Saturday, October 29, 2022

Telegram removes paid posts on iOS and raises the important issue of Apple's app tax stifling the creator economy--though other major platforms such as TikTok may be affected to an even greater extent

In a little over a fortnight--on November 14--the Fortnite antitrust case, Epic Games v. Apple, will be heard by the United States Court of Appeals for the Ninth Circuit. Apple would like people to look at it as a dispute over whether Epic or Apple makes an extra hundred million dollars. Not only is Apple itself making it sound like that, but Apple's astroturfers--falsely claiming to represent the interests of small developers while actually just being their master's voice-- attacked Epic Games CEO Tim Sweeney on Twitter as a greedy billionaire who just wants to make more money.

That's the wrong angle. It's weak (and un-American) to appeal to envy.

Even I may not have agreed with every single one of Epic's positions throughout these more than two years of litigation, but that changes nothing about the fact that Epic's case is fundamentally in the interest of small app developers and--by extension--individual content creators.

Another billionaire (see Wikipedia's article on Telegram fonder Pavel Durov) already spoke out against the app tax a couple of weeks before the Fortnite hotfix that gave rise to Epic's lawsuit in the summer of 2020. Yesterday, Mr. Durov had to make an unfortunate announcement: Apple used its monopoly power to force Telegram "to disable [previously available] paid posts on iOS devices." The way it worked was that some content creators "us[ed] third-party payment bots to sell access to individual posts in their Telegram channels. This way, content creators could receive close to 100% of whatever their subscribers paid, which was great." By "close to 100%" Mr. Durov obviously means that the only cost they incurred was that of a payment service like stripe (roughly 3%).

Telegram's CEO then calls on "regulators in the EU, India and elsewhere [to] start taking action before Apple destroys more dreams and crushes more entrepreneurs with a tax that is higher than any government-levied VAT." I agree with the part about Apple destroying dreams and crushing entrepreneurs. In the EU, our best shot again would be a complaint that Epic Games brought last year. In India, Apple's market share is ridiculously small, but the Competition Commission of India has--in the aggregate of two decisions in short succession--imposed a comprehensive set of remedies on Google.

Will regulators take note of Telegram's cry for help? On the controversiality scale, Telegram is nowhere near Donald Trump's Truth Social or Parler, and right now politicians and advertisers are watching with anxiety what will happen on and to Twitter after Elon Musk acquired it. The role that Telegram plays in the Ukraine context has actually helped its reputation among Western governments.

In any event, it's important to focus on the merits of the message rather than the messenger. We can all be grateful to Mr. Durov for raising this important issue that others should have raised before.

Telegram's paid posts are only a thin slice of the wider creator economy. Every dollar that Apple siphons off of platforms also reduces the payout to developers, even disproportionately so--and results in higher prices that reduce demand.

For content creators, platforms like TikTok, Snapchat, Facebook, and YouTube are arguably much more important. Apple's terms and policies harm creators in two ways:

Facebook is a company that has repeatedly criticized Apple, most recently in connection with Apple applying the app tax to "boosts" of social media posts.

Snapchat sucked up to Apple toward the end of the Epic v. Apple trial last year by defending the app tax, but ATT has really hurt it in the meantime.

TikTok is clearly a service that could pay out much more to creators if not for Apple's monopoly abuse. But at this point TikTok has a bigger problem to solve: for geopolitical reasons, some politicians would like to force it out of the U.S. market (which already happened in India two years ago), and now some are even arguing that American companies like Meta lose ground in their domestic market because of a "Chinese" competitor while China doesn't allow certain American social networks in its own country. At this stage, Bytedance (the company operating TikTok) has an even more fundamental problem in the U.S. than the app tax and ATT, but even if they don't say a word, anyone can easily see that countless content creators would do better if measures were taken against the excessive app tax and against the abusive aspects of ATT.

Having said that, the way to read Telegram's statement is to think of all those content creators not only on that particular messaging service but also on platforms like TikTok, YouTube, Facebook, or Snapchat.

This increasingly includes Epic. It acquired music platform Bandcamp--which wrought (temporary) concessions from Google--and its vision for the Metaverse very much involves payouts to content creators.