When iPhone users want to edit blemishes out of their selfies, identify stars and constellations or simply join the latest video game craze, they turn to Apple Inc’s App Store, where any software application they buy also includes a 30 percent cut for Apple.
That commission is a key issue in a closely watched antitrust case that will reach the U.S. Supreme Court on Monday. The nine justices will hear arguments in Apple’s bid to escape damages in a lawsuit accusing it of breaking federal antitrust laws by monopolizing the market for iPhone apps and causing consumers to pay more than they should.
The outcome of this case could have far reaching consequences for Apple.
Let Apple have their app store as it is.
It’s hard to argue that they are causing consumers to pay more for apps than they should when Apple is the reason for 99¢ and $1.99 apps. That automatic photo retouching software probably would cost $20 on a PC if it wasn’t for App stores.
Monopolies aren’t inherently bad, nor are they illegal. Abusing a monopoly position is, though, and I’m not sure the argument that Apple is abusing their monopoly position is very strong, considering their App Store policies have remained fairly static long before they had anything resembling a monopoly position.
It’s even harder to argue that Apple has a monopoly position at all when phones with access to their App Store has just under 40% of the market, and virtually the entire rest of the smartphone market features the Google Play Store. In the App Store business, they’re the minority.
Edited 2018-11-27 02:17 UTC
Drumhellar,
Yea, the court could dismiss this case for that reason – I don’t know. But even if they’re only a duopoly or oligopoly, it would be just as devastating to the software industry to have all the top platforms deny them the right to sell their software independently, and I think there’s a significant risk of that happening in the coming years if companies are given the all clear to impose platform restrictions by the supreme court.
Apple simply doesn’t need or deserve to block competitors in order to be successful. I think a judgement forcing apple to compete on merit rather than using device restrictions would result in a better experience for most apple users. Apple could no longer take users for granted but would have to compete for them.
Edited 2018-11-27 03:41 UTC
They may be blocking app stores from the iPhone, but they aren’t blocking app stores from the larger smartphone market, and I am not at all convinced that the iPhone is a separate market from the greater smartphone market. And, unless a judge can be convinced that the iPhone should be treated separately from the greater smartphone market, it’ll be hard to make the case that they are stopping app stores from entering the greater smartphone market (In this regard, Google is the company that deserves much more scrutiny), especially since the somewhat more popular Android platform allows app stores.
The argument that it is bad for consumers doesn’t seem to hold water. There’s two things that are key for this argument – that nearly all consumers are hurt by their position, and, that there is no alternative.
I’m not at all convinced all consumers are hurt – there is certainly a reasonable enough argument that some consumers benefit from a locked down platform. And, it isn’t like consumers don’t have an alternative – Android phones are available, and more popular even. And, as I said above, I’m unwilling to entertain that the iPhone market should be considered separate from the greater smartphone market.
Drumhellar,
That is false, consumers can also be hurt by duopolies and oligopolies too.
Edited 2018-11-27 04:06 UTC
I didn’t realize there was such a disparity in app revenue. I still maintain my position, though, that Apple hasn’t reached the point where antitrust proceedings need to be considered.
Oh, absolutely. Every neighborhood in the US gets cable from two companies, which end up having similar business models and similarly terrible service, and US airlines all off similarly terrible service, using the same anti-consumer practices. You have a choice between companies, but not between different models of accessing internet or the air.
That isn’t quite the choice between Apple and Google, though. The iPhone is locked down, but Android has the capability to install any app store (phones often include one curated by their manufacturer), or bypass app stores altogether. It isn’t merely two different business, but two ways of facilitating app distribution.
Apple phones are outsold by rival phones and the Google App Store has more apps. Apple does not have either a monopoly share of the phone market or of the app market. The birth of the Apple App Store was actually instrumental in driving down software prices for consumers, prior to the Apple App Store the average price of software was much higher.
Apple makes far more money on its hardware sales than its competitors, even though it has a minority market share, and the Apple App Store delivers much more revenue to app developers than any competing app ecosystems, even though it has a minority market share, because Apple’s business model is superior.
Where is the monopoly effect?
There are two millions apps available in the Apple App Store. For any given function there are usually many, many different apps to choose from.
The prices of apps in the Apple App Store are very, very low, and many are free.
In what concrete way (note the word ‘concrete’) would any of this be improved if there were competing app stores?
All of the three arguments being irrelevant to the question asked of course (that’s question substitution btw, and it’s not appreciated in the context of an honest discussion). The actual question is whether the App Store being the only gate for the apps users can get in iOS (and Apple being the only toll-booth keeper of that only gate) affects the fees developers (and by extension users) pay to get an app in users’ hands (for the apps that do have a price anyway). I mean, in Android you can always sell your app in Amazon App Store or some other App Store that can choose charge a smaller fee.
Of course, Google’s pre-installation requirements make this harder (but not impossible like for the case of iOS), so an investigation was needed there too (and I am glad it actually happened, though belatedly). Now let’s see how the investigation into Apple fares.
Edited 2018-11-27 16:40 UTC
Tony Swash,
Erm, you didn’t read any of my posts, you need to ask about the oligopoly effects because that’s what best describes the mobile market today. Apple’s business model has created a race to the bottom where app developers ultimately sacrificed quality to get where we are now. Apple charges software developers ~$40B per year mostly for the privilege of allowing users to install their apps. That’s a very significant portion of apple’s income coming from software developers that they didn’t really deserve and wouldn’t have gotten under a more competitive free market for software. Like I said I wouldn’t mind if apple’s software business model was to compete entirely on merit with no manipulation/coercion. However relying on manufacturing restrictions into hardware to force users into their store at the expense of the free market is what’s wrong with apple’s business model for software.
Obviously it’s an easy cash cow that’s generated tons of wealth for apple for very little work, but it’s hurting the mobile software industry and threatens to hurt the general software industry as these owner restricting business models become normalized. And given their enormous profit potential, it’s a pretty safe bet that they will be pushed by corporations seeking ever more control over software markets.
Edited 2018-11-27 17:41 UTC
Thinking about this, and witnessing it, for years, I would say monopolies are inherently bad, because size (actual, and proportional) matters. Anything done by a monopoly is magnified non-linearly, not linearly or remains a constant, as people assume.
Any small action (with no corresponding opposite reaction) by a monopoly is always magnified to an extent that distorts the “market” at levels that is indistinguishable from abuse. Intent no longer matters if the end effect is the same.
The reason? Money is non-linear. The more money an entity has, the less effort an entity needs to use that money to create more money.
Why didn’t I hear about this case sooner? Users actually won in a lower court? That’s huge news to me!
Apple’s deliberately conflating things, and I really hope the supreme court stands up these kinds of market abuses because courts are ultimately the last stand against market abuses. There’s no higher authority to force corporations to be fair.
The threat of more rounds of antitrust lawsuits has really tempered microsoft in the last decade, but if apple (and by extension other tech giants though case law) are given the green light to block competition using platform lockouts, it will mark the beginning of the end for independent software development as we know it. The health and viability of the software industry depends on the rights of software developers to distribute their software unimpeded and the rights of owners to buy it unimpeded!
Serious question… Is your objection to their monopoly on the app store a product of simply wanting price competition, or do you want to see a competing app store implement different/more lenient policies regarding what apps can and cannot do (i.e. by allowing apps that would violate current Apple policies)? I’m assuming both…
I’ll be honest… Over the years I have grown to appreciate the limitations Apple has placed on developers as to what is acceptable in regards to what apps can and cannot do. Yes, it is limiting your freedom to do what you want with your device, but it has significant benefits with regards to device security and platform stability, and it goes a long way to protect users from rogue developers. In short, while I don’t really “like” it, I have come to accept and even appreciate that most of their seemingly draconian policies (not all, but most) are necessary to keep the platform safe for problem free for most users. I’ve seen first hand what happens to Android devices when users tick the “allow apps from unknown sources” and I’d rather not go through that again…
I believe users should have the option of running whatever they want on their devices, but I also believe most users don’t really understand what the risks are in doing that. Personally, I wouldn’t install an app from a 3rd party app store on my iPhone unless it enforced the same policies as Apple does (well, most of them anyway).
I have a developer account. If I want to run an app that isn’t allowed in the app store (like Kodi for example) I currently just build it myself. It is a pita, but Kodi is the only app I can think of that I actually trust to run on my device that isn’t in the app store because of Apple policy (in this particular case unfairly imo)…
That said, I wouldn’t mind seeing some competition either. I just worry about what it would do to the stability of the platform in the long run…
Edited 2018-11-27 06:35 UTC
galvanash,
Well, my thinking is closer to what kwan_e said: the concentration of power is wrong in and of itself because it ends up distorting meritocracy. Just like he said, it’s not linear. When leaders, who already have huge economic & business advantages, also get the ability to deny competitors access to the market, it completely breaks the tenets of a free market. We saw this with the robber barons over a century ago (ie carnegie locking competitors out of critical markets), and we’re seeing a resurgence of this today in the digital domain.
IMHO the best way to understand why this is so bad is to consider the industry in terms of “the tragedy of the commons”. When deciding if a policy like giving manufacturers the right to lock out competing software channels is good or not for an industry, it’s not sufficient to consider the ramifications for one single corporation to do it because soon other manufacturers will feel the economic pressure (and case law will give them entitlement) to do the same thing as the first.
Allowing manufactures in aggregate to limit software developer’s access to customers (and visa versa) is extremely short sighted. If we don’t act to stop the corporations that are actively killing competing channels today, they will continue to take more control away from competitors until their control over us is practically absolute. Some people don’t want to let go of the sentiment that apple is the innocent underdog company is was 20 years ago, but the corporation today has indoctrinated the very notions of market control that apple once protested (microsoft and ibm).
To be fair, I don’t think apple’s ambitions are any worse than ibm’s were in the past, however increasingly effective advances in cryptographic technology and DRM makes the ambitions of control far more dangerous to us now than it’s ever been in the past. If we (or more succinctly our courts) allow corporations to freely employ cryptographic lockouts against users and developers, it will cause long term damages to software industries. Some of you may object to my arguments because these things haven’t completely played out yet, but as in chess, these events will become harder and harder to avoid if we don’t take steps to stop it now. I’m afraid that most will just ignore this warning, but the truth is that the future viability of open computing 10-20 years from now is totally dependent on what we choose today, if too many of us take our computing freedoms for granted, then we will loose them and only a privileged few will remain free from corporate control.
Edited 2018-11-27 09:40 UTC
Like http://www.osnews.com/comments/29863 ?
Not just for Apple, it will have consequences for the whole industry. I hate this app distribution model where you cannot install your own apps in a device you own.
This started with game consoles, where the measure was explained away by the fact game console manufacturers sometimes sell the device at a loss or at no margin and expect to make a profit on software sales. It was still a bait and switch move, but with devices like Apple which are sold at fat margins it’s just unacceptable for this distribution model to be considered “normal”.
Soon it will be considered “normal” PCs (Metro comes to mind). Since Wine would’t be possible if this model became the norm, any self-respecting computer user should object to it.
I hope something good comes out of the court decision.
Edited 2018-11-27 10:11 UTC
kurkosdr,
I can’t upvote you, but I think you’re right on all counts. The reason these changes don’t register for many people is the long time scales involved, yet inevitably the momentum is never yielding in one direction: fewer rights and less control for owners and more control in the hands of powerful corporations. The loss of rights is not a one time event caused by any single company, but a sustained pattern of incremental loss over many product cycles that end up normalizing corporate control over what consumers are allowed to do with the hardware they own.
Edited 2018-11-27 15:20 UTC
It’s more of a case “Here is an appliance with a screen, it even does Facebook, Netflix and YouTube” and that’s as far people care.
For some reason, most people I talk to honestly believe tech companies are always going to be good citizens and won’t abuse any power given to them. It’s the same reason people buy iTunes songs instead of MP3s on Amazon, they think the iTunes authentication servers will always be up because they paid for these tunes and Apple will honour the moral obligation to keep their authentication servers online, and also think that Apple will never pull a fast one and discontinue existing OS support.
I mean, I own Origin games and Play Store games, but at least I am aware of the power yielded to the tech companies that own these products, and try to avoid doing that where possible.
Edited 2018-11-27 15:36 UTC
kurkosdr,
Yeah, there’s a lot of naivety too. That certainly contributes to corporations being able to normalize owner restrictions. There are many of us who should know better, but downplay the significance because it’s not effecting them in the moment without considering the long term effects of allowing owner restrictions to become the norm.
Measures to ~control by manufacturer the market for software for their console was also partly in response to US video game crash of 83 …and who knows, we might be ultimately heading for another, with average quality of software in the appstores plummeting.
The Fortnite example shows that it could be more a developer fee.
I don’t know, but if you get Fortnite for Android do you as a player get to pay LESS than an IOS player?
Is Epic now getting that 30% benefit from not using the Play store, or do they simply not tack on the “Google User Fee”?
I know some apps on IOS have off site subscription services. Are they cheaper than the IOS version?
Are there any apps on the Mac app store that charge less if you buy them direct? Or is it a mix?
Obviously we’re all familiar with the “Buy direct, and SAVE!” tag lines from all sorts of producers.
Is it an accounting game on how Apple collects the fee? As in rather than simply sending the vendor $1000 and an invoice for $300, they collect the $300 up front. If Apple invoiced the company for the fees, then it would clearly be a developer fee.
Also, hasn’t Apple changed the rates for some items? Were there stories about them giving lower rates to SOME providers (I think there’s a bump for subscription content)?