Elon Musk may be luring Apple into a fight with Republicans
Tim Cook walks in the Paddock prior to the F1 Grand Prix of USA at Circuit of The Americas on October 23, 2022 in Austin, Texas.
Jared C. Tilton | Getty Images
Apple has remained a sleeping bear in the face of Musk’s provocations. It has not commented, nor has CEO Tim Cook, and while its app review moderation staffers may be talking to Twitter behind the scenes over questionable content, Apple hasn’t pulled the app. In fact, Twitter got an update through app review last week.
Twitter is not that important to Apple from a business perspective. It’s just one of a vast number of apps on the App Store, and it isn’t a huge moneymaker for Apple through in-app purchases.
But on Tuesday, Florida Gov. Ron DeSantis and Ohio Senator-elect J.D. Vance, both Republicans, made remarks about Apple’s situation that show how Musk could put Apple in a tough spot.
Here’s one way it could go:
- Musk makes a change to Twitter in order to bypass Apple’s 30% fees, such as allowing users to plug their credit cards in to the app to subscribe to Twitter Blue or other new features.
- Apple pulls the app because of these violations.
- Musk frames the dispute with Apple as an issue over free speech and content moderation, and Republican politicians agree.
- Apple gets caught up in a nationwide debate over free speech and monopoly power focusing on its App Store.
How things could play out
On Tuesday, DeSantis said at a press conference that if Apple were to kick Twitter off, it would show that Apple has monopolistic power and that Congress should look into it. DeSantis framed it as an issue of free speech — many conservatives believe that social networks, including Twitter, generally discriminate against conservative viewpoints.
“You also hear reports Apple is threatening to remove Twitter from the App Store because Elon Musk is actually opening it up for free speech, and is restoring a lot of accounts that were unfairly and illegitimately suspended for putting out accurate information about Covid,” DeSantis said.
“If Apple responds to that by nuking them from the app store, I think that would be a huge, huge mistake, and it would be a really raw exercise of monopolistic power,” he continued.
Vance framed the situation similarly in a tweet, saying that if Apple pulled Twitter, “This would be the most raw exercise of monopoly power in a century, and no civilized country should allow it.”
In fact, Apple’s app review department is unlikely to pull Twitter over content. While Apple regularly bans apps over questionable content, they are rarely big brand names such as Twitter — they’re usually smaller, lesser-known apps. Apple’s rules for apps with significant user-generated content, such as Twitter, focus less on specific kinds of infringing content and more on whether the app has a content filtering system or content moderation procedures. Twitter has both, although Musk’s recent cuts to Twitter’s staff could hurt its ability to flag problem posts.
But Apple would be much more likely to pull the Twitter app if Twitter tries to cut Apple out of its platform fees.
It’s happened before. In 2020, Fortnite added a system inside its iPhone app that allowed users to buy in-game coins directly from Epic Games, cutting out the 30% of sales that Apple typically takes. Apple removed Fortnite from the App Store the same day. The episode kicked off a legal battle, which Apple won on most counts but is currently in appeals.
Google takes a similar cut for Android apps sold through its Play Store but also allows other Android app stores to exist and allows people to “sideload” apps directly onto their phones, while Apple has an exclusive lock on all iPhone app distribution.
Musk has good business reasons to pick this fight.
In particular, Musk wants Twitter to make much more money from direct subscriptions and not advertising. But Apple’s 30% cut of purchases made inside apps is a major hurdle for a company that is slashing costs and has a significant debt load.
So Musk could pull an Epic Games move and enable direct billing, spurring Apple to take action, while at the same time framing the debate around free speech. If that happened, as DeSantis suggested, perhaps Congress would start asking questions. Apple would become a football in political debates. Executives could be forced to testify or provide written responses.
At the very least, you’d have lawmakers such as Vance using the words “monopoly” and “Apple” in the same sentence. That’s a risk to Apple’s brand. Debate over these topics could reenergize pending regulation such as the Open Markets Act which threatens its control over the App Store and its significant profits.
The last time Apple pulled an app that was popular with conservatives for lack of content moderation was Parler in January 2021. It was restored in April.
In the interim, Apple faced official inquiries from Republican Sens. Ken Buck and Mike Lee about why Parler was removed from the App Store. Cook appeared on Fox News to defend the company’s decision.
Twitter is a significantly more important and well-known social network than Parler was and would grab more attention.
It’s probably most valuable for Apple if Twitter remains on the platform. The controversy-averse iPhone maker would probably like this whole Elon Musk narrative to go away.
Indeed, it could play out this way: Apple remains silent, working with Twitter behind the scenes on its app, and Musk tweets about the 30% cut when it irks him. Nothing really changes.
But Musk is unpredictable, and if he does really want to “go to war” over 30% fees, Apple could be forced into a tough spot.
Apple and Twitter did not immediately respond to requests for comment.
Brendan McDermid | Reuters
Amazon will start charging delivery fees for Fresh grocery orders that are less than $150, in a move it said will help keep prices low on its services.
Beginning Feb. 28, Prime members who want home delivery from Amazon Fresh will incur a $9.95 delivery fee for orders under $50, while orders between $50 and $100 will include a $6.95 delivery fee, and orders between $100 and $150 will carry a $3.95 delivery fee, the company said in a note to customers viewed by CNBC. Only Prime members can use the delivery service, although anybody can shop at an Amazon Fresh grocery store.
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Amazon previously guaranteed members of its $139-a-year Prime service free delivery on Fresh orders over $35.
“This service fee will help keep prices low in our online and physical grocery stores as we better cover grocery delivery costs and continue to enable offering a consistent, fast, and high-quality delivery experience,” the notice stated.
The move comes as Amazon CEO Andy Jassy has embarked on a wide-ranging review of the company’s expenses amid slowing sales and a worsening economic outlook. Amazon has eyed laying off 18,000 employees, frozen hiring in its corporate workforce, and paused or canceled some projects such as a sidewalk robot and a telehealth service.
Amazon has previously recalibrated its approach to online grocery deliveries, a business that is notoriously challenging from a cost and efficiency perspective. In 2021, Amazon added a $10 service fee for Whole Foods delivery orders to Prime members, after previously offering them for no extra charge.
WATCH: How Whole Foods has changed in the five years since Amazon took over
Tesla CEO Elon Musk smiles as he addresses guests at the Offshore Northern Seas 2022 (ONS) meeting in Stavanger, Norway on August 29, 2022.
Carina Johansen | AFP | Getty Images
Tesla shares surged 33% this week, marking their best weekly performance since May 2013 and second best on record.
The stock rose 11% on Friday to close at $177.88. The rebound followed a six-month period in which Tesla shares had declined more than 40%. The stock’s 65% plunge in 2022 was its worst in Tesla’s 12-plus years as a public company.
Tesla’s rally this week was aided by an upbeat fourth-quarter earnings report. During the call with shareholders and analysts, CEO Elon Musk said the company was on target to potentially produce 2 million vehicles in 2023, and he suggested demand would support sales of those cars as well.
Official guidance called for production of 1.8 million vehicles this year. The company has not revised its longstanding target for 50% compound annual growth rate over a multi-year horizon.
Tesla’s five day performance charted against Rivian and Ford Motor Company.
Tesla beat on both the top and the bottom lines, recording total revenue of $24.32 billion, including $324 million of deferred revenue related to Tesla’s driver assistance systems. The company cut prices for its cars dramatically in December and January, leading to concern about demand and a buildup of inventory.
Analyst reaction to Tesla’s numbers was mixed.
“For bulls, the growth story is alive and well,” Bernstein’s Toni Sacconaghi, who has an underperform rating on the stock, wrote in a note on Thursday. “For bears, the numbers don’t lie.”
In early January, Tesla reported fourth-quarter vehicle deliveries and production that fell shy of expectations.
Tesla’s stock jump came amid a broader market rally. The S&P 500 was up 2.2% for the week and the Nasdaq gained 4.3%.
Other U.S.-based electric vehicle makers saw their shares climb higher. Rivian rose 22% during the week, while shares in legacy automakers Ford and General Motors each gained more than 7%.
Rival electric car manufacturer Lucid spiked on Friday as well, rising 43% on reports of rumors that Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, intended to take the company private.
Some of Tesla’s underperformance last year was attributed to Musk’s shift of focus to Twitter, which he acquired for $44 billion in October. Under Musk’s leadership, Twitter has experienced mass layoffs and fleeing advertisers, gutting morale.
Tesla remains the second most-shorted stock in U.S. markets, behind only Apple, meaning that a large numbers of investors are betting on a decline. Over 94 million of the automaker’s shares are shorted, according to data from S3 Partners.
Despite the rally, active short selling continues, S3 managing director Ihor Dusaniwsky told CNBC. Short sellers view Tesla’s appreciation as having created “an overheated and overbought stock that is due for at least a short-term reversal,” he said. In the last week, S3 Partners said it’s seen a 3.9% increase in total shares shorted, while investors shorting the stock lost $4.3 billion over that stretch.
U.S. House Republican leader Kevin McCarthy (R-CA) talks to reporters as he arrives on the first day of the new Congress at the U.S. Capitol in Washington, January 3, 2023.
Evelyn Hockstein | Reuters
Twitter CEO Elon Musk discussed how to make the social media site “fair on all sides” in a meeting with House Speaker Kevin McCarthy, R-Calif., the lawmaker told reporters on Friday.
“He wants to have a level playing field” and for everybody to have a voice, McCarthy said of the meeting in remarks reported by NBC News. “He’s really defending the First Amendment. And we had a really good discussion.”
Musk shared on Twitter Thursday evening that he had met with McCarthy and Minority Leader Hakeem Jeffries, D-N.Y., “to discuss ensuring that this platform is fair to both.” On Thursday, McCarthy only shared that Musk came to wish him a happy birthday.
On Friday, McCarthy also confirmed that Jeffries was in the Thursday meeting and that he had not previously met Musk.
An aide to Jeffries told The Washington Post his encounter with Musk was only coincidental and happened as Musk was leaving his meeting with McCarthy. Jeffries’ office confirmed the Washington Post anecdote to CNBC.
McCarthy also confirmed to reporters on Friday that he had convened a meeting in his office that day with Musk and several top Republicans: Majority Leader Steve Scalise R-La., Judiciary Committee Chair Jim Jordan, R-Ohio, Oversight Committee Chair James Comer, R-Ky., and Energy and Commerce Committee Chair Cathy McMorris Rodgers, R-Wash.
McCarthy said he wanted to “continue to have that discussion” of fairness on tech platforms with the other lawmakers as they seek to move legislation and make sure “American has an even voice,” NBC News reported.
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