. That dynamic is shifting. Hi, I'm Brad Stone

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<v Speaker 1>and I'm Alex Webb. And this week on Decrypted, we'll

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<v Speaker 1>look at what Apple is doing to pull off its

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<v Speaker 1>next act as everyone waits for a new blockbuster device.

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<v Speaker 1>Tim Book is trying to show that Apple can keep

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<v Speaker 1>making money even if people are buying fewer iPhones. But

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<v Speaker 1>if you own an iPhone right now, chances are you've

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<v Speaker 1>downloaded many apps from the App Store already. We're going

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<v Speaker 1>to take you inside the world of how apps get

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<v Speaker 1>made and how people who create them make money, sometimes

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<v Speaker 1>even fortunes. It's the changing relationship between Apple and developers.

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<v Speaker 1>You'll hear a lot more about today and why it's

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<v Speaker 1>so crucial for Apple to strike a new balance. It's

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<v Speaker 1>a complicated world, and you'll come out of this episode

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<v Speaker 1>knowing more about Apple's business than perhaps you ever thought

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<v Speaker 1>you would. But stick with us now. It's worth stating

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<v Speaker 1>that last year was something of an Anna cerebelist for Apple.

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<v Speaker 1>They had that drop of revenue to deal with, and

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<v Speaker 1>that turned out to be a serious blow to shareholder moral.

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<v Speaker 1>Apple also got ensnared in some complicated and potentially expensive

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<v Speaker 1>tax issues, a standoff with the US government over encryption,

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<v Speaker 1>and other projects like the self driving car were all

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<v Speaker 1>but shelved. So a lot of people feel like services.

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<v Speaker 1>That's Apple. Software platforms like iTunes and iCloud are a

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<v Speaker 1>bright spot right now, and the app Store is a

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<v Speaker 1>huge part of that. Yeah. Apple expert Gene Munster told

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<v Speaker 1>me the app Store grew more than last year, generating

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<v Speaker 1>eight point six billion dollars in revenue. For context, that's

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<v Speaker 1>more than three times twitters two thousand sixteen sales, though

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<v Speaker 1>it's still only about four percent of Apple's total. Even

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<v Speaker 1>though it's already doing well, Apple has said it wants

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<v Speaker 1>to see the app store start bringing in a lot

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<v Speaker 1>more money than it does today. Tim Cook, the CEO,

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<v Speaker 1>said it explicitly on a cool with analysts in January.

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<v Speaker 1>Services are becoming a larger part of our business, and

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<v Speaker 1>we expect the revenues to be the size of a

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<v Speaker 1>fortune company. This year, Apple realized that if it wants

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<v Speaker 1>to grow its App store sales, it needs to incentivize

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<v Speaker 1>its software developers, inspired them to make more better products

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<v Speaker 1>so that customers spend more money buying them, and that's

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<v Speaker 1>where those changes. Apple and nounced the Developers Conference. Come

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<v Speaker 1>in back to you've all Kaminka the entrepreneur who traveled

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<v Speaker 1>from Israel to here. Tim Cook speaking on stage. He

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<v Speaker 1>started joy Tunes in two thousand and eleven. It's an

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<v Speaker 1>app that teaches you how to play the piano in

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<v Speaker 1>a fun way, like playing video games. But it wasn't

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<v Speaker 1>until last year that things really started to go stratospheric.

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<v Speaker 1>You've all on this team made some changes to their product,

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<v Speaker 1>and they coincided with these revenue changes happening at the

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<v Speaker 1>app store. The change in revenue sharing meant that once

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<v Speaker 1>a customer had clocked twelve months of subscription to an app,

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<v Speaker 1>the card of revenue that Apple would take from developers

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<v Speaker 1>felt a fifteen percent from initially. You've our wondered if

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<v Speaker 1>Apple was simply making superficial changes. Being a cynical person

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<v Speaker 1>like I am, it's you also get worried. Okay, what

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<v Speaker 1>you know? What's uh? Is there anything any hidden interests?

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<v Speaker 1>What does it mean that all of the apps are

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<v Speaker 1>going to do subscription? Now? Is it going to stop? Here?

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<v Speaker 1>Are you going to continue? So far? He's relieved to

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<v Speaker 1>have been proven wrong, like they've been rolling out one

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<v Speaker 1>after the other more capabilities, more data, more analytics, more

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<v Speaker 1>abilities to change pricing in a more convenient way, like

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<v Speaker 1>a lot of a lot of stuff. It just makes

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<v Speaker 1>it so much, so much better. More transparency for developers.

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<v Speaker 1>Believe me, if you make apps for the iPhone, these

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<v Speaker 1>are welcome changes. Until now, Apple had the power to

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<v Speaker 1>dictate many important aspects of how apps were made. We

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<v Speaker 1>have this highly controlled device. This is Cushal Dave. He's

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<v Speaker 1>in charge of technology at the startups scroll dot Com.

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<v Speaker 1>Every application and the content of what it says and

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<v Speaker 1>how you build it and how you release it and

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<v Speaker 1>how you test new features is sort of all you

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<v Speaker 1>know up to Apple's wims. What Crusha is describing here

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<v Speaker 1>are the ways in which Apple can force developers to

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<v Speaker 1>work in a particular way. It was an especially heavy

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<v Speaker 1>burden for people releasing new apps. Small apps trying to

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<v Speaker 1>get off the ground face review hurdles in this pretty

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<v Speaker 1>opaque process and can get totally stuck at any given time. Now,

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<v Speaker 1>obviously a lot of developers have managed to do well

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<v Speaker 1>on the App Store despite all the rules. Adrian Deyong

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<v Speaker 1>is a successful independent game developer, so Apple speaks to him.

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<v Speaker 1>But that's an exception to most people. Apple is a

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<v Speaker 1>black box. Basically, once you submit an app to the

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<v Speaker 1>App Store, Apple controls everything. A group of people in

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<v Speaker 1>the so called editorial team decide which apps get promoted

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<v Speaker 1>on the front page of the store. It can make

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<v Speaker 1>the difference between losing money and making a fortune. Just

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<v Speaker 1>look at Adrian's experience. His new game Hidden Folks, launched

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<v Speaker 1>on the App Store last month Imagine Where's Waldo, but

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<v Speaker 1>black and white and interactive and animated. He and his

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<v Speaker 1>business partner have been working in it for almost two

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<v Speaker 1>and a half years, but after you got featured on

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<v Speaker 1>the app Store, after four days of having Hidden Folks

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<v Speaker 1>on the store, we broke even on it. But members

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<v Speaker 1>of the editorial team don't really talk to developers, so

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<v Speaker 1>nobody knows for sure how they decide what to feature

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<v Speaker 1>and when. Adrian considers himself fortunate because Apple does communicate

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<v Speaker 1>with him, which is very rare, but he's not allowed

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<v Speaker 1>to talk directly to the editorial team. He communicates with

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<v Speaker 1>someone else. The actual editorial team is very much a

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<v Speaker 1>black box. I talked to Apple developer relations people who

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<v Speaker 1>have been assigned to me from the moment my first

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<v Speaker 1>game got on the App Store and was doing really well.

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<v Speaker 1>That was the first time they called me, and you know,

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<v Speaker 1>said from now on, you can just email email me

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<v Speaker 1>if you have questions. Adrian agrees Apple is becoming more

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<v Speaker 1>open with developers, even if they're just small steps for now.

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<v Speaker 1>One example, a few weeks ago, he came to San

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<v Speaker 1>Francisco for the Game Developers Conference. It's a big industry

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<v Speaker 1>event with thirty attendees, and for the first time, Apple

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<v Speaker 1>held a drinks mixer for about forty select iOS engineers.

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<v Speaker 1>That may sound like a tiny detail, but it's actually

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<v Speaker 1>a major change. Outside w w d C, Apple has

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<v Speaker 1>made few significant efforts to meet the people who make

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<v Speaker 1>iPhone apps, let alone talk to them and buy them beers.

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<v Speaker 1>It's crazy, really, I feel extremely privileged. Um these kinds

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<v Speaker 1>of mixers can change my life quite dramatically, Like it

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<v Speaker 1>can make the difference between selling a thousand copies and

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<v Speaker 1>selling a hundred thousand copies, and that's a very dramatic change.

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<v Speaker 1>It's partly about ensuring there's an ongoing dialogue with the

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<v Speaker 1>developer community. It's also about Apple's effort to get more

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<v Speaker 1>returning revenue from customers. People see games as a service

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<v Speaker 1>these days, so you start. The release is only the beginning,

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<v Speaker 1>and that's when you start ending more content. That's when

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<v Speaker 1>you start ending more features, because that's also the point

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<v Speaker 1>where a lot of your fans will get to know

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<v Speaker 1>your game. That's also why Apple decided to change how

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<v Speaker 1>much revenue it gives to developers. In the past, only

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<v Speaker 1>a handful of app categories dealing with content like Netflix,

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<v Speaker 1>Spotify or drop Box could charge a subscription fee. When

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<v Speaker 1>the business community looks at smartphone makers, they often talk

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<v Speaker 1>about the stickiness of devices. In other words, what feature

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<v Speaker 1>does a phone have which makes it harder to switch

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<v Speaker 1>to a competitor to take a phone running Google's Android system?

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<v Speaker 1>For example, With global smartphone sales slowing, the manufacturers are

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<v Speaker 1>fighting for market share, and Apple overtook Samsung in the

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<v Speaker 1>final quarter of helps. Of course, by the recall of

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<v Speaker 1>Samsung's flagship smartphone. Apple has also been masterful at the

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<v Speaker 1>stickiness game. Your music, photos and film library build stickiness,

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<v Speaker 1>the movement tracking, and the health app same thing. Even

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<v Speaker 1>the Apple Watch itself could be seen as a ploy

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<v Speaker 1>to make it harder to dig your iPhone. So for years,

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<v Speaker 1>the app store was seen as a big differentiator for Apple.

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<v Speaker 1>The great apps available for the iOS operating system meant

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<v Speaker 1>that customers would up for an iPhone rather than an Android,

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<v Speaker 1>but there were question marks over just how sticky the

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<v Speaker 1>apps were, as in, how many of these apps do

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<v Speaker 1>you return to every day or even every week. The

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<v Speaker 1>way the app Store was set up encouraged most developers

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<v Speaker 1>to build products which customers would pay for once enjoy

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<v Speaker 1>for a brief spell, than maybe never use again. Newn

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<v Speaker 1>Glen Salveas Pedro is a venture capitalist at Delta Partners

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<v Speaker 1>Group and Strive Capital who invests in startups. Do you

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<v Speaker 1>still need to have actually engagement? You still need to

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<v Speaker 1>make sure as a developer that you're getting people enough

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<v Speaker 1>utility that they will come back to the app on

0:11:31.120 --> 0:11:33.520
<v Speaker 1>a daily basis or weekly basis, whatever makes sense for

0:11:33.559 --> 0:11:37.520
<v Speaker 1>the app right. Opening subscriptions up to everyone and reducing

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<v Speaker 1>Apple's cut gave more developers an incentive to build sticky apps,

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<v Speaker 1>but this move didn't come out of nowhere. In December,

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<v Speaker 1>Tim Cook, the Apple CEO, put a new executive in

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<v Speaker 1>charge of the App Store. His name is Phil Schiller,

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<v Speaker 1>the head of Worldwide Marketing. He was already in charge

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<v Speaker 1>of developer relations. He's one of the masterminds behind Apple's

0:11:58.360 --> 0:12:02.280
<v Speaker 1>glitzie product launches. Behind the scenes, Apple engineers have been

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<v Speaker 1>fighting since at least twenty thirteen too improve the data

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<v Speaker 1>they give developers. Again, that might sound small, but it

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<v Speaker 1>gives developers a chance to understand how people are using

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<v Speaker 1>their app, and it's hard to make improvements without these

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<v Speaker 1>kinds of metrics. Phil Schiller moved a hundred engineers from

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<v Speaker 1>Apple's faltering i ads advertising business to work on new

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<v Speaker 1>tools for the App Store. Within a few months, app

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<v Speaker 1>developers were seeing wait times for approving new apps or

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<v Speaker 1>updates were getting shorter. Right, if you can believe it,

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<v Speaker 1>it was normal for Apple to take a week or

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<v Speaker 1>ten days to review submissions that drafted less than two

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<v Speaker 1>days a few months after Phil Schiller took over. The

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<v Speaker 1>biggest thing that we've seen from Apple which has had

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<v Speaker 1>a real positive influence on that is how they've sped

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<v Speaker 1>out with the review times. That's James Vaughan, CEO of

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<v Speaker 1>Endemic Creations. He talked to me from Bristol in the UK.

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<v Speaker 1>His mobile game is called Plague Inc. Players develop a

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<v Speaker 1>disease with the intention of destroying the world entire population,

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<v Speaker 1>and it has been in the app stores top ten

0:13:03.400 --> 0:13:07.760
<v Speaker 1>since launching five years ago. That's been really significant in

0:13:08.200 --> 0:13:10.760
<v Speaker 1>just get we can get our content out there quicker.

0:13:10.840 --> 0:13:12.520
<v Speaker 1>We don't have to wait if there's something we need

0:13:12.559 --> 0:13:15.320
<v Speaker 1>to fix or we want to get out an additional update.

0:13:15.360 --> 0:13:17.840
<v Speaker 1>We don't have to worry about waiting a week two

0:13:17.880 --> 0:13:20.920
<v Speaker 1>weeks anymore. And I mean that's that's been hugely positive

0:13:20.920 --> 0:13:23.760
<v Speaker 1>as well. That success has given him a front row

0:13:23.840 --> 0:13:26.560
<v Speaker 1>seat for how developers are using another of the tools

0:13:26.640 --> 0:13:30.679
<v Speaker 1>introduced under Phil Schiller, paid search. Developers can now pay

0:13:30.760 --> 0:13:32.760
<v Speaker 1>for their app to appear in the search results for

0:13:32.840 --> 0:13:36.320
<v Speaker 1>certain keywords. Now that's not necessarily good news if you're

0:13:36.360 --> 0:13:39.120
<v Speaker 1>already successful. I mean, what we we tend to see

0:13:39.200 --> 0:13:41.880
<v Speaker 1>quite a bit is the game fALS starting out our

0:13:41.920 --> 0:13:44.560
<v Speaker 1>look around the games that already being search for quite

0:13:44.559 --> 0:13:47.360
<v Speaker 1>a lot, and we'll see thereous games putting in plaguing

0:13:47.400 --> 0:13:49.199
<v Speaker 1>as their search ads to try and get some of

0:13:49.320 --> 0:13:53.800
<v Speaker 1>that search traffic. Not quite sure how I feel about

0:13:53.800 --> 0:13:56.760
<v Speaker 1>that soup or how successful it is, but it's it's

0:13:56.760 --> 0:14:02.160
<v Speaker 1>certainly been something most interesting to see there. Here's the

0:14:02.160 --> 0:14:05.040
<v Speaker 1>trade off for Apple. It wants more developers to make

0:14:05.080 --> 0:14:09.000
<v Speaker 1>more apps, get more downloads, and eventually make more money,

0:14:09.040 --> 0:14:11.520
<v Speaker 1>but it also means more competition for the apps that

0:14:11.559 --> 0:14:22.280
<v Speaker 1>are already successful in the App Store, so faster a view, times,

0:14:22.320 --> 0:14:26.560
<v Speaker 1>improved outreach to developers, different revenue models. But in some

0:14:26.600 --> 0:14:29.360
<v Speaker 1>ways those were all just tips of the iceberg. There's

0:14:29.400 --> 0:14:35.880
<v Speaker 1>also an eight pound gorilla in the room. It's called Google. Yes, indeed,

0:14:36.360 --> 0:14:40.160
<v Speaker 1>Google owns the Android operating system used by most smartphones

0:14:40.240 --> 0:14:42.800
<v Speaker 1>not made by Apple, and Google has its own version

0:14:42.800 --> 0:14:45.280
<v Speaker 1>of the App Store called the play Store, So if

0:14:45.280 --> 0:14:47.920
<v Speaker 1>you have a phone made by Samsung or LG that's

0:14:47.960 --> 0:14:50.280
<v Speaker 1>probably where you would download new apps. The thing is

0:14:50.320 --> 0:14:54.120
<v Speaker 1>Google has great analytics. Google's main business comes from ads

0:14:54.120 --> 0:14:56.560
<v Speaker 1>that appear next to its search results, and that's a

0:14:56.640 --> 0:14:59.920
<v Speaker 1>very data intensive process. So it already has a ton

0:15:00.000 --> 0:15:02.960
<v Speaker 1>of expertise in this area because they've been doing Google

0:15:03.000 --> 0:15:06.040
<v Speaker 1>analytics for for a lot of years. They're very very

0:15:06.080 --> 0:15:11.680
<v Speaker 1>agile around measurements on advertising, etcetera. The investor we had

0:15:11.680 --> 0:15:14.640
<v Speaker 1>from before. For several months now, Apple has been rolling

0:15:14.640 --> 0:15:18.000
<v Speaker 1>out tools which help developers understand how people are using

0:15:18.040 --> 0:15:20.920
<v Speaker 1>and spending money in their apps and let them react accordingly.

0:15:21.240 --> 0:15:26.040
<v Speaker 1>You've all again they added and analytics specifically for subscription

0:15:26.920 --> 0:15:31.280
<v Speaker 1>um His ability to see conversions from from child to

0:15:31.400 --> 0:15:36.920
<v Speaker 1>see subscription events when people are canceling, when people are subscribing.

0:15:37.760 --> 0:15:40.040
<v Speaker 1>Um So a lot of reporting, a lot of analytics

0:15:40.360 --> 0:15:43.400
<v Speaker 1>for that, which is which is amazing, Like, you didn't

0:15:43.480 --> 0:15:46.640
<v Speaker 1>have visibility for this before, so this is a tool

0:15:46.720 --> 0:15:48.960
<v Speaker 1>for you to learn on what people like and dislike

0:15:49.000 --> 0:15:53.000
<v Speaker 1>in in the product. Again, these are all positive developments,

0:15:53.120 --> 0:15:55.360
<v Speaker 1>but Apple has been playing catch up and we haven't

0:15:55.360 --> 0:15:57.800
<v Speaker 1>even mentioned the pressure Tim cook has been under firm

0:15:57.840 --> 0:16:01.360
<v Speaker 1>as investors. We already said glow will smartphone sales slowed

0:16:01.440 --> 0:16:04.280
<v Speaker 1>last year, but Apple gets almost two thirds of its

0:16:04.320 --> 0:16:07.160
<v Speaker 1>revenue from selling iPhones, so it has to prove that

0:16:07.200 --> 0:16:11.200
<v Speaker 1>it's not a one trick pony. Here's the key. Revenue

0:16:11.200 --> 0:16:13.800
<v Speaker 1>from the app Store has a higher profit margin than

0:16:13.840 --> 0:16:17.680
<v Speaker 1>from an iPhone, iPad or Mac. That's because it's software,

0:16:17.760 --> 0:16:21.000
<v Speaker 1>so there's no manufacturing cost. The irony is that while

0:16:21.040 --> 0:16:24.000
<v Speaker 1>Apple is by some distance the most highly valued company

0:16:24.000 --> 0:16:27.080
<v Speaker 1>in the world, with a market cap exceeding seven hundred billion,

0:16:27.480 --> 0:16:31.560
<v Speaker 1>it's by other measures valued less optimistically than Google or Amazon.

0:16:31.960 --> 0:16:35.480
<v Speaker 1>And here's why. Google and Amazon have customers who return

0:16:35.600 --> 0:16:38.520
<v Speaker 1>on a daily or weekly basis to use their services.

0:16:38.560 --> 0:16:42.400
<v Speaker 1>So Google's market valuation is thirty times it's earnings and

0:16:42.520 --> 0:16:45.440
<v Speaker 1>Amazon is a staggering a hundred and seventy three times

0:16:45.440 --> 0:16:48.000
<v Speaker 1>it's earnings. That means for every dollar per share in

0:16:48.120 --> 0:16:51.920
<v Speaker 1>profit that Amazon records, investors give its stock one hundred

0:16:51.960 --> 0:16:55.240
<v Speaker 1>and seventy three dollars in value. Apple meanwhile, there's value

0:16:55.280 --> 0:16:58.680
<v Speaker 1>to just sixteen times earnings, which is why Tim Cook

0:16:58.720 --> 0:17:01.920
<v Speaker 1>talks up the prospects of Apple services business here is

0:17:01.960 --> 0:17:06.199
<v Speaker 1>on the January one earnings call with analysts. Our services

0:17:06.280 --> 0:17:10.000
<v Speaker 1>offerings are now driving over one hundred and fifty million

0:17:10.119 --> 0:17:14.800
<v Speaker 1>paid customer subscriptions. This includes our own services and third

0:17:14.800 --> 0:17:18.720
<v Speaker 1>party content that we offer on our stores. We feel

0:17:18.800 --> 0:17:22.040
<v Speaker 1>great about this momentum, and our goal is to double

0:17:22.200 --> 0:17:25.119
<v Speaker 1>the size of our services business in the next four years.

0:17:26.240 --> 0:17:28.960
<v Speaker 1>Apple is basically admitted that they don't quite know yet

0:17:29.040 --> 0:17:31.160
<v Speaker 1>how they're going to reach that goal, but they've made

0:17:31.160 --> 0:17:36.040
<v Speaker 1>the first steps. The app store is seeing robust growth. Counterintuitively,

0:17:36.400 --> 0:17:39.080
<v Speaker 1>James Vaughan's game Plague, Inc. Has seen its position in

0:17:39.119 --> 0:17:42.280
<v Speaker 1>the grossing charts how much total revenue it makes decline

0:17:42.320 --> 0:17:45.600
<v Speaker 1>in recent years. Now that potentially sounds like it's a

0:17:45.640 --> 0:17:47.919
<v Speaker 1>big problem, but actually it's not it's not in the

0:17:47.960 --> 0:17:52.800
<v Speaker 1>flight is our revenues state broadly constant that the only

0:17:52.840 --> 0:17:55.840
<v Speaker 1>reason why we're going down the grossing chart is because

0:17:55.960 --> 0:17:59.160
<v Speaker 1>the absolute is just making more and more money every

0:17:59.359 --> 0:18:01.800
<v Speaker 1>All the private A pie is just getting bigger and bigger.

0:18:03.440 --> 0:18:05.760
<v Speaker 1>So all this data that Apple is starting to supply

0:18:05.800 --> 0:18:08.639
<v Speaker 1>to developers is helping them build products which can be

0:18:08.720 --> 0:18:12.320
<v Speaker 1>carefully tuned towards customer demand. I think the notion that

0:18:12.359 --> 0:18:14.679
<v Speaker 1>you can just create an app and it will do

0:18:14.840 --> 0:18:19.560
<v Speaker 1>very well is sort of slowly disappearing UM, which is good.

0:18:19.960 --> 0:18:23.520
<v Speaker 1>So the very very early stage UM apps that we

0:18:23.600 --> 0:18:26.520
<v Speaker 1>see UH sort of the what I call the two

0:18:26.520 --> 0:18:31.240
<v Speaker 1>men and a dog type type teams. UM. The ones

0:18:31.280 --> 0:18:35.399
<v Speaker 1>that do exist are much more thought through. A final

0:18:35.440 --> 0:18:38.080
<v Speaker 1>word from Uvalcamina, the developer we heard from at the

0:18:38.160 --> 0:18:42.960
<v Speaker 1>very start, to means this change means that Apple is

0:18:43.040 --> 0:18:48.880
<v Speaker 1>serious about building bigger businesses that depend on the App

0:18:48.920 --> 0:18:53.439
<v Speaker 1>store ecosystem, and I think it's going to be I

0:18:53.480 --> 0:18:55.880
<v Speaker 1>think it's it's a very big win. It's a very

0:18:55.880 --> 0:19:01.359
<v Speaker 1>big bet on their part. So Alex, in conclusion, is

0:19:01.400 --> 0:19:03.840
<v Speaker 1>the app store really the next big leg on the

0:19:03.880 --> 0:19:07.200
<v Speaker 1>Apple revenue store? Has no doubt. Many investors hope the

0:19:07.240 --> 0:19:10.320
<v Speaker 1>way that Tim Cook talks about it, their revenue from services,

0:19:10.400 --> 0:19:13.879
<v Speaker 1>which also includes things like iTunes and the I Cloud,

0:19:14.200 --> 0:19:18.680
<v Speaker 1>will be above fifty billion dollars by now. Apple does

0:19:18.720 --> 0:19:21.520
<v Speaker 1>about a hundred and fifty billion dollars in iPhone sales,

0:19:21.960 --> 0:19:24.880
<v Speaker 1>so it's certainly got a very good chance of being

0:19:24.960 --> 0:19:28.640
<v Speaker 1>a size of revenue contributor. But for the foreseeable future,

0:19:28.840 --> 0:19:31.720
<v Speaker 1>Apple is going to remain the iPhone company. Yeah, I

0:19:31.720 --> 0:19:34.280
<v Speaker 1>think these changes are promising. I mean, what we what

0:19:34.320 --> 0:19:37.640
<v Speaker 1>we've seen with a lot of successful apps is subscription

0:19:37.720 --> 0:19:43.879
<v Speaker 1>models work Pandora, Spotify, Netflix, That app store commission was steep,

0:19:44.280 --> 0:19:46.639
<v Speaker 1>and you could tell that companies like Netflix would go

0:19:46.680 --> 0:19:48.920
<v Speaker 1>out of their way to avoid signing people up via

0:19:48.960 --> 0:19:51.320
<v Speaker 1>the app store. So with these changes, and with Phil

0:19:51.359 --> 0:19:53.879
<v Speaker 1>Schiller now in charge of the app Store, it feels

0:19:53.920 --> 0:19:56.840
<v Speaker 1>like Apple starting to make some changes that are receptive

0:19:56.960 --> 0:19:59.040
<v Speaker 1>to the demands of these companies and how they want

0:19:59.040 --> 0:20:14.040
<v Speaker 1>to interact with customers. And that's it for this week's

0:20:14.040 --> 0:20:17.439
<v Speaker 1>episode of Decrypted. Thanks for listening. Do tell us what

0:20:17.520 --> 0:20:19.239
<v Speaker 1>you thought of the show. You can write to us

0:20:19.280 --> 0:20:22.679
<v Speaker 1>at Decrypted at Bloomberg dot net or find me on Twitter,

0:20:22.880 --> 0:20:26.320
<v Speaker 1>I'm at a t B web and I'm at brad Stone.

0:20:26.640 --> 0:20:29.440
<v Speaker 1>Don't forget to subscribe to us on iTunes or wherever

0:20:29.520 --> 0:20:32.240
<v Speaker 1>you get your podcast and leave us a rating and review.

0:20:32.480 --> 0:20:36.080
<v Speaker 1>It really helps new listeners find our show. This episode

0:20:36.119 --> 0:20:39.320
<v Speaker 1>was produced by Peter Gadkari Archie Ito, Liz Smith, and

0:20:39.359 --> 0:20:42.400
<v Speaker 1>Magnus Hendrickson. Big shout out to Robin and Yellow, who

0:20:42.480 --> 0:20:45.359
<v Speaker 1>edited the article I wrote alongside this podcast. You can

0:20:45.400 --> 0:20:48.200
<v Speaker 1>read it at Bloomberg dot com Forward slash Tech. Alec

0:20:48.280 --> 0:20:50.560
<v Speaker 1>McCabe is head of podcasts. We'll see you next week.