I’m writing this for release on Christmas Eve. At this point, most tech news outlets would be writing holiday fluff pieces, on holiday shutdown, or maybe getting a little leg work done on CES 2024. This has not been a typical pre-Christmas Apple News week. If anything, it potentially has some huge ramifications for the company's future. Instead, Apple is being visited by either Krampus or Scrooge’s three ghosts depending on your choice of analogy.
If passing the three trillion mark wasn’t an indication, that’s the GDP of France BTW, Apple isn’t the scrappy Mac-making underdog we remember it to be in the second jobs era. Tim Cook has built an empire. Who else has noticed: The United States government and the European Union. They’ve made one thing clear, the days of Apple going unnoticed are over.
Three government actions could have a huge impact on how Apple does business and I think they would do well to get ahead of these rather than having their business be dictated to by politicians.
Apple Watch ITC Ban
Five years ago Apple and Qualcomm got into a patent spat that wound up in the International Trade Commission. You probably don’t remember because, like 99% of ITC cases, despite Qualcomm seeking a ban, the Spice… I mean iPhones kept flowing. Nobody seriously thought iPhones would ever get banned and predictably both companies settled on a number they were fine with.
That’s how the consensus was with the Apple Watch; either Apple would write an unbelievably large check to Medical device maker Masimo or the White House would bail them out. Neither of those things happened and as of yesterday, Apple is no longer selling the Apple Watch Series 9 or Ultra 2 in the United States with the import ban expected to go into effect on Christmas. Absolutely nobody expected this to go this far and yet it has. Furthermore, there’s no stay of the order during the appeals process. If you want to buy a new Apple Watch or even have one repaired, your options are going to be limited until this plays out. You can get the SE or buy it second-hand. Those are the options.
There are essentially a handful of options here for Apple. Wait until the appeal plays out. Given the tortoise-like speed at which the Federal court system moves, this could play out until later in the Series 9’s run or even bleed over into the 2024 Apple Watch. If that happens, it’d be a litmus test of how truly important the watch is to Apple.
Other than that, there are three other options: a software or hardware fix to degrade oximeter functionality that could include watches back to the Series 6, writing a check for whatever king’s ransom Masimo wants to license tech, or Apple could also easily enter into a purchase agreement for Masimo. Not only would the company’s medical IP be something that would benefit Apple greatly, but it also owns Sound United which owns high-end audio brands like Polk, Denon, Marantz, and Bowers & Wilkins which would help Apple’s own home audio ambitions. Rolling Beats into an Apple audio group with these brands would make a lot of sense, and Masimo’s medical patents and talent would help the future of the Watch.
Honestly, I would expect this to be resolved quickly now that the ban is likely to go into effect (12/26 update it has gone into effect) and for Masimo CEO Joe Kiani to become a very wealthy man and possibly even an executive future in Apple’s health group if there’s a purchase. He’s won this round.
Update 12/28: The ban has been temporarily stayed by a Federal appellate court pending an appeal hearing. It is now again available for sale.
This is Bigger than Beeper.
Okay, a quick recap of the Beeper Mini thing: a smart-as-a-whip teenage programmer reverse-engineered code that could essentially Mackintosh its way into Apple Messages. Beeper, an Android messenger app owned by the former CEO of Pebble smartwatches, bought the code and came out with iMessage-compatible Android App Beeper Mini and has had a cat and mouse game with Apple ever since launching with Beeper getting increasingly desperate in its fixes. You can find that story literally everywhere right now. It's not just a story in tech news, it’s on the national news shows.
That’s not the issue. The fact that ranking members of both the Senate and House are not amused by Apple's blocking attempts is. In this very politically charged environment, having ranking Democrats and Republicans working together should not go unnoticed. This is the political equivalent of dogs and cats working together. Neither should the fact that BOTH the Department of Justice and the Federal Trade Commission are looking into the matter. If it’s not illegal under current antitrust laws, this has the attention of the people who make those laws.
It has been rightly pointed out that the membership of Congress leans towards demographics that are less than literate with technology. That’s why Apple needs to get ahead of this. They will dictate to Apple on their terms. On what polls well with their constituents. This has the potential to make messaging less safe for everyone.
Rather than risk having the political class do something or facing an antitrust judgment, Apple may want to consider an iMessage API for other apps and/or a version of Messages for Android and Windows. This should get the Feds off Apple’s back while allowing them to maintain control of their technology. Also, let’s face it, some recent reports are bunk. iMessage is a small fry in Apple’s cadre of apps, not the glue holding Apple together. Tying the Windows and Android versions to iCloud could also be a way to get service money out of non-Apple users or the large number of iPhone users who also use a Windows PC. Services have become a vital part of Apple’s revenue eclipsing Mac and iPad sales COMBINED.
The DMA is Almost Here.
In the last section, I talked about politicians making changes if Apple didn’t. That exact scenario is playing out in the EU in the form of the Digital Markets Act. Europe has already been successful in influencing Apple with the USB-C Connector replacing lightning on the iPhone 15 series as well as the Air Pods Pro 2 refresh earlier this fall. Sharing its name with the Dark Matter Anomaly in Star Trek Discover, this DMA aims to be similarly disruptive with tech companies’ control of their own platforms. In Apple’s case, the DMA specifically targets iOS and the App Store and will require Apple to open up its mobile operating system to side-loaded apps and third-party app stores. Microsoft and Setapp are among those who have expressed a desire to offer an alternative to Apple’s own store. Implementation is likely fairly advanced as the March 6, 2024 deadline is just 73 days away.
While this date is extremely close, the company has yet to officially talk about it in all but extremely general terms. Implementation on the developer and client sides is unknown. macOS uses a security protocol called, ironically, Gatekeeper to protect Macs from harmful software. While Intel Mac supported the use of unsigned apps, the version of Gatekeeper for Apple Silicon Macs restricts this to either just App Store only or App Store and certified developers who undergo a similar process to the App Store. Apps downloaded from the internet are subject to a warning and must be unlocked. Given how closely related macOS and iOS are, bringing Gatekeeper to Apple’s other platforms would be the most likely solution, though not guaranteed.
Another question is how this would ultimately affect developers. Apple could look to recoup any losses from app commissions to third-party apps and stores by reimplementing the kinds of fees that were commonplace before the App Store or introducing new ones altogether. CEO Tim Cook has said that Apple will get its money one way or another. The question is ultimately how this would be done. The other question is whether any new fees could affect the accessibility of development. Anyone, from mega-corporations to individuals can develop and publish on the App Store.
The biggest unknown is whether these changes to the developer policies would be restricted only to the EU. Would it be feasible for Apple to essentially ship a separate version of iOS and ipadOS or would it just have to accept this change worldwide as it did with USB-C or how EU Cookies protections simply became the norm? Furthermore, if Apple does restrict DMA changes to the EU, what would the legal and political ramifications be for Apple in other markets, especially here in the US? For a company so tightly controlled, the interjection of world governments into the company’s affairs has introduced a bit of chaos.
Final Word
Apple is a mature company with mature products, but this is the first time since the mid-to-late 90s that they’re not fully in control of their own destiny. What’s going to happen to the Apple Watch? What effects are government actions going to have on iMessage and the App Store? That’s not even including a brand-new OS and product category in visionOS and the Vision Pro headset. The only certainty here is that Apple is no longer operating in its own bubble. Success always means more scrutiny and over the last two decades there have been very few companies more successful than Apple. That’s the difference in Apple now vs the 1990s near collapse, the company has the structure to weather whatever the storm brings it.
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