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(Bloomberg Opinion) – When Apple Inc. opened the App Store in July 2008, it was a $ 155 billion company that sold 12 million iPhones a year. It’s now a nearly $ 2 trillion business that sells over 200 million iPhones a year. In the time it took you to read these two sentences, Apple sold 60 handsets.
While the world’s most valuable company has changed, the rules by which it governs the App Store have not. He’s like a 120 pound Great Dane who still thinks he’s a puppy. It has failed to adapt to the disproportionate role it plays in the smartphone market. A dispute with the makers of the popular Fortnite gaming app – alongside new Apple antitrust investigations by the European Union and the US Department of Justice – puts this failure in the spotlight.
App developers, such as Fortnite owner Epic Games Inc., have two complaints. First, Apple takes a 30% reduction in revenue through the App Store (fees drop to 15% for subscription-based apps after the first 12 months). Second, the App Store is pretty much the only way to get your product on an iPhone. So unless you give away your app for free, you have to pay Apple to leave it on devices that are running its iOS operating system. The developers call it “the Apple tax”.
It was less troubling when Apple was the challenger for mobile devices. Nokia sold 468 million cell phones in 2008, nearly 40 times more than Apple. Better control allowed Apple to create a compelling user experience, and if customers or developers didn’t like it, there were plenty of alternatives. In addition, third-party apps were still a relatively new phenomenon on smartphones. In the pre-4G era, mobile devices had not yet replaced so many functions of the personal computer.
Today, Apple controls much of the smartphone market, but it insists on the same rules. Its defense is “coherence”. This is a bad argument. It was illegal in Britain to house a Catholic priest, but the rules change when they cease to make sense.
Fed up with handing so much of their money back to owners of the smartphone operating system, Fortnite has created a deadlock with Apple and Alphabet Inc.’s Google (which operates its own app store for Android devices). The game developer, in which Tencent Holdings Ltd. owns a 40% stake, said it would stop paying Apple and Google a revenue share. The Silicon Valley giants responded, as Epic surely knew, by removing its app from their stores.
Google has been in Europe’s antitrust reticle for some time now, but Apple also warrants close scrutiny of the pressure on independent app developers, as my colleague Tae Kim wrote. Facebook Inc., a frequent target of opprobrium from Apple CEO Tim Cook, joined the criticism on Friday.
Apple’s unwillingness to compromise is part of the company’s intransigence, but there’s something else too: It’s never encountered serious antitrust accounts. Maybe he thinks it’s bulletproof.
Just last week, a beta of its upcoming operating system for mobile and desktop devices demonstrated Apple’s plans to redirect news readers by clicking a link in a web browser to its News app, and to move away from the websites of news organizations. This seems characteristic of a company that does not seriously consider whether its behavior can be considered anti-competitive.
Apple says there are costs in its market that must be covered. But if he’s convinced that his App Store guarantees the best experience, maybe he should let competing stores work on his devices as well. Then the users can decide for themselves. Perhaps the best response to accusations of anti-competitiveness is to introduce competition.
This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.
Alex Webb is a Bloomberg opinion columnist covering the European technology, media and communications industries. He previously covered Apple and other tech companies for Bloomberg News in San Francisco.
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