Subscription scandal reveals the dark side of Apple’s pivot to services
Macworld ·
Macworld Apple scandals usually revolve around a piece of hardware failing to do what it’s supposed to do: a phone, for instance, that loses connection, or bends in the pocket, or breaks when used normally . So the latest controversy is at least refreshingly different, in that hardware is barely involved at all. For a couple of weeks now the consumer rights advocate Louis Rossman has been reporting on allegations of malpractice in Apple stores. (You can catch the gist in his latest video on the topic, while a fuller exploration is given in this earlier video .) It’s alleged, specifically, that multiple retail employees in multiple stores have signed up customers to auto-renewing subscription services without obtaining fully informed consent. And worse, that an employee performance metric put in place by Apple management incentivized them to do so. Apple stores have a system called Connect and Personalize, under which purchasers of a new iPhone, iPad, or Mac scan a QR code to receive a tutorial from a retail employee. This process temporarily unlocks the customer’s account and payment information and shows the employee any free subscription trials for which the customer is eligible. Look, they will then say, you can get three months of Apple One (for example) for free; tap here to start your trial. Like most services companies, Apple offers free trials not out of a sense of altruism but in the hopes that customers will carry on using the service after the trial ends. They are free to start with, then they auto-renew after a certain amount of time and the customer begins to pay. But whistleblowers claim the auto-renewal part of the deal was not always made clear to customers. Some employees implied that the trials were simply a gift with no strings; others, it is alleged, tapped Accept on their own device and didn’t get consent at all. Needless to say these are very serious allegations. We have contacted Apple for comment and will update this article to include the company’s response if we receive one. While reports claim the practice is or has been relatively widespread (one tipster told Rossman that they had “confirmed with others that this happens at other stores” and that “many employees [have] admit[ted] to me that they do this”), one defense Apple could offer is that these were rogue employees taking matters into their own hands. That it wasn’t company policy to have employees behave in this way, and that company management is indeed aghast to hear about such goings-on. But the issue with that defense is that the problem appears to be systemic. Not explicitly, and perhaps not intentionally, but indirectly as a result of employee incentives. Apple, again like other companies, tracks the performance of its retail employees. Until recently, one metric by which performance was graded was called “services attach rate:” the percentage of device purchasers assisted by the employee who signed up for a subscription service. It’s been reported that employees in at least some stores were set a target of 40 percent. If you help 10 people buy iPads, you should make sure at least four of them sign up to something at the same time. It isn’t clear what action was taken (or threatened) against employees who failed to meet this target, or whether there was a reward for those who did. But targets affect behavior even in the absence of explicit punishments and rewards. The mere existence of that 40 percent figure tells employees that the company values that specific form of success, and heavily implies that success or failure by this metric will be one of the factors used to determine promotions, redundancies, pay raises, and bonuses. It would be surreally naive to imagine that putting in place a target of this nature wouldn’t encourage employees to hard-sell signups and, in at least a few cases across an organization with more than 100,000 retail staff, bend the rules regarding informed consent. Apple stopped tracking services attach rate shortly after Rossman’s reporting was published. This might be taken as a tacit acknowledgement that the metric was a bad idea with the potential to incentivise unethical behavior, but Apple claims it’s actually just a coincidence; the company told MacRumors the metric is simply “less relevant during the holiday season.” If that is truly the case, no doubt the metric will be reinstated in the new year. The company has also reportedly sent internal memos to retail stores reminding employees to make sure they obtain informed consent before signing up customers to subscription trials, and to ensure its customers, not the employees themselves, tapping the buttons. Again, this may or may not be a coincidence. Stores hire lots of new staff for the holiday season. Maybe it’s just a reminder for the newbies. But the timing is striking, to say the least. Abuse the user: The dark side of services Apple’s relentless march into services was one of the great successes of the Tim Cook era. Overly dependent on the iPhone and trying to plan for the eventual decline of the smartphone market, the company pivoted: instead of just selling hardware, it would focus more and more on selling subscription services to people who own the hardware. This leads to steadier, more predictable recurring revenue and (assuming you own the services content, which Apple does wherever possible) effortless scalability. Building six million iPhone Duos is very difficult and expensive. Making one motor-racing movie is quite difficult and expensive, but distributing it to six million people barely increases your costs at all. At first glance it looks like a business model that’s all upside. Services certainly have their advantages, and they’ve helped put Apple in a spectacularly strong financial position: this category brought in $30 billion of revenue in the last quarter alone. But selling subscriptions is a murkier business than selling one-off hardware purchases, because there’s more of a disconnect between the best outcomes for buyer and seller. Selling hardware is essentially a collaborative effort, where both seller and buyer want the same thing: for the buyer to be pleased about the quality of the product and then buy the next model a year or two down the line. Sure, it’s a bit more complicated than that. We could talk about planned obsolescence, and unscrupulous retail employees encouraging people to buy a more powerful model than they need–although in both cases, short-term gain for the seller would come at the risk of long-term loss of user goodwill. In any case, because it’s a single purchase, the dynamic is relatively simple. But when you switch to services, the best outcomes become radically decoupled. When it comes to streaming, for example, it’s clearly in the best interests of the customer to shop around, unsubscribe regularly, take a month of Netflix here and a month of Apple TV there. But it’s in the streamer’s interest for you to sign up and forget about it, like a gym owner who loses interest in your fitness journey the second you join. This is why whole seasons being dumped at once (which is good for the user) has largely been replaced by weekly drops, which is better for the streaming company. If you pay for an iCloud+ subscription, similarly, your hope is that the storage allocation will prove adequate for your needs. Apple would much rather have your needs subtly increase, pushing you up to the next tier. If you pay for Apple Music, the company would ideally like for sharing to be a problem so you have to pay for the Family plan. Apple hasn’t yet put ads in these services, but (based on past behavior ) it’s plausible that at some point it will follow the lead of Netflix and others and make the cheapest tier of TV+, Music, and Fitness+ ad-supported, thereby ensuring additional revenue while pushing customers to pay more for a higher tier. Services, in short, reward companies which deliver a user-hostile experience. An opportunity to be better Apple has been making and selling tech hardware for 50 years; Apple Music didn’t open until 2015. So, when it comes to services, the company has had far less of a chance to forge an identity. This, then, is an opportunity. Just as it did in desktops, laptops, music players and smartphones, Apple can establish itself as the services company that’s different. The one that begins with the idea of a great user experience and then extrapolates from that, rather than just doing whatever scrapes the most data or boosts engagement or increases short-term revenue. Goodness knows there’s plenty of public discontent with the practices of streaming companies. There are swathes of streamers out there crying out for a provider which doesn’t constantly put up prices, deluge the user with unskippable adverts, remove content without warning, and cancel shows without giving them a chance. That could be Apple. It could also be the one company which doesn’t get flack for making it easy to sign up to a subscription and incredibly hard to end one. Instead, many customers’ first experience with Apple as a services company is going into a store, paying a small fortune for a product, and then getting pushed into signing up to a subscription they don’t want or need. As first impressions go, it’s hard to think of a worse one. Be better, Apple.