Yesterday the Supreme Court ruled that iPhone owners can pursue lawsuits with Apple over antitrust behavior regarding the App Store. This case will be closely watched but ultimately may force Apple to make some changes to the App Store developers have been hoping for.
Before digging deeper into this specific issue, I had written last month about concerns I had that US companies were in danger of FTC lawsuits, or other in the case, around antitrust. We live in an era of tech conglomerates, and that is not going to change anytime soon. While it is true, the biggest companies today have most of the power, that does not always mean they are monopolies employing anti-competitive behavior. That being said, one of the biggest themes in tech over the next few years will be regulation of the tech conglomerates, and we can imagine they will take many shots from agencies and governments.
The App Store Value
As I wrote earlier in the year, Apple charging a fee for helping developers build apps, find customers, and make money is not an idea anyone would disagree with. The question is how much is the marketplace worth. Apple is making the case that 30% is fair, with subscriptions going to 15% after the first year. Apple offers a lot in this scenario from security, privacy, management, payment and refund processing, marketing, and many other benefits. Deep within this debate is the question I have asked before, what is the value of a marketplace?
Some developers in my Twitter stream were commenting that sideloading apps may be a workaround for Apple. I strongly doubt this is a reasonable solution and I think this brief Twitter thread from Benedict Evans is apt.
The points Benedict make seem to be echoed in some of Apple’s formal response to the Supreme Court decision:
“Today’s decision means plaintiffs can proceed with their case in District Court. We’re confident we will prevail when the facts are presented and that the App Store is not a monopoly by any metric.
We’re proud to have created the safest, most secure and trusted platform for customers and a great business opportunity for all developers around the world. Developers set the price they want to charge for their app and Apple has no role in that. The vast majority of apps on the App Store are free, and Apple gets nothing from them. The only instance where Apple shares in revenue is if the developer chooses to sell digital services through the App Store.
Developers have a number of platforms to choose from to deliver their software — from other apps stores to Smart TVs to gaming consoles — and we work hard every day to make our store the best, safest and most competitive in the world.”
Note the keywords as value statements from Apple. I added bold to safest, most secure, and trusted platform to emphasize what is very difficult to do in what is often a Wild Wild West of app stores, or the idea of sideloading apps. There is superior user experience, and guarantees of safety when this marketplace is controlled and curated. It is the reason the App Store is so successful in the first place.
If sideloading apps isn’t the answer, and it isn’t, what other possible alternatives could exist if things should not go Apple’s way with the lawsuit. Noted Apple blogger and app developer Marco Arment had a quick take worth considering.
The idea that sticks out to me is alternative payments that don’t go through Apple’s system. There are positives to this argument, but it is worth exploring why a move like this would not make sense for many independent developers.
This argument is not that different from the one Amazon has made, or Netflix as they take their transactions outside of the Apple ecosystem. Some companies are big enough, and already have the infrastructure to handle commerce on their own. For those companies, the idea of a 30% fee is a hard pill to swallow. Especially, when they are already big to establish brands. Other developers of different sizes have tried similar approaches where you download their app but to purchase their service you go to the developer’s website, make the payment, then enter a code on the app to unlock the services.
What is interesting in this scenario is a statement that goes back to one Apple made regarding trust. In the above scenario when I mentioned how Amazon and Netflix handle these transactions outside the App Store, it is easier for consumers to go this route with these brands. Generally, these companies are already known and trusted entities. Consumers are likely to have that built-in trust. But for other smaller companies or developers, how can consumers trust is the weather app they are interested in wants them to go make a transaction at the developer’s website that the developer isn’t going to sell their information? It’s a risk that Apple is mitigating by maintaining a trusted transaction between the consumer and the app developer.
In a response to Marco Arment, a good question was raised about how can Apple compete against a developer offering a lower price option inside the App Store. His point was Apple would have to compete on the merit of services added value to keep the transaction on their system.
They could actually compete.
Apple’s IAP system would still be the easiest for most users, and easy payments equal more purchases.
They’d have to earn their 30% on their merits, or reduce it to a percentage that’s more commensurate with the value they’re providing. https://t.co/jiW0ywGGYM
— Marco Arment (@marcoarment) May 13, 2019
His point, to a degree, may still only limit Apple’s value to transaction and merchant but perhaps Apple can do more still to make their additional value more clear to developers. I do think developers often take the App Store for granted, but they are the reason Apple is uniquely positioned in the market and for future platforms, so I believe it is important for them to keep developers happy and more importantly motivated to keep innovating on Apple’s platforms.
We will have to see how this plays out, but even if Apple wins this legal battle, I think it is worth an honest strategic review of what they are offering as an added value to developers and looking for ways they may need to be more strict as well as more flexible.
