The walls of Apple’s garden are tumbling down

I was sitting in a suburban Cincinnati Starbucks when I realized everything was going to change.

It was early 2008, and a friend was showing me his new phone. He loaded a website and passed his iPhone across the table, and I scrolled down the page. It was slow and clunky, but it was real. “There it is,” he said. “The internet on my phone.” 

It was like seeing the moment that something fragile falls out of your hands. You know it’s going to be everywhere, but for a second, it isn’t. And everything did change, though not all at once. In the early days, the iPhone was powerful — exciting even — but not dominant. I carried a work-issued Blackberry Curve well into 2012. People had a lot of different phones back then, actually; Nokias, Motorolas, HTCs, Palms. But over time, they were seemingly replaced one by one in the hands of everyone I knew, all with the same device: the iPhone.

I didn’t cover smartphones then, but even just being adjacent to mobile tech, I could feel that the energy around a new iPhone launch was different. Normal people were aware of them, making them very different from the camera launch events I was covering. And they truly felt like events, something that made everyone stop and take notice. They reverberated across the country — from Cupertino all the way to suburban Cincinnati. 

But over the years, the vibe slowly shifted. Last fall, coming off an intense couple weeks of testing the iPhone 15 Pro, I stopped by my wireless carrier’s local store. A sales associate and I chatted as he swapped my eSIM back to a physical SIM card. “What do you think of the new iPhones?” I asked. They were on the store shelves and had only gone on sale a few days ago. “Eh,” he said, “they’re phones.”

As much as Apple would like us to think otherwise, this is where we are: iPhones are just phones. To most people — even to someone who spends all day selling them — they’re just a tool, and getting a new one feels like an inevitability, not an event. Something about as exciting as upgrading your washing machine. 

Phones have assumed a more appliance-like position in our consciousness; that much was inevitable. That’s not necessarily a problem for us, the consumers, but that’s definitely a problem for Apple. Despite its efforts to diversify over the years, it is still a company whose massive fortunes largely rest on one humble product: the iPhone. Apple has a vested interest in keeping us believing that the brand name on your phone matters.

Apple’s answer has been to build the walls of its garden higher and higher, making sure customers use its own products and nothing else. Now, those walls are threatening to come tumbling down.

We’re a long way from the “wow” moment of that first iPhone. It’s not all vibes, either. According to IDC, smartphone sales shrunk six out of the last seven years. The firm attributes some of that slump to improved device durability. Just about every flagship phone sold in the past few years, Apple’s lineup included, has offered full water resistance, meaning they’ll survive a brief dip in a body of fresh water. My 2016 iPhone SE did not survive such a fate.

IDC also points at something that’s a little harder to pin down: a “lengthened replacement cycle.” This is where we get into vibes territory: it just doesn’t feel as urgent to replace your smartphone every few years as it used to. In the real early days, lots of things about a smartphone were just bad. Battery life wasn’t great. Cameras were bad. Processors would chug, and console-quality mobile gaming was a distant vision. But all those things have gotten much better and increasingly irrelevant in the better part of the past decade.

Apple consistently ranks as one of the top three companies by revenue in the US, but it is the only company on those lists that makes most of its money from one very specific business: making and selling phones. When the smartphone market is in decline, Apple feels it in a way that Amazon and Walmart don’t.

So it’s been doing the logical thing for years, which is finding other ways to make money, and it’s been largely successful, particularly as it added the App Store and services like Apple Music. But its fortunes still rest disproportionately on iPhone sales: in Apple’s 2024 Q1 financials, it reports net sales of $119.6 billion in the three months prior to December 30th, 2023, with $69.7 billion attributed to the iPhone. Services — the second-highest business segment — contributed only $23 billion.

Early in its life, the iPhone gained a reputation as a platform that perfected new concepts rather than pioneered them. It wasn’t the first to implement face unlock, high-refresh-rate screens, or telephoto cameras, but it could be relied on to implement new-ish technologies with the edges roughed out (well, usually). But as Apple amassed a pile of proprietary features and services in its walled garden — the App Store, iMessage, FaceTime, Apple Wallet, to name a few — and its dominance in the US grew, one thing became clear: the company had no interest in letting anything in that might threaten its position.

As those products took off, Apple deployed some defensive moves. Take iMessage: it launched in 2011 and reached 140 million users by 2012. In 2013, there was clearly an appetite for cross-platform compatibility. The benefits were obvious — seamless communication rather than a confusing mix of green and blue bubbles, SMS and not. And it wasn’t just a matter of Android users wanting in; keeping Android users out gives iOS users an objectively worse and less secure experience. Apple executive Eddy Cue pushed for an Android iMessage app in 2016, but Craig Federighi responded in an internal email that “iMessage on Android would simply serve to remove an obstacle to iPhone families giving their kids Android phones.” 

And Tim Cook, famously, thinks you should “buy your Mom an iPhone” if you want to use iMessage with her. 

We can see the same strategy at work across the ecosystem — from FaceTime to watches, you’ll find a lot of friction if you try to take an Apple product outside of the garden. But while we can speculate about Apple’s motivations for peripherals and services, when it comes to iMessage, there’s no mystery at all: Apple kept it locked down for a decade to keep iOS users locked in. Executives at the company have said as much, both internally and out loud. 

Customer lock-in is only part of the equation — there’s also the platform itself and the people who develop for it. Unsurprisingly, Apple has also maintained a death grip of control over the app store since its inception, placing strict limitations on developers making apps for the platform and building it into a revenue-generating machine for the company.

The app store launched in 2008 with a key policy in place: Apple would get a 30 percent commission on every app sold. Later, when the company added in-app purchases, it would require developers to use Apple’s own payment processing — with the same 30 percent cut applied to every transaction. Over the years, the app store ballooned — from its initial 500 apps to “thousands” at the end of 2008 to its present-day total of 1.8 million. And in 2020 alone, it brought Apple more than $60 billion in revenue.

As the App Store grew, Apple’s strict controlling measures came under more and more criticism. Developers complained that the company’s app review process — deciding which apps get to go into the App Store and which don’t — was opaque and unfair. Complaints about the company’s 30 percent cut on purchases led Apple to drop its fee down to 15 percent on subscriptions after the first year. And smaller developers struggled to find a business model that worked between Apple’s commission fees and strict guidelines over how and when it could charge customers for their product.

By 2016, Apple was taking a much more reactive stance than in the early days — introducing policy changes more frequently and usually in response to criticism. 

The result has been a patchy and confusing network of fixes. Certain types of apps were disallowed and then quietly re-allowed. App store policies made it difficult for services like Kindle and Netflix to exist on iOS since they let users access subscription content purchased outside of those apps. So Apple carved out an exception for these apps, but controversy ensued when an email app maker tried to apply the classification to its app. Apple’s strategy is starting to look a lot more like defense than offense. 

The tactics are different, but Apple’s situation now smacks of Microsoft’s in the ’90s. Back then, Microsoft was the dominant force in the PC market and made every effort to keep it that way by placing restrictions on Windows. Netscape emerged as a threat to Windows’ dominance, so Microsoft cut off its air supply by giving away its own web browser for free with Windows. Microsoft recognized that Java could make porting software from Windows to other systems easier, so it sabotaged Sun’s efforts and instructed its allies not to aid the company.

But you can only play whack-a-mole with the competition — or push back the barbarians at the gate — for so long.

Apple’s reckoning started in the courtroom. In 2020, Epic sued Apple and Google over their app store practices — specifically, the 30 percent commission that Apple helped establish as an industry standard. The court ruled in favor of Epic, but Apple was ordered to let app makers direct users to payment methods outside of those offered by Apple. Then, in 2022, the European Union introduced legislation trying to reign in the power of big tech companies, Apple included. Apple responded to the pressure by promising to support RCS on the iPhone — a standard that updates the relatively ancient SMS/MMS protocol and includes more iMessage-like features. 

The other shoe fell last month when the US Department of Justice filed an antitrust lawsuit against Apple for operating an illegal monopoly in the smartphone market. The legal process is just starting, and when it eventually happens, the trial seems likely to drag on for years into the future. The DOJ’s antitrust case against Microsoft was introduced in 1998; appeals stretched into 2007.

Apple has already started implementing changes as a result of the new EU policies: adding a new app store commission structure, enabling third-party app stores, and creating a choice screen for users to pick their preferred web browser. But that’s unlikely to be the end of it — app developers aren’t happy with the company’s “malicious compliance” to new rules under the DMA, and European regulators are investigating Apple’s response. 

One new law or antitrust case might not be enough to bring down the garden walls, but for Apple, the past five years have amounted to an enormous pressure buildup — and it’s not stopping. Apple could have had more control over its destiny by opening up its services earlier, but it didn’t. Now, it’s being forced to react to regulation, creating different rules for iOS in different regions of the world. It’s hard to run a visionary, future-forward company with lawsuits and regulators as a constant distraction — just ask Bill Gates.

In the years that followed my first glimpse of the iPhone, I’ve used more phones than I could possibly recall or count. And over the years, I’ve seen them get faster, more reliable, and harder to distinguish from one another. A new technology can’t wow us forever; eventually, it’s everywhere. History has shown us that one company can only claim dominance over that technology for so long — and the bigger it gets, the more energy it takes to maintain it.

A little daylight is creeping into the walled garden now, and I’ll bet there are even brighter days ahead of us.