Upgrade - 562: Let's Break the Law

Episode Date: May 5, 2025

From Relay, this is Upgrade episode 562 for May 5th, 2025. Today's show is brought to you by Oracle, Squarespace and Delete Me. My name is Mike Hurley. I am joined by Jason Snell. Hi Jason. Hi Mike. It's good to be back. Good to be back with you. And happy, happy May. Oh, thank you. It's going to be May. I'm very excited for today's episode. I've been looking forward to it for reasons that I assume most listeners

will understand. We'll get to it a little later on in the show, but we don't have time for that right now because we have a snow talk question comes in from Adam who has to say Jason as An e ink connoisseur, would you ever consider an e ink monitor? And I have a link here Jason to the books your friends over at books the books mirror Pro-color e ink desktop monitor color, E Ink desktop monitor. Yeah. Uh huh. What do you think of this?

Or do you, what do you think of the idea of an E Ink monitor in general? Okay. So let's back up. Sorry to Adam, but I'm not an E Ink connoisseur. I'm just not. I think you are. I'm not. This is how the world labels you. Sometimes when the connoisseurship is hoisted upon you, you must take it.

I'm not. I just want to be clear. I just like to read books and e-readers. I have people all the time send me notes saying, hey Jason, I know you review e-readers. What are you gonna read review this giant thing that you use a pen to take notes with? And it's like, I don't care. When I get an e-reader that has a pen option, I don't get it. When I get sent a review unit that includes the pen, I don't use the pen. I'm not interested. I'm only interested in basically reading books on e-ink.

Readers, that's it. That's where it goes. Well, Jason, with great love of e-readers comes great responsibility to listen to people talk about e-ink everything. That's what's going on. Yep. Not interested.

Not interested. So would I consider an e-ink monitor? No. No, not only are they expensive and are their frame rates not great and not only are their color reproductions not great and their contrast not great. But this very credulous, overly credulous Verge article that you put in our show notes that says, oh, it's got lighting like on a Kindle, so it'll be fine. It's like, okay, they don't have backlight.

So what lighting is going on here across 25 inches? Can that even reach? That's a very bright front light. I don't really want to have to sit in a room where I'm brightly lit from behind in a way that allows me to see my screen because it's a reflective screen. I don't really know what this is for. I don't know. I'll tell you what it's for.

I'll tell you what it's for. E Ink made a panel this big. And it's that typical thing I've seen in my entire career, which is some manufacturer makes a thing and then there are companies who will step up and just put it in a product. And nobody asked the question why. The only reason is because we made it.

So now we'll see if anyone wants to buy it. Maybe in the long run, this technology could be used in certain products, right? The idea that you could have a smartphone that was as good as today's smartphones in terms of refresh rate and resolution and things like that, but it used much less power and it didn't have reflection issues because it was actually most of the time being lit by the lighting around you instead of needing a backlight. Like, okay. And also, like, this panel could be used in a bunch of places, but I don't know

if it's a consumer product. Like you could use it for signage. Like in London now, all of the bus stops, a lot of the bus stops that I've seen recently, the newer ones, they have an E Ink display showing you the bus times. It's like, that's perfect. Right? Great. That says do it and also you can tap through like I have like physical buttons that

you can tap through to see the schedules. It's like that is a perfect use of an E Ink display. It's just sitting there. It's not drawing any power until somebody needs it. I have that terminal that's on my you know on my microwave right now and then before that I had the other E Ink kind of experiment but again the point there was more it's an ambient device that has that is an interesting application yeah and that's a personal not commercial and it's a hobbyist kind of thing but like in the end it's not about the the screen it's a thing that's enabled by the screen this just seems like nonsense to me but you know I'm sure there, I'm sure there are very specific niches,

probably not personal, as you said, it's probably more commercial, where these could be used, you know, people always talk about like, science and supermarkets and stuff like that. There are lots of uses for this kind of technology that make it interesting. But I just don't, I just don't see it. I just I mentioned, I need to mention again, the, um, the overly credulous verge story, just because the other part of it that made me chuckle is the conclusion, which is, I feel like it's okay. I'm not trying to be mean here, but this it's so cliched. It's like, if you're a gamer photo or video editor, or someone uses their desktop monitor for watching TV and movies, the Miro pro color isn't for you.

Well, that's true. That is objectively true. But if you spend your days editing text, writing or crunching numbers in spreadsheets in a space with plenty of light, wow, okay. An E-ink monitor might be worth considering, particularly if you find yourself frequently dealing with eye strain. This is too much. It's like this is not the kind of product that is for everybody except this little narrow area for whom it is inappropriate.

It really is inappropriate for almost everybody unless you have a very specific need and the in a space with plenty of light and dealing with eye strain and like yeah, yeah, I'm sure that the you know, 400 people who actually want this product will find it but I also want to read a quote from this now want this product we'll find it but I also want to read a quote from this now this is just I just find this funny the statistics and then the price so the mirror pro color uses a 3200 by 1800 ink collider 3 panel that can only display a limited palette of 4096 colors its refresh capabilities can't match the best LCD OLED screens but, but Books offers four customizable display modes balancing image quality and performance as fast enough to watch videos.

This monitor is 25 inches and it costs $1,900. So, you know, follow your bliss. Yeah, anyway, Adam, sorry, we've, we've beaten your question to death. But this is good because what Adam has provided us in the upgrade ends with today is the knowledge that Jason likes e-readers. He does not like e-ink. That is important. That is important. Yeah, it's true. I like, I like, and I like ambient displays, which is why I've got like the Lymetric Time, which is not, not an e-ink display. Itymetric Time, which is not an E Ink display.

It's like, I don't even know what it is. It's little teeny tiny LEDs, I think, in a matrix. But yeah, I'm more into kind of e-readers and ambient information than I am like E Ink. It's an interesting technology, but no, I've never dreamed of having an E Ink monitor and I don't think anybody should. Should, yeah. No. If you would like to send in a question for us to answer on a future episode of the show please go to upgradefeedback.com and you can send in your snow talk question Jason it's also where lots of people lots of people sent in their recommendations for me for a thermostat to replace my nest.

And I was very happy. I've got lots of great advice. It seemed pretty split between the two companies that I was expecting Hive and Tado, Tado edged ahead. So that is the product that I will be upgrading to. But what I did come to realize and doing a little bit more research is I have a third gen Nest thermostat, which is not one of the ones that is being kind of like

shut off by the app. So we have a little bit more time to make this decision. So we'll still be able to use our Nest as we were, but this is, the point kind of still stands to me that we do need to upgrade because Google is, there is only a set amount of time and Google's going to kill off our nest too, because they have no desire to support products in Europe. And a bunch of upgradians wrote him saying that like, what's good about Tetto is they actually have like a whole system.

And so they also make smart radiator valves like I have here at the studio and so what I will do so are we have downstairs we actually have underfloor heating and then upstairs it's all controlled by the boiler so we have radiators so the downstairs heating that's on its own system it's not going to be connected to this at all because unfortunately the system that we have this is all installed by the previous owners. They went with a system that doesn't really tie into any smart home stuff. So it's like, whatever, it's fine.

It has an app though. And so like we can program it and whatever. Yeah. I mean, my system, I can't replace it comes with its own controller and it's very barely smart and I'm using Homebridge to connect it and yeah. But the upstairs, you know, it's like it's two bedrooms and office and a bathroom and we now have very different temperature needs for those rooms from now going into the future. The nursery would need to be warmer than our bedroom, for example. Um, and they also make these, uh, the radiator valves and it ties into the whole system

together. I thought, ah, okay, that's actually something I can do to make things better because at the moment when we have to turn the heating on to heat up one room, we heat up all the rooms, which is like not ideal. Um, and so we'd be able to kind of balance them out a little bit across each other and do what we need. So that this, that's what I'm going to do at some point. And Tado, they're a German company and this is what they do.

So this was actually as well, I found out in Europe, people that have a first and second gen Nest, Google worked with Tado to give them 50% off one of the systems to replace it. That was who they did the thing with. You get the European option, I think, if you're using European heating.

Absolutely. Absolutely. Because Google can't be bothered anymore. Nope. They don't have enough money. They're not big enough. No, it's a shame. They're just not powerful or big enough.

It is sad, really. I feel bad for them. Hard times. Hard times over there. So obviously, we have a huge lawyer up segment to do later on today, which means you don't really have enough time for a full roundup. But I wanted to mention one story, which is also kind of like.

Yee. Yeah, just half, just a yee. There's no ha. I wanted to bring up the fact that the information is reporting that Apple is considering splitting their iPhone lineup into two separate releases, one in the fall, one in the spring. Mike, I literally texted you immediately when I saw this story and I was like, Mike, it's coming true. Your prediction, your, your,

your prediction is finally coming true. Two separate rollouts. This was a prediction that I made in the draft of the ages in episode 300 for episode 400. So it was, I was very ahead of my time on this one. And how did your time? But they're considering this for 2026. If they do this, they would do fall 26 and spring 27. And then in fall 2026, you would get the iPhone, would it be 19 pro?

Yeah. Right? What are we on now? 16? a 16 18 so you get the pro the 18 pro max the 18 air and say the 18 fold right whatever they were all that in fall of 2026 if that's what they have and then the iPhone 18 and the iPhone let's just call it the 18 e would bring in spring of 2027. Apple want to do this for the obvious reason of the logistical work becomes much easier. If you're not releasing six phones at once, six distinct phone models at once.

But I have, I think they should do this for the reason I've been saying they should do it for a long time. I think you get, it's cleaner to spread it out. You get two distinct kind of like marketing beats at different points of the year. Why have one iPhone event when you could have two? Exactly. Exactly. I mean, you know, the Apple over the years has done stuff like they might release an SE or they might release a color of an iPhone but no let's just actually make it that there will be one in say March and there

will be one in September and you just rely on that. Samsung has done this for ages right? Like for ages. This is when I when I when I saw Samsung were doing this over time is what made me think about it is like they release their like expensive big phones and their foldable phones at one point and then their flagship kind of this is the phone that everybody buys at another time, like at a different time of the year. They actually do the, I think they do the more expensive ones at the beginning and then the kind of more mainstream ones towards the end of the year, but whatever,

it doesn't matter. Um, and when I was thinking about this today about like, you know, should they do this? Now would it make sense to, I kind of realized they do not do this to any other product line. They don't release like all of the max at once. They spread it out a bit because it makes sense to do that because just logistically marketing wise product development wise, there is a sense to kind of stretching this logistically marketing wise, product development wise, there is a sense to kind of stretching this out a little bit where you can. So I think this makes a lot of sense to do, especially if there are six devices, they won't be able to talk about them all in one event anymore.

Like I can't, I really give them a fair shake. Imagine how much easier it is to make iPhones if you have separate production ramps. So we just saw this with the 16E, but going even further. Separate production ramp up required, separate finalization. All the steps are off a little bit. You're using a lot of the same base technology, but you don't have to ship them all at once. It is like you said, it is like not shipping every M4 Mac on day one. Because that would be really, really hard for

lots of reasons for engineering reasons for marketing reasons for for factory reasons for part reasons. There's so many reasons it would be hard. So you spread it out into two, you're giving yourself breathing room as a every aspect of your company you're getting breathing room. And like I said, I don't think it makes the iPhone message weaker. In fact, I think it makes it stronger because you get two punches at an iPhone event and the iPhone event is by far the most watched Apple event. So if they do two iPhone events, I think that benefits them. I think that there's a net benefit there on marketing plus literally everything else. Yep. All right, let's take our first break now and then we'll get into this big chunky segment.

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Our thanks to Oracle for their support of this show and all of Relay. It's time to lawyer up. Clunk. Clunk clunk indeed. Alright so there's some context around this one we're gonna get into it and we're gonna talk about all of this stuff but I think that there are some some table there's table setting to be done. So last Wednesday, uh, in the kind of next event in Apple's Epic five-year legal dispute, Apple and Epic's Epic five-year legal dispute, uh, judge of on Gonzalez Rogers made a huge ruling over Apple's ability to collect purchases made outside of applications that are on the App Store. So in 2021, the judge gave an injunction, ordered an injunction that resulted in Apple creating the

ability for developers to have one text link to an external page for purchases that contained no tracking information would display the scare screen to them. What did you call those screens? So like this app may kill you. This app may kill you. This app will kill you, right? Like danger, this app could kill you. That was a long time ago, but scare screens is so perfect. It's just perfect.

After all of that, they would still demand 20% of any subsequent purchases and use the developer had to do all of the accounting to work that out for a, I think it's a seven day period of any purchase that could occur even though you couldn't have any tracking on them. Epic went back to the judge and argued that this does not meet with what the judge ordered and effectively results in no change for Apple, which we all knew was the case. The judge subsequently ordered further hearings. These went incredibly poorly for Apple and has resulted in a fiery 80 page opinion that rules that Apple can no longer impose any commission or any fee on purchases that consumers make

outside of an app. They cannot place any restrictions on how a link or a button looks to start a purchase via the web from inside an app. And they cannot present any screens or dialogues to users to discourage them leaving outside of something that says a user is going to a third party website. Essentially, the result of this injunction is that now,

from now, from last week, but it's happening now, a developer can choose to forego Apple's in-app purchase system and the 30% fee completely. All they have to do, and I say all, but all they have to do is the work to enable a web-based purchasing system, which frankly most large companies have anyway because they don't exist in just one place, but it could be any developer and have this set up with accounts and such, and are happy with their customer leaving app to complete it. So me and Jason make an app.

We want to charge, say we made an app for upgrade plus, and we want to charge for it in the previous system. Even if we collected payments outside on our own, it was fine. If we had an iOS app, we would have to do this via in-app purchase to be on the app store. That no longer needs to be there. Um, and you can't do the purchase inside of the app, but you can have a button that just takes you to a website and you complete the purchase and you're all done.

Yep. And those URLs can't the, you didn't mention it in your bulleted list, but the URLs that Apple said, okay, we're going to, we'll let you do it. You can link to one URL and it has to be static, which is the worst, right? Because what you want to do as a developer is linked to the particular membership plan that they're on or the particular item that they want to purchase or whatever. And none of that was allowed before. And in this ruling, the judge said, no, you can let them

link to whatever they want. Yep. This is pretty huge. This is pretty huge. And just to be clear, the judge's take here is I gave you, Apple, the opportunity to implement my ruling in order to be non, you know, not be anti competitive anymore. That was her ruling was, was. And so, and so I don't want to hear it. I, this is an important point. I don't want to hear it from the people who say, oh, it's so outrageous. Judges and regulators in the legal system are all making free enterprise, follow their rules and build products that they should be building.

And the judges shouldn't be building it. That's outrageous. The judge here let Apple implement something that was in line with the rules. She said, this is anti-competitive. Here are the reasons why. You need to make it competitive. She didn't say, let me design a system for you. This was three years ago,

and then it went through the Court of Appeals, the circuit court, and then it went up to the Supreme Court. And then, and in neither case did those courts say Apple is right about this. So they, they, I mean, there were like little details that she gets to into the ruling, but basically all the way through the Supreme Court, they said, yup. And the day after the Supreme Court denied cert, which is basically said, we're not going to even take this case, right? Like, no, it's fine. This is the ruling is fine. Apple had to implement this thing. And this is the important point, which is, she gave Apple the ball. And all she said was, you design your own system. Here's what I'm looking for in terms of not being anti-competitive. And what we know, because she details it because there was more discovery of memos at Apple, is Apple was well aware of what was being asked of them.

Apple had internal debates about what they wanted to do to implement her ruling. Many senior Apple executives said, this means we need to do things like allow people to link out and not have an enormous commission and all of these things. And Phil Schiller in particular, and we'll probably get to that. And they were overruled by other executives inside Apple who said, no, what we need to do is maximize our revenue and our anti-competitive behavior in a way that has a fig leaf. It looks like it would be competitive, but all of the details will be poisoned. They decided to go that path. Now, the way the legal system works is it has come back to the

judge in the case because Epica said they're not doing it. It's still anti-competitive. The thing that they built 27% of credit card purchases and a seven day tax on any further transactions in the store from somebody coming from the app. This is not what you asked them to do. And the judge said, it's absolutely not what I asked them to do. And the deal is I gave you a chance to build what I wanted. You refused to build it. So now you don't get to build anything. And this is, she says, this is not a negotiation. This is not a second try. I gave you your try. You chose to refuse to honor what I ordered you to do.

So now you don't get to build anything. You just have to turn it all off. And that is what we've been talking about for a while now. That is the consequence of this incrementalism, this malicious compliance is in this case, the judge can say, you only get one swing at it. You squandered that swing at it by conspiring to and cooking up fake reasons. And she's got the details in order to, in order to maintain your, your anti-competitive behavior. And so I'm just blasting all your rules away.

And so as of the next day, all of those rules didn't go to, well, what about 10% or what about 15? No, it's zero. And what about the URLs? No, you just can. And what about the scare sheet? No, it's zero. And what about the URLs? No, you just can. And what about the scare sheet? No, it's gone. It's not like it's gone beyond a small thing because I mean, this is the truth. She gave Apple a chance to comply and actually behave in a way of Apple's choosing that fulfilled her desire. And Apple refused.

And so they are now reaping what they sow. Or sowing what they reap? I don't know. There's a lot of reaping and a lot of sowing going on. And I think as well, I think what's important to note that, I don't know exactly, I don't know exactly how these things go, but there is a scenario where, you know, they did it, they did it in a way that the

judge wasn't happy and we kind of go back around again. But the difference here is she found the evidence of them trying to get around it. Like that's, that's the problem here. It's not that like, you know, Apple took this and they misunderstood it and they acted in good faith and, and this is what they implemented. No, like I'll give a quote from the opinion, Apple, despite knowing its obligations there, under thwarted the injunction's goals and continued its anti-competitive conduct solely to maintain its revenue stream. Remarkably, Apple believed that this court would not see

through its obvious cover-up. So for example, the 27%. Yeah. It is exactly what we thought it was, which is a bunch of Apple executives said, well, it's a little like arrested development. Like, what could a banana cost, Michael, $100? It's like, well, what is credit card transaction? 3%? OK, we'll just make it 27% instead of 30%.

And they knew what they were doing. They knew that what they were doing was poisoning the entire concept because it was not gonna save anybody any money to compete with Apple's purchases and therefore you should just stay with Apple. And then what happens is an app developer came to them and said, I think it was a dating app,

and said, it's not even 3%, it's like more than 4%. So we're gonna lose money if we go outside the store. And Apple's internal reaction was, good, good. It's working even better than we thought. But what they said to the judge was, oh no, 27% is totally a scientific number that we arrived at by scientific means. We calculated up all our expenses and the cost of our APIs and like 27% is what we have

to, we just have to charge that. But she's got the receipts. That's not what it is. They're doing, I mean, Mike, I don't know if it struck you, but as I read the entire judgment, which I did, I just kept shaking my head and thinking, it's exactly what we thought it was. Yeah. Exactly. We knew all of this, but it's worse to see it in black and white. It's worse that way.

It is. And if you're a judge, we can look back with our popcorn and be like, oh, I knew it. I knew those guys just made up that number. But if you're the judge and you're saying, you need to do this thing, and they're like, no, we don't want to. I mean, this is why she forwarded Apple and one of their executives for criminal contempt.

It's hard not to say that Apple is absolutely in contempt of this court, acting in contempt of court, because they literally made a mockery of her instructions, which were to eliminate anti-competitive behavior by creating a new anti-competitive system. And so is it any wonder that at the end of the day, the judge said, forget about it? It was more anti-competitive because like in a scenario based on the fact that somebody would have to then incur all the additional costs of the accounting. Like if I, as a customer went to this link, right.

And like signed up for an account, but didn't pay. If I then went back on the web within three days, Apple wants that money. Then that's not how it works in the app store. Like if I go to, you know, look at Netflix and I'm like, no, I don't worry about it. And then three days later, I go, you know what? I do want it and go to the web browser and sign up Netflix. I don't have to give Apple any money. Right. And just to be clear, cause I'm seeing some comments about, um, well, Apple got three years where they got to rake in more money and that's like, haha, look what they did Okay But here's the thing

Apple was given an opportunity to build a reasonable proposal. Yes, that would include more language that would scare you that would include them taking a percentage of Transactions outside their store, maybe not the seven day auditing, whatever, but maybe 10% or something. And by forgoing that they got there two or three years in the sun or whatever. But the judge now is saying you can take nothing ever. That was, that was a world in which you could have 10%, 5%, 3%. I mean, this probably wouldn't work, but a world where you could be like, it has to be Apple Pay, right?

So you still get a little bit like whatever, that wouldn't, you know, you get my point. There were lots of different things you could have tried, but now you have 0% of nothing. It's what you've got. Right. All you had to do was build a system that was arguably competitive, right?

So if Apple said, and it's not like, I know people have said, oh, well, what if they did, you know, 5%, they would feel pressured to compete. It's like, yeah, but they got the home field advantage. They've got, it's so easy. You've already got your credit card at Apple, all of that. They could even make it clear in their rules that the outside link and the in-app purchase link

had to be on the same screen, right? They could make a bunch of rules like that. And then they could say, you know, we're gonna take 10% or whatever. And then Epic might complain and other companies might complain. But what Apple would, I think Apple would have a strong argument to say,

look, our system is really easy. It's already there. It's convenient. It's secure. People trust Apple. For that, you pay 10%. But if you don't, you're doing what? Again, we just heard you're doing what? 4%, 5%. So, and we're giving the customer the choice, right? They said we're giving customers the choice and you can choose. Yeah, it's up to them. They could do 10. They could do 15. They could do 20. I mean, you've

got to see what the judge might say about that. But like, all you want to do is create an area where there's a competitive opportunity to not use what Apple forces you and see if that competitive system is more of a benefit. And then because what judge what the judge in this case, Judge Rogers, Gonzalez Rogers said, is Judge Rogers, or Gonzalez Rogers said is competitive, make it competitive. She did not say Apple can't compete. She said make it competitive, but Apple didn't choose to build a competitive framework. They chose a non-competitive framework.

And again, if I were her, I would be furious. And she's furious. And we're not lawyers. I know that Ben Thompson pointed out that there's, there's some, you know, questions about like, is this takings and all of that? Although I feel like Apple stance Apple standing is greatly decreased because they are acting in contempt, right? Like they got their shot at it.

Um, so it strikes me that this is going to be a rough one for them. It's not impossible. They said they're going to appeal, but they have to cook. The appeal was filed this morning. Yeah. And Tim Cook, you know, basically said, but you never know what might happen. And it's in effect now. That's the other thing is that this first round happened with appeals, but I believe

this is all just in effect. They had to do it the next day because we're at the end of that process now. I mean I would be really surprised if their appeal worked. Like they might be able to gain some ground back, I don't know, but there is also this thing that like, I mean, even as I'm saying it, I'm like no, but like does it feel like the genie's out of the bottle on this one, but no, Apple doesn't care. They would just go back. We know this. Like, we can see this. Here's what I'll say, just a quick aside, actually, about saying about seeing this.

I can't believe that all of this information was just written down. It is kind of amazing, right? Haven't these executives learned by now? But here's the thing. I don't know. It may be that they were ordered to keep notes of the meetings involving compliance with the orders, right? Yeah. Yes. I mean it's super damning and you're in a, you're literally in meetings where you're saying how do we scheme to get around the judge and people and people are taking notes. Like what are you, what are you

doing? Yeah. I just feel like at this point it surprises me. I mean, maybe they decided this was the route they wanted to go down because you know, Google lost its case, like lost its case and continues to lose lots of its cases because they kind of instituted this system of like, let's not write this down. And that actually came back to bite them big time. So maybe it is the right call to write. You know, actually the right call is just not to, just don't do anything anti-competitive. Like maybe that's just the right call. Just be competitive.

So speaking of that, let's talk about Phil Schiller. Yeah. Because Phil Schiller comes off pretty well in this document. Not like a hundred percent, like, but here's the point. Phil Schiller, first off, did the work. And there's a very strong indication from the judge that she is not impressed by other Apple executives who have lots of opinions about her ruling, but did not read it and were not at the trial. Whereas Phil Schiller was at the trial and clearly she says, read every word of the judgment and expresses awareness of what is being asked.

And so when all of these jokers are saying, oh, well, let's just do 27% and let's avoid this and let's avoid that, Phil Schiller rolls in and Phil Schiller, he's a true believer. He's a lifer. He is not some malcontent revolutionary inside Apple. He is a made man at Apple. And he says, this outside commission thing,

we can't do it. We can't do it. It's a bad idea. The judge is clear about what she wants here. We can't do it. It's a bad idea. The judge is clear about what she wants here. We can't do it. And Luca Maestri and the finance team basically says to Tim Cook, don't listen to Phil. Just do this thing. And then Tim Cook says, I'm going with what Luca says and not the guy who was our guy at the trial who knows every detail of it, who is Phil Schiller, Apple fellow and very senior person at Apple, still Phil Schiller. I'm gonna go with the money men. And as the judge wrote, cook chose poorly. So I was reading as a John Voorhees at Mac story,

used to be a lawyer, right? And so like, you know, he wrote a good piece about this. They also spoke about on app stories. I really enjoyed it. And something I didn't understand that John explained is like typically a company, a large company, they will appoint an executive specifically to go and listen. Like, yes, that's the point you're going and you're listening. That person was Phil Schiller. So he was appointed as the person to go listen and then he didn't listen to him. Why, why, why even have him? Like how much money did, did that cost to send Phil? And like, you know, in his time, like time for money for his time, right? Which must be very expensive to have him go and sit in that courtroom and listen for hours and hours and hours and hours, right? And then he was in this situation. He's like, we shouldn't do this again. Like someone

who has effectively before now ran the app store for a decade, who has sat there and not wanting to change these fees, right? And has done everything possible over this last 10 years or however long to hold on to that 30%. He's the person in theory would least be likely to say, let's get rid of this because he could have gotten rid of it at any point before now. And he's like, we shouldn't do this. Because he knows it's now a question of following a judge's orders. It's the law. Yes. We are saying, and I mean, I'm going to boil it down. There's a meeting where the guy who went to the trial says, the law says we have to do X. And then off in the corner, the money men say, oh, let's not do X. Let's concoct a scheme to avoid X.

Let's break the law. Yes. And Phil Schiller says, whoa, whoa, whoa, whoa, whoa, whoa. I'm as true a believer as anyone. I want us to get our money. I believed in the 30%. I believe it's still the 15% for the small developers. We did that, but the 30%, it's our bread and butter.

We have all this. But we can't break the law. This is the law. So we need to find the right approach that benefits us the most that follows the law. And the money men are like, I think we should break the law. I think we should concoct a scheme to break the law instead. And Tim Cook said, Let's do that. Let's break the law. Let's ignore the judge's wish. Let's ignore the guy we sent our expert, Phil, who's been around longer than anybody at this point in the senior ranks.

Let's ignore him who's saying you need to follow the law and let's break the law. And that's why the judge says that was a bad decision by Tim Cook. That was a bad decision. Tim Cook. That was a bad decision. You are defying a judge because, and I think this is the way we have to say this, Apple executives, at least some of them, not Phil Schiller,

Apple executives think they're above the law. That's it. That's the answer. They think they're above the law. And here's the thing that kills me. It's everything we thought they thought. They've behaved in the last five or 10 years, like they're above the law,

that they have contempt for everyone, including judges, including regulators, and including their own third party developers. And this ruling just says, including regulators and including their own third party developers. And this ruling just says, yep, that they are who you thought they were. And like saying about breaking the law, it is now being considered that one of those people actually also lied in court, right? Like that they lied in court.

And it was a simple, I mean, it's very simple. Like the lie was, you know, they, the judge asked him, yeah. Asked him like, you know, did you have any idea about the, about the, the, you know, when did you come up with this idea of 27% and they set a date or whatever. And it's like, you didn't have it before then it's like, Nope, this was the first time we ever spoken about it. But this meeting that Jason's talking about happened months before long chain of events involving them concocting the scheme and then reverse engineering.

You just couldn't get that wrong. Like you just, cause you would also, in theory be prepared, right? Like you would also have your meeting notes. And, and so this is why this, I think the whole thing and especially this is now being kicked up to the district attorney for North Carolina, the US attorney for criminal contempt. Yeah. So it's the US attorney in San Francisco, it got kicked there for criminal contempt,

which is that attorney will decide if they want to pursue that or not. And given the current state of the Justice Department and the Trump administration and all that, who knows whether they want to, you know, any corporate crime is worth prosecuting to them or not. I don't know. I'm sure that Donald Trump would get a call from Tim Cook if they tried to prosecute one of their guys. But still, I mean, the point is made that they've been referred to the US attorney because the judge feels that they've committed criminal contempt in a case. That's not great. That's not great. I should also say, because I saw there was a particularly disturbing piece last week on a kind of a penny ante Apple website that is embarrassing and is

even more embarrassing now, and I'm not going to even mention it, where they said something derogatory about the judge in this case. They have also in the past said that about the regulator in the EU. It's sexist. But I just want to point out, how do you get that job? You got to get nominated by the President of the United States and confirmed by the Senate. This judge was confirmed by the Senate like 80 to 15 or something. Like this is not a rando judge that rolled in off the street.

This is a federal district court judge doing all of this. So I think it shows you what dire straits were in that a bunch of people who are, who are reflexive Apple boosters and propagandists have to resort to insulting a distinguished judge because they got nothing left. They got nothing left. I don't understand. Like obviously I love Apple products and I love the idea of the company and have done for 20 years or whatever. But most of all, like, I care about the products. But like, I just, I don't understand how at this point you feel the need to defend them in

this. Like, why do you, anyone, why would anyone feel the need to defend Apple in this scenario? Beggars believe to me. Anytime anybody wants to come to me and say, oh, you shouldn't say those things about Apple. They're really just making a good decision because of this and that. I'm just going to point to Phil Schiller. Do you think Phil Schiller is against Apple? Phil Schiller is, I'm going to say it again, a true believer and a lifer, an apple lifer and a true believer.

There is nobody more in tune with Apple and also with Steve Jobs and what he believed about Apple than Phil Schiller, number one guy. And he's waving his hands saying, no, no, no, no, no, no, no, don't do this. And they did it anyway. So like, I don't want to hear about it. Phil Schiller was right.

Don't do crimes, okay? It's not hard. It's not hard. And they went the other way. Let's talk about the developer response. As expected, this is a big topic. So do developer response and then we'll get into what I'm labeling as the fervor ramifications. The aftermath of this. I want to read a little bit from

underscore Davis Smith, who posted on a mastodon about this. And I think the underscore is so perfect because like in even like even in private conversationserscore says to me the same stuff that he says here, which is like, I am very happy to, and have been very happy to give Apple the, you know, to be in the Apple ecosystem, to play by the rules, like it doesn't bother him, right? But I want to read this thing from him on Masterlon here saying that, reading this, it is clear that the highest levels we are viewed developers, we are viewed as a resource to be extracted from, not a customer to be served. It feels like Apple got turned around here and stopped trying to grow satisfaction with developers.

Because, you know, he's saying that like, and I'll read a little bit more to kind of put a bit more context in his words, over the last 17 years, I paid Apple and I watering the large sum of money for the services they provide me and I don't begrudge them at all. Like, because someone like underscore, the life that he has is based upon the fact that Apple gave the tools that they gave, right? But I think that there has been a hopeful, what was originally an implicit understanding and a hopeful understanding as time has gone on, that no matter what Apple do at their core, they do still value the developer. But it feels like at this point, they have gotten far enough away from that, that it doesn't feel like it doesn't feel like that anymore. As he says, they got turned around and stopped trying to grow satisfaction with

developers. Yeah, it is. I think the, I think it's broader than developers too, because there's a tendency for people to sort of say, well, boohoo developers, right? Like you chose this path and whatever. And I think that's wrong, but I will also say hurts consumers. Yes, fundamentally. It's a consumer harm. Because we're not saying we're really not saying you know what we need is Apple to take the 30% away so that they can come in with alternate payments at four or five

percent, six percent, whatever their processing fees are. And then the developers just take all the money away. That could happen. But the other argument is that it makes more price competition because you've eliminated an enormous amount of overhead and that you will now have price competition where they could charge less, maybe not all that less, and they are more productive. You could also say that it makes it easier for developers to be successful at the App Store. But I do think that there is a fundamental kind of, I keep using this word contempt, that parts of Apple feel, and I also want to be clear, I know people in the developer

relations group. They really, there are parts of Apple that really do love and care about developers and want to do right by developers. And I'm going to return now to that image of Phil Schiller in a meeting saying we need to follow the law. And I'm going to continue to call them the money men in the corner. and his cadre of financial group people who said no. And why did they do that? Because the organization chose money over everything else. And we can talk about this more in the aftermath, but like, it's not just about the money, it's not. And an effective CEO needs to balance

a lot of different aspects, including the money, but not limited to the money. And this is a case where, you know, there's a shiny object out there, shiny gold, and the judge says, don't take that. You're like, well, what if I do a look over there and I take it? Like you just can't. It's the marshmallow experiment on a, except for CFOs. Don't take this marshmallow. Like, no, they took the marshmallow.

Expensive marshmallow. Very. So very the it's already started right so the the rules had to be changed immediately and they were basically as immediately as they could be changed and you're already seeing a couple of key players maybe the most aggrieved ready to go so patreon right out of the gate so So this will allow again, if you're a caution, mine back a few months, uh, Apple put its, uh, uh, thumb on Patreon and insisted that Patreon take a give Apple 30% of any subscription that was signed up for in the app. And it also demanded that that everybody had to have the ability to sign up in the app. Right? So it wasn't even

like a individual creator could choose whether or not ability to sign up in the app. Right. So it wasn't even like a individual creator could choose whether or not someone could sign up in the Patreon app. It was like that one to punch. Well, they're now not going to do this again. And so they've gone back on it again, which is great. So creators will now be able to be in the Patreon app and accept payments from the iOS app by going outside. Right. So that's how it's working.

So it's the same for everything. You'll say like, subscribe in the app, you'll tap it, you'll go out to a website. Something I don't know, but I think I know the answer to is it doesn't, you can't do this in Safari View Controller, but it just, it opens a website. I don't know the answer to that question. I would like to, I would love it if it could just open

a Safari View Controller window right within the apps, you know, actually even being kicked out to another app. But ultimately, I don't really think it matters. I don't think customers will care. So this will, this now means that Apple will no longer be forcing themselves into the process and taking money from creators, which I think is fantastic. I'm so happy about this. Um, Spotify, they were, they've been ready to go for like four years. Uh, and it's now shipping. So this one's in the store. Like Federico had some screenshots, like you do it, right? You press a button. It's like an actual button unbelievably, and it takes you out to open Safari. So I think that might be the route you have to do because I'm sure Spotify. Yes. Push any line they could push. No, you have to

go out to Safari. Right. Um, just come on. But anyway, um, I'll take what I can get at this point or the by way of not me. I won't take anything. Cause this is just in the U S which I'll just quick diversion. Come on Apple. Like I mean, I know you won't, but just like give it up. Just give it up. Like you've just, I won't step into the ramifications point yet. We'll get there in a minute. Uh, Stripe has already published a huge set of documentation to help developers implement payment processing of their own and Epic Epic have said that they want to bring Fortnite back. There's been a lot of question about if they can or cannot do that.

I don't think that Epic would say that unless they actually had a developer account. Like Epic have developer accounts outside of America because otherwise they couldn't publish the Epic game store in Europe. Yeah, but that's because they were, they were, Apple was forced to allow that. And I don't see any sign that, that the judge in this case has forced Apple to allow Epic to come back to the store in the US after violating the, Epic says a lot of things. But we also don't know that Apple haven't said, yes, you can have your account back. Like we don't know the answer to that like we'll have to wait and see you know

Like no one's saying anything other than epic is saying we're coming back Apple hasn't said epic's not coming back So well, there's some bad There's some bad story new stories that got published that said fortnight's coming back to the app store and it's like no epic said Fortnight's coming back to the app store in the US We'll see. But they haven't made some other stuff. So they have announced that the Epic Games Store will come. Again, they're making lots of announcements.

All we can say is Epic have said that the Epic Games Store will be available and it will offer game developers payment processing at no cost for the first $1 million of revenue. Then it is their usual 88 to 12% split for being on their store and using their infrastructure. And they're also working on something they're calling web shops for developers of non-games

that will be hosted by the Epic Games Store. So if you wanted to sell digital content or something, you could, Epic will give you the tools to set up a store that you have all the links and a customer will click it, it will take them to the site, they'll, you know, take them to the web, they'll have your Epic store there. They have said they haven't published it, but it would be better rates than Apple. They will handle the infrastructure and customers get kind of credit that they can then use in the Epic game store for any purchase that they make on an epic web shop. So

My point is this is a few of the many things that's gonna happen, you know Revenue cat. I don't know if they're doing anything yet But you know, they're gonna have stuff like every and there will also be Whole new companies that are created sure to facilitate this stuff But you're gonna see I think a lot of a lot of success from stripe and and a lot of these developers are also already Using payment processing for things that happen outside So to build in a new flow that just takes people from the app to their existing outside payment processing same makes sense Makes sense all of this though

It's messy and ugly for customers so like all major companies now are gonna implement their own systems and're going to be forcing you out to pay because you'd be bananas not to. If you're Disney, if you're Netflix, if you're Amazon, anyone, everyone, why would you give Apple 30%? Why would you do that if you don't have to? 30% is a lot of money. Even the 15% that some developers get under certain circumstances is a lot of money, right? That you're not going to make your service cheaper, but then you get 15% more of it. Like, why would you not do that? And the problem is now customers are going to be thrown left and right to be signing up for accounts all over the place. This is the exact thing that Apple was saying that

they were trying to avoid, right? Like they're talking about consumer privacy and stuff, which a judge, Gonzalez Rogers said was a lie, right? There's something along those lines of like, you just, you, you hide behind this, which again is a thing that we've all felt. I think Gonzalez Rogers might be an upgrade listener. If you're out there, judge, we appreciate you. But like, if Apple chose to be a partner to either the developers or the legal system, not a gatekeeper,

they could have kept the experience at least for their customers being good because the experience is going to be worse now than it was before. Because as a customer, your experience of signing up for stuff in the Apple ecosystem, having all your subscriptions available in the app store,

one-click cancellation, all of this stuff, purchase sharing, all of these incredible benefits that you get as a customer, amazing, but they're gonna be gone now. You're not gonna have these because no one's gonna to use this anymore. Even fewer people than before. So if they would have actually just prioritized the customer experience,

the experience of their development partners, everyone could have been better off. All customers could have been better off. Apple could have been better off because they could have gotten something out of this. It's all gone now. It's been thrown away in the US. This episode is brought to you by our friends at Squarespace, the all-in-one website platform designed to help you stand out and succeed online, whether you're just starting or scaling your business. Squarespace gives you everything you need to claim your domain, showcase your

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Then when you're ready to launch your site to the world, use the offer code upgrade to save 10% off your first purchase of a website or domain. That is squarespace.com slash upgrade with the offer code upgrade to get 10% off your first purchase and show you support for the show. A thanks to Squarespace for their support of this show and all of Relay. So I was saying, you know, I'm frustrated this is US only, honestly, because I think it'd be great if everybody didn't have to keep paying this developers, customers, because, you know, I know that there are things that I pay more money for because I choose to do them in the

Apple ecosystem than if I would have just go sign up on the developers website. So I wonder, look at Europe and the DMA, like, are they just just gonna look at this and be like, oh you know what actually that's what we wanted. Like what we wanted was more competition. What we wanted was our developers to make more money. We don't really care about these other app stores anymore. The cut is the biggest problem. It's always been the biggest problem. We'll take that. Similarly, like other antitrust lawsuits, right?

If you kind of tie these things together, like Apple still got that outstanding case for the Department of Justice. We now know if you look hard enough, there's a ton of stuff available in discovery. There was so much damning evidence that seemed somewhat readily available to Judge Ivan Gonzalez, Rogers. And so is there more of that sitting in there? I've got to assume. Yeah. Like especially in the slack, which I think we'll get to some of this again in a minute, but like a lot of the slack messages is by designers and engineers, people who don't care at the same level that the C-suite would about being careful about what they're saying.

You know, so like they're just doing what they've been told to do or doing what has been loosely instructed to them and they're just talking about it. But all of that stuff is available under subpoena. So like, is this, if you're a lawmaker, you're now being like, great, it's in there, we know we can get it. I don't know. I don't know. And then you think about games, right? Games is kind of the big thing here. This is what makes up the majority of that services revenue, right? Is the assumption. It's it's coins and gems in games.

No game is going to give Apple the 30 percent, right? None. And well, again, it depends on the implementation because. I think you're right that they're going to be extremely motivated and probably they'll just, there'll be a price disparity between them. But I think you still have to offer in-app purchase as an option. Maybe hidden away, but I think that rule is still in effect, that Apple also needs to be there.

Really? I think so. But it doesn't have to be visible, right? But what about for the things that you couldn't? Because there's now stuff that you couldn't do with in-app purchase, but the rules have been changed. And you can do it. I don't know.

But what I'm saying here is, I think there's some, especially since that's 100% profit, right? I think there's some benefit to giving Apple its cut and having it be super easy. And I'm sure these developers will learn, if they don't know already, the dynamics of parental controls and asking for approval from parents. And how much does opening Safari to a webpage

where a kid has to go and tell their parents to log in or put in their credit card in order to get by those gems? Or even just you as the consumer, like giving you that second thought before you press buy. Exactly. There are economic practices there. That's the home field advantage. You know, again, but that would be Apple competing. So we'll see.

But these things, right? The way that this could touch the money in quite significant ways, the way that this could play into more kind of legal challenges. This decision to me feels pretty existential to Apple's business. Now, because it's services, right? So services is the growth area. We're going to talk about earnings in a bit, but services is the growth area. It has been for years. It's what they have always pointed to for Wall Street to be like, Hey, look, we're still able to do stuff. You know, our products might be flat, but look at this growth. It just goes up and up and up and up forever. You couple this decision, but the fact that it's looking more and more likely that the Google search deal money is going to be going away. And in a few quarters from now, that services

revenue could take up pretty big decline that would feel at least unlikely that they would be able to build up with any kind of speed. So I don't know, you take away the services revenue. Obviously, Apple as a company is doing fine financially. It would be a big chunk, but not, you know, they're going to carry on, but the stock market's not going to be happy, right? And how much do they care? I don't know.

I think this is a, an important point, but I also think that it can be over emphasized. Yes. I am much more skeptical. It sounds like than you are of the Google search money going away in part because I have a hard time imagining a remedy that is in a case against Google that allows Google to keep money and harms other people who lose money.

Seems like a very weird remedy against Google to say, Google, keep your whatever they're spending in total, 30 billion dollars, just keep that. And everybody's gonna choose you anyway, and now you're not. Also also I don't think it actually fits very well because it's referral money, it's affiliate money, and I think the most that will happen is that they won't be allowed

to be the default, but everybody's gonna choose them anyway. I think Apple's still, and by the way, Safari, default Safari search is so valuable that if Apple is not allowed to make a deal with Google for it, Apple will find another way to make money on it. They will set up their own search engine with their own ads. They will find a partner. There will be somebody who will pay for Safari. It might not be as much.

And this is what my point is. I don't think you're going to talk about 20 billion going to zero, but it could take a hit. And I don't think in-app purchase and app store revenue is going to go from all to nothing. I think it's going to take a hit. And that means, yes, the services line, we're probably headed for a moment where the always goes up service line is going to have a correction but I will also say because we're going to talk about about Apple's results in a little bit that if Wall Street understands it and they understand the ramifications and After that is done It continues to go up from the new low lower level They'll probably get over it. They'll get over it. It's not existential because Apple's doing fine. It really is just, it's an area that they've really built up

that they're gonna get a black eye in. But if it's about court cases and things like that that are out there that are just part of doing business, I don't know whether Wall Street will be too upset about it in the long run, even though it's going to be a hit to them. Yeah, that's fair. So I wanted to, I wanted to talk about Luca Meistree for a second. Okay, great.

Yeah. Cause he left. He's not the CFO anymore. No. And one of the stories here is that, is that Luca is prominently named as one of the people and one of his lieutenants is the was personally referred to for criminal contempt. He's referred to in that story, as Phil Schiller, who's paid attention to the whole trial saying we can't do this. And Luca Meister says, No, let's

do let's concoct a thing and Tim chose poorly and chose to go with Luca. I'll also throw in that report from a couple of weeks ago about how Apple's AI team wanted to buy an enormous amount of GPUs for AI training, a key area where Apple is behind. And the report was that Luca said no. And Apple actually responded to that report. And their response was weak sauce because their response was no, no, no, no, no. All we did was slow down the amount, but they did get it eventually,

which to me, I read as being, that's not great. Apple's got its hair on fire about AI training and AI models and all of that. And you go and your boss, the head of AI says, we're gonna buy this stuff. And then the CFO rolls in and says, well, let's not buy it all at once Why it's like your parent coming in and saying well, I know I know you want this thing

But why don't we get you this lesser thing or why don't we just do a little like why don't why don't we rent a surfboard? Instead of buying a surfboard for you, which is great if you're gonna go on to the next thing but it turns out AI not the next thing. And I got really bad, scary vibes from the idea that the CFO was telling the head of machine learning how many GPUs he could buy. And slow played. Apple's argument is essentially, well, we just slow played him. Which is not, I mean, that doesn't really help.

So I have to say, knowing what we know now, one, I wonder if this is why Luca's not the CFO anymore. That people within Apple were very unhappy with this kind of behavior, and they knew that there were gonna be ramifications of it. Maybe, maybe not, we'll see. And two, I wanna point out that we can't make Luca Maestri the boogeyman, because as I mentioned earlier, and as I know from all through my career, the job of the CEO, the job of the person at the

top is to balance all the needs of the organization and have a vision for what that organization needs to do. And their job is not, and I hear this a lot in some bad analysis. I hear people say the job of the CEO is to make the shareholders happy or to maximize revenue or to maximize profit. And what I would say is, I think the job of the CEO is of a public company to make the shareholders happy in the long run in terms of the corporation's value.

The danger is you get these short-sighted CEOs whose job is to make the number this quarter and not worry about next quarter and try to make that quarterly number as long as they can. And once they finally don't make it, they get a golden parachute and they're gone and they replace it with another guy who goes through the same process. And that's how you hollow out successful businesses and destroy them. The job of Tim Cook is not to be Pennywise and pound foolish. The job of Tim Cook is to listen to his CFO. Yes, it is, but also to consider the value of the brand and the long-term relationship with developers. And the possibility that if they lose this, if they displease the judge,

they're not going to just lose some money, they're going to lose all this money because they're going to be zeroed out by an angry judge. The job of the CEO is to consider all of that. Yeah. And that's the part that troubles me the most about this, is not, cause I'm not saying don't listen to the money men. I'm saying CEO's job is to not just listen to the money men, but consider the big picture. The money men have a very loud voice.

A good CEO knows that you can't just listen to that noise because there are bigger picture issues. And I gotta say, this is the most disappointed. And I know that other thing. This is the most disappointed I've been in Tim Cook, because this suggests to me something that I didn't really think was true of Tim Cook, which is that at the end of the day, if there's an argument between doing a good thing that takes a hit in the short term but is probably better for Apple in the long term and also complies with the

law or just spiting a judge's order because you want to maximize revenue, that he chose that one. That's very disappointing because that is not thinking big picture of a guy who I think has shown that he's pretty good at thinking about the big picture, but I think he got overwhelmed by whatever it is that Apple thinks it's really entitled to not compete and to take as much money as it can out of the market. I'm going to go one step further than in, because I agree with you completely. So I, I find in general it to be quite tiring to hear people try to like fire this person, fire this person, that kind of, every time you're unhappy about something that Tim Cook does, we have friends that have wanted to fire Tim Cook for a long time and talk about it often. Sure. This is the first time that I really think

that it could be time to consider a new CEO. And the reason for me is not, it's not the Luca thing, right? Like it's for me, it was the fact that there are designers who were egging each other on to make the scare screens look scarier because it would appease executives. Like that there's transcripts of this from Slack that it would make the bosses happy if they made it worse. And similarly, the people inside of Teams who were celebrating the fact that this would be more expensive. It seems clear to me from seeing this slice

of communication that Apple's corporate culture has changed to a degree which I'm unhappy with. I've always felt that, and the reason that I love Apple products and why I respect the company is it feels like their corporate culture was about producing the best possible work. And I know that that is the thing that encourages people to go work there but it seems like there is a level of the company now a level of the company which is being listened to by the CEO maybe more than any other level where

their most important thing is To make money at all costs which is what most businesses do, but then you lose the custom experience, which is Apple's whole frigging thing. And it should have remained the whole thing. And I just feel like if you've gotten, if you are at the point where you've taken Apple and turned it into something

where there are designers that are trying to make text reads scarier to customers, so they are less likely to click a button that would save them money, you've gone too far. It's gone too far. And I don't know how you Untangled that and I and I don't think this is it because I know those same people and now like that dang judge She doesn't understand us. How dare she that's our money

How could she and the reason and like that and I am calm. I'm very confident that that thinking is encouraged, which would suggest to me, and I feel confident in that just from reading what I have read in the last few days. And so I feel like at this point, there needs to be some change. I don't know if it's Tim Cook. I don't know, right? Maybe it was Luca, I don't know, but they've jumped the shark at this point, I think. So yes, I mean, the argument is that Apple's whole business model is they used advanced technology and their own innovation to create products that delight customers and the money follows. And what this is, is this is a little thing

where they got an enormous injection of revenue that they didn't really, I think, expect, which is App Store revenue, like when it happened. And they've become, not only have they become kind of reliant on it, which I don't think is actually true, but it is a source of growth for them. Wall Street loves it, but they become addicted to it and they feel they deserve it and that they feel that it belongs to them. And it has, I don't know, whatever metaphor you want here. I mean, it's hollowed them out, it's poisoned them, it's addicted them to something, they feel entitled to it.

And that's what you're saying about the culture being broken, the priorities being misaligned. I mentioned Luke and Maestri. I don't know. That's just a weird coincidence that these two things happen. But I will say, in the end, to the CEO. It goes to Tim Cook. Tim Cook talks a good game about what Apple stands for. But when you look at this, you see that part of what Apple stands for is compromising their values in order to prevent competition and maximize revenue. And again, I'll make the point, CEOs got to think of a bigger picture, because this is a real, if this stands, this is a completely avoidable misstep that will dramatically

harm their revenue and dramatically harms their image. And they've got a house on fire when it comes to how developers feel about them anyway. And so the problem, Mike, is this is happening simultaneously with us being in an era where Tim Cook has cultivated amazing relationships with key global players politically, and is the master of supply chain in general, Apple supply chain in particular, at a moment where the supply chain has to be reconfigured rapidly based on global events. So the problem if I'm on the board is I don't like what this says about Tim Cook's approach to these areas, but these other areas is what Tim Cook is great at and that Apple would be in a much worse place if he wasn't able to do his magic there. And so I would be torn as a board member about that, but I will say this.

I'm not going to go so far as to say it's time to consider a new CEO. If I were on the board, what I would say is I'm troubled by this report and the suggestion that Apple has lost its way culturally. And that given that Tim is not going to be staying as the CEO for 10 years or whatever, that I want to accelerate a clear succession plan and say, if you've got a favorite, let's name our favorite who's going to take over in three to five years, and let's get that person up to speed, and let's make that person more visible, and let's explain to that person as a board what we think of as

the strengths and weaknesses of this along with the CEO. I would make my displeasure known to Tim but what I would say is not you're fired. I would say you need to you need to also start planning your and maybe this has already happened but like you need to you need to know when you're going and it needs to be in the next three to five years. And we're not gonna, we don't want you to stay beyond that. You need to step off. And the new person coming in

needs to know what we want from you. Because this is, I think, they shot themselves in the foot here. This is unnecessary, and they are going to pay for it. But I don't think I could say you got to go to the guy who's kind of holding it together given everything else. If this was a calm seas kind of moment, I would say maybe you've stayed too long. But it's not a calm seas moment. This is why I'm like, I struggle to be like, I'm not saying fire Tim Cook, but I'm saying something needs to change because it seems to me that the culture is broken and like,

what does that need to be? Is it he steps aside? Is it they, as you say, like they accelerate the new CEO and like now internally in the company, everybody sees this person as like the new light, you know, like in the, and we, you know, we looked towards them. And I will say as well, you know, you're saying about all Tim Cook's, you know, it would be concerning like he's built all these relationships. Apple has the model Tim Cook becomes executive chairman or chairman of the

board, like Steve jobs did. And then the new CEO comes in. Like sure that I think would be the way they should do this, right? To have that, like, whenever Tim Cook does retire. I think that should be part of the plan, of like, he's still there, he's still visible, he's still someone that can be called upon, and then they'd transition out that way. But I agree with you in the broader sense, which is this is the least confident I've been in Tim Cook. Seeing what's in that document makes me much less confident in Tim Cook as a CEO because

he took bad advice for the wrong reasons and applauded bad decisions like making the scare sheet almost satirically, ludicrously scarier. And he specifically applauded that as Phil Schiller saying, it's not really allowed. That's not really the spirit. Didn't matter. He went all the way in, which suggests a level of, and this is the thing that comes with, of course they're going to appeal because of course they're going to appeal. It's a judgment against you.

You appeal it. Great. But like, I do think that that says something, which is that they just don't believe that they're in the wrong. And that's the problem is it's very hard not to look at that 70 page thing and say, you're in the wrong here. And maybe privately, they're saying, we should have listened to Phil. I hope that's what they're saying. They're definitely saying that now. Like they are saying that now.

I mean, maybe, maybe. I hope so. I hope so. Because that's the only way you learn is to be, in this case, brought low and told you have to break all of these rules that you set are just gone because you screwed this up. Like, that's what you need to hear.

And then somebody needs to actually believe it and try to institute change. And I'm not convinced that Apple is capable of that, but we'll see. So I don't, I don't like particularly begrudge them for getting to the point that they got to with the, like that led up to everything before this court case, right? Where like, and I, I wouldn't have said you should fire Tim Cook because they wouldn't get rid of 30%. Like that just wasn't my feeling. The thing that, that why I feel like it should be considered now that this change should happen, like even if it's Tim needs to change, which I also would like to see,

like he's, you know, re kind of think about how he's considering this, is that when forced to rethink it, from a legal perspective, they were like, yeah, but what if we didn't though? Like that was the prevailing sentiment. Yeah, but what if we didn't? Like what if we didn't and we did everything possible,

including either asking to or encouraging someone to lie on their oath, right? Like I don't know why that happened, but there are two reasons why that happened. I don't know which one of them it is that this guy wanted to lie to keep his money or it was suggested. Who knows, right? Like I'm not going to say either way, but there's only two ways that that kind of thing happens. Or there's a third one is like that they really just don't remember, but I don't know about that. I do want to just before we wrap up on this, Jason, I do just want to read, cause I've mentioned this thing about the designers, right? And like the copywriting about the scare screens. I want to read this passage from the verge because I think it is, it shows what I'm talking about and there's also one paragraph at the end which I think is just, just objectively hilarious. So, a user experience writing manager at Apple instructed an employee

to add the phrase external website to the screen because it sounds quote sounds scary so execs will love it. Another employee gave a suggestion on how to make the screen quote, even worse by using the developer's name rather than the app name, quote, ooh, keep going. Another Apple employee responded in Slack. So that is the, that just doesn't, I just don't like any of that. Like it's like it's become fun to make developers

seem untrustworthy, right. And then carry on. Even Cook got in on the action. When he finally saw the screen for approval, he asked that another warning be added to state that Apple's privacy and security promises would no longer apply on the web. And then this is the part that I think is hilarious. In core, Apple tried to argue that the term scary didn't actually mean it wanted the screen to scare people. Scary, it claimed, was, quote, a term of art, an industry term with specialized meaning. In fact, the company claimed scary meant raising awareness and caution. The court did not buy it, saying the argument strained common sense. Yeah, we're all talking about that like scary design. You know, it's a new

responsive design, scary design, and it just means consumer privacy, scary design. Yeah, it started with the Spice Girls and it's just gone on from there. Consumer spice. Oh boy. Well, here we are. Yeah. They also say things are sporty or ginger. I mean, it's just a thing that happens in tech.

I'm surprised people more people don't know this. I can't believe nobody's talking about this. That most things in tech are described by Spice Girls. Sporty design. Yeah yeah well I'm looking forward to the to the Posh redesign. Uh-huh. And uh in June yeah let's do it. This episode is brought to you by Delete Me. Delete Me makes it easy, quick and safe to remove your personal data online at a time when surveillance and data breaches are common enough to make everyone vulnerable. Sadly, it's easier than ever to find personal information about people online. Having your address, phone number and family members' names hanging out on the internet can have consequences and nobody wants to feel vulnerable.

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Who has all the money? It's Apple For now... Alright, so it's Apple earnings time It's Apple earnings time Awkward! It was the next day Pretty awkward Alright, let me run through

the top line. Revenue, $95.4 billion up 5% year over year. This is overall revenue. Mac was at $7.9 billion up 7%. iPad was $6.4 billion up 15%. The iPhone iPhone was 46.8 billion up 2 percent. Services up 12 percent at 26.6 billion. And wearables, home accessories, it's the ugly stepchild, 7.5 billion dollars down 5 percent. You did a really good article on six colors that I enjoyed where you were like, all right, thank you. Let's actually look at the headlines here and what is really going on. I know you sometimes on this piece on Mac world, but they don't want it anymore. So I read it here now and I really liked it. I thought it, I thought it had a different kind of vibe than the one that you usually do.

And I found it really useful. I put more jokes in it. Like I put you know what it's probably why I liked it. It's just written more like you right. It's because it was the six colors voice is different to the Mac called voice as it should be because it's not your publication, right? You kind of have they have a style that you fit within when you're there, but I'm gonna there's a bunch of things that you pointed out in

here, but like essentially the things that I found interesting is that iPhone revenue has been flat for the last three years. Uh, an iPad is up 15% and it's four straight quarters of growth after being down for nine out of 10 previous quarters. And I, for the iPad specifically, I don't feel like I can really put my finger on why it's so successful right now. I mean, they're ship, I can, they're shipping new iPads, but they've always shipped new iPads. No, but there was a year where they didn't, but that's, that's, that's more than nine out of 10 quarters though. Right. That's what I mean. It's like, I know there was a

year where they didn't, but like, I don't know. It's hard. It's hard to look at these charts sometimes. My argument is there was a pandemic high where they sold a lot. Then there was a drop off after that because they had, they had sold a lot to the people who were going to probably buy one in the next year. Then they didn't release an iPad for a whole year. And now that bar is low enough that by releasing iPads in a regular schedule, they can be higher sales numbers than the year where they didn't release any iPads. So I think that's actually what's going on here. But yeah, the net result is they had a really huge spike with COVID.

And then they kind of like fell off for the following couple of years. And now they have a little bit of a resurgence, which I do think that those are the two things going in there is they had their year of no iPads, and they had the year where they were coming off the high of COVID, and that's why. Okay, that's fair. I think. Wearables, 5% drop year over year

in line with the last seven quarters, which showed revenue drops. Yep. What's happening? It's actually a 10 of the last 12 quarters have been down. What's going on here? Well, I laughed out loud when Apple said that it was a difficult compare with last year because last year they introduced

the Vision Pro. Although, I have to say, if you do the math and multiply 100,000 or whatever it was, 200,000 by 3,500, you can get that 900 or 400 million drop off. You can get it. If Apple sold 115,000 more Vision Pros last Q2 than this Q2, that would actually account for it. I'm sure it's not all Vision Pro, but like it doesn't take that much

to account for that drop in revenue. And then the other thing that they also, I lifted my eyebrow at was they mentioned the Ultra 2 Apple Watch. And it's like, okay, the Ultra 2 Apple Watch was for sale in Q2 last year. But it had been for sale for four months prior to that. And so, but I actually, I actually don't doubt though.

I honestly, I don't doubt the fact that there is a, an aging curve of any Apple product and that when you're in month four versus when you're in month 16, that month four sells more than month 16. I don't doubt that they sold more, more ultra twos last year than they would this year when it's an old product and there's probably an ultra 3 coming in the fall. I don't doubt it. I just find it very funny that their difficult compare is a four month old watch and the Vision Pro. But that's where wearables home and accessories is right now,

which is why I referred to it as the ugly dog in these results. It's like, Oh, I mean, I love you, but you don't look that great. That's what's going on here. You seem very nice, but, but also, you know, you wouldn't win a contest or anything right now. That's where wearables is. I think personally, my theory is this category is driven almost entirely by the iPod or by AirPods Pro. Yeah. And they have, and they haven't been around and they haven't been updated in ages. And, uh, that when they do a new AirPods Pro that they'll get a big boost in this category, but also that it's just kind of flat to down. And that's just where they are right now. I can't, I can't get,

I cannot get my head around the Apple torture tube. I thought, right. How much though, like what you saying saying people don't like the black one? Is that what you're saying? Cause there's a new black one. Honestly, I think they looked at the $400,000 or sorry, $400 million difference between Q2 last time, it was 7.9 billion and now it's 7.5 billion. So $400 million.

And they looked at, well, why is that? We need an excuse. And they looked and they said, well, actually if you add Vision Pro and Ultra 2, you got all of it. And somebody with like a green eye shade in a back room somewhere, back behind where Luca and his senior executives were all conspiring.

Is it green because of money? Is that why? He's just got like a little adding machine and a green eye shade and he's doing long division and all that. Just somebody in the back room. When you said eye shade, I thought you meant makeup. No no no, not eye shadow, an eye shade. You got to have the green eye shade because it makes everything look like money. It tints everything green like money. I get it. And he's back there counting pennies and doing whatever click, click, click

on the adding machine and all that and goes, ah, I got it. If you add these two things together, it makes it a difficult compare. And the Kevin Perrick, the new CFO is like, great, that's what I'll say. And so that's what they said is, wow, boy, it was tough this year.

No new Vision Pro, no new Apple Watch Ultra really saddled that category down. I'm like, okay, I mean, I think it's technically true, but what a weird case to make. It just, it's weird, weird. I mean, I just, just say Vision Pro. I know, but they had to throw in Ultra too as well. Why?

Just say Vision Pro. Also, are they mad because there was some executive who was like, let's not do an ultra three this year. And they're like, Oh, how dare you? I'm going to show you. Like, I just feel like they obviously do not need to, they don't need to. Apple has kind of constructed their own is called in such a way that they don't need to tell you anything. They don't want to tell right and so like I just don't know why I mean it helps to save face a little bit If they're like, yeah, yeah, man Vision Pro made us so much money now. We don't have the new like it's a I just find ultra to being brought up there to be very curious. Yeah, right. I mean cuz it wasn't this is the thing Tough a tough compare a difficult compare that they talk about all the time

Usually it's about a product that launched But they bring up the ultra tunes like really the ultra to didn't do as well This year as it did last spring after it already had been out since September What and also like the ultra to? September? What? And also like the ultra two, I don't know. I can't get this out of my head now. The ultra two was like not even really a good upgrade from the old, like I bought it because I've been waiting, but like it added like one sensor.

It wasn't even a helpful sensor. If I remember, I can't even remember what it was now, but it's like, it was, it's just like such a peculiar product to bring up. Like why not bring up the fact that you have not updated AirPods Pro which is obviously all this is. Weird. Very weird. Just weird. Look, look there's very little when they do these things you got to glean what you can because there's so much of it that is is just sort of boilerplate and almost marketing but that one yeah that one step just I was struck by that just vision it's a tough compare because of vision Pro and Apple Watch Ultra 2 okay I guess strange there were they didn't

if they didn't really talk about the legal stuff, right? On the earnings, not very much? No, this is the line that I thought. I mean, so Tim Cook said, we strongly disagree with it. We've complied with the court's order and we're going to appeal, which is, of course, he says that, but I thought it was, you know, I think it's BS, but that's what he has to say. Fine. But what he didn't do is say, it's not going to matter. Don't worry about it. Instead, he said, we're monitoring these closely, but as you point out, there's risk associated with them, the Google case, as well as the Epic case.

And the outcome is unclear, which I would say it is. So at least he had that in there that they're not, they're not, they're not take, they're not taking it lightly, nor should they. I feel like it would have been made more of a thing if tariffs weren't also in conversation. So I've got a good quote here and some information. So Tim Cook said that for the June quarter, we expect the majority of iPhones sold in the U.S. will have India as their country of origin and Vietnam to be the country of origin for almost all iPad, Mac, Apple Watch and AirPods products also sold in the US. Chinese-made products will be sold

everywhere else and Apple said that they expect to lose around $900 million in the next quarter due to tariff implications, which that number is large, but as you very astutely pointed out, That number is large, but as you very astutely pointed out, this quarter was 85.8 billion. Sorry, the quarter that they're going to be comparing against was an 85.8 billion quarter that they say they're expecting to beat. So. Yeah. So it's a, yeah. 900 million seems large until you realize it's gonna be a beat on 86 billion and they're gonna just take you know

0.9 back from that It's not massive. They could do that. I think the challenge is what happens after that and the thing is Wallstreet wants certainty, right? That's what they like. They don't like to be surprised They want certainty and the problem with all of this is as Tim Cook says, nobody knows, right? Like nobody knows. He says, we'll be thoughtful. We'll manage the company. We'll focus on the long-term dedicated to innovation, right? All those things. It's like, great. But like, that's all he can say. It's like, look, we'll, we'll try our best to weather this, but he can't say it's not going to be a problem because nobody knows. It is a problem. It's just how it is a problem, right? Yeah.

Cause they did that's $900 million. They weren't expecting to not have, right? Like that's again, it's like even to a company that makes the money that they make, I'm sure that they could use a billion dollars, right? That they would use it on something. I don't know what it would be, but they would use it on something. And who knows what the potential knock-on effects of doing what they have to do is? We don't know. Like there could be knock-on effects that they can't even perceive of yet. Like we were just talking about it last time, right? Of like, how, how ready are these manufacturing pipelines for what is now being thrown at them? Were they that ready? Like, are they going to be ready? Like what is the, is there

going to be, you know, like, uh, for the iPhone this year, will America have less units available for launch day than they would have otherwise? Right? We don't, we don't, I'm not saying this will be the case, but there are knock on effects. They also kind of wouldn't ask, right? If they remember, right? They were asked and didn't really say much about if prices were going to change. It's kind of just like, Hey, who knows, man, I have to wait and see. Like for customers, there's nothing about it. Cause I don't think they know yet, right? Like nobody knows, right? It's like even-

I'm sure they've got lots of contingency plans, but you can't say here are our various contingency plans. You basically say, we don't know, we'll see. We're gonna like what Tim Cook said, which is like, we're gonna keep doing our thing and monitor everything closely, but that is not like that. And the analysts did say like, do you have any color on like the rest of the year?

And they're like, we told you about the next three months. That's it, that's all we're willing to do. And even there, they're like, by the way, this is an assumption that nothing changes over the rest of the next two months, I guess, left in this quarter. If something changes, it'll be different. Like the 900 million is only if things stay the way

they are today or last week. And like, when has anything in the last five months stayed the way it is today? Like it just doesn't happen. So we'll see. Yep. Yeah, it was an interesting, it was interesting earnings. Also on Apple intelligence, Tim Cook said, we need more time to complete our work on these features so they meet our high quality bar.

We are making progress and we look forward to getting these features into customers hands not much of a statement but no he did say they're still working on those features yeah and and and again clearly it's like they weren't good enough high quality meet our high quality bar is a very weird like that's you don't meet the bar you you clear the bar, I don't raise the bar, but you don't meet the bar. Whatever. But it's okay. Like, also, I wanted to shout out one of the analysts on this call. So there's a bunch of analysts, they're like characters in a weird sitcom that only airs every three months. One of them is a guy named Richard Kramer at

One of them is a guy named Richard Kramer at Areet Research. He had the line of the whole thing, which is when they say, okay, we'll take our next question, please. Then the operator comes on and says, the next question is from Richard Kramer from Areet Research. Then there's the clicks and pops, and then you hear the voice of somebody else on the call, and they say, Tim, Kevin,

thanks for taking my call. And then he says, I'm not going to ask about tariffs. Because literally every question up to that point had been about tariffs. And Kramer's like, I'm not going to ask about tariffs. And you know what? I feel like in that moment, the Apple people were probably like, oh, thank God, we don't want to hear about tariffs anymore.

Then he asked two questions. His two questions were, so you failed to ship that Apple intelligence feature set that you were talking about. What's up with that? And then he said, well, it didn't meet the high quality bar, but we are making progress, and we're going to get those into customers' hands.

And then his follow-up question was, so all these court rulings against you, the one yesterday, the Google thing where you've got all that money in search referrals, what's up with that? And they're like, uh, uh, this thing. And I just like, I don't know if he's going to get invited back. Uh, he, I gave him a gold star basically in my column. I actually got an email from Richard Kramer, who was like, I've just Googled Richard Kramer. And then I like you like, what are you all about? You know, I don't want to reveal too much, but I will say I got a LinkedIn message from Richard Kramer, which is the most analyst thing possible. But like, at least he asked

these questions. Imagine going through this whole phone call without without giving it away. Was Richard Kramer happy to be mentioned in the article? Yes. Oh yeah. No, he was very appreciative of that. I love that. Oh my God. That's so funny. But but like, can you imagine going through this whole phone call? I mean, I don't want to reveal too much, but I will Richard Kramer happy to be mentioned in the article? Yes. Oh yeah. No, he was very appreciative of it. I love that. Oh my God. That's so funny. But, but like, can you imagine going through this whole thing without anybody asking about them failing with Apple intelligence stuff and being in all this peril in courts?

Like somebody needs to ask that question. So they did let Richard Kramer ask those questions and they had their little statements about it. But I, I'm glad somebody did, cause every did because I mean tariffs is big and people need to ask about tariffs. But I just laughed out loud when he said I'm not gonna ask about tariffs. I'm like oh man here we go something that is not another question trying to get them to say anything resembling anything about tariffs which you know they don't want to do. So thumbs up to Richard Kramer. Good job.

And then the only other detail, which probably was known, but they kept talking about, oh, you know, we love the US. It's one of those, right? Like we love the US. Tim Cook twice listed off all of the states that are in that February press release about their US investment of $500 billion. They'd list all those states got listed multiple times. There's a list. Tim Cook's got it right in front of him taped down that says Michigan, Texas, California, Arizona, Nevada, Iowa, Oregon, North Carolina, and Washington. There it is. Great. It sounds like one of those songs that you learn in school.

That's right. And the part that I thought was an interesting detail probably already known but I thought it was very specific, which is the TSMC project in Arizona. He said, we're going to get tens of millions of advanced chips from that, and they are going to be systems on a chip. They're SOCs. And he said, we are the largest and first company getting product out of that. Now they're not cutting edge. They're legacy nodes, but it is, there's going to be stuff in, I don't know, the next Apple TV, that little, that home thing, some other low end Apple products that are not using the latest and greatest, hottest TSMC processes will be processed, will be powered by chips fabbed in Arizona by TSMC. So you know, I don't know.

There was, what a week, Mike, and what a whiplash from the judge's report the day before to then that That I was wondering if they were would say would have like a comment on it And instead it was sort of just this mild answer to a Richard Kramer question at the end. So yeah Yeah, they were just hoping they're like, oh no one's gonna bring this up. Everyone's gonna be too focused on tariffs But we can always rely on Richard Kramer. I assume those analysts have their questions like vetted beforehand by Apple and like, but I don't know. I don't know. I didn't ask Richard Kramer that, but I'm glad they invited him

because somebody had to ask those questions. Big episode. I think we'll come back to ask upgrade next week because we've run very long. Give the lasers the week off. So you can send us your questions by going to upgradefeedback.com. You get your question in for next week. Similarly, if you have any feedback or follow-up, please send them in there. I want to thank our members who support us with Upgrade+.

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