Apple's Market Dominance

Note that while Google took similar action, I will be focusing primarily on a discussion of Apple’s market dominance and anti-competitive behaviour, rather than Google’s. This is, honestly, because much of this post was written before Google took action.

There are many things at play here, and they are conflated. Early today Epic Games fired the first shots to kick of a war with Apple and Google over their dominance of their respective platforms. Epic added an additional payment option in both their iOS and Android Fortnite apps, which allowed customers to use their Epic accounts to purchase “vBucks” (digital currency for buying stuff), rather than using the platform-provided In-App-Purchase (IAP) options.

The result was not unexpected: Apple (and shortly after, Google) removed the Fortnite app from their app stores. Epic in turn quickly release a parody commercial and filed suit against Apple.

These plays were clearly meant to gain public support, and push this debate into the public eye. Did they go too far in baiting Apple into taking action? Perhaps, although it was still a brilliantly laid out plan. It has sparked the conversation that they wanted to spark, and did not make Apple look good. Did Epic “violate the Apple ToS?” Of course they did, but the goal was not the violate the ToS and get away with it. The goal was to draw attention to the anti-competitive nature of those ToS. In this regard, they succeeded.

Unfortunately I do believe that the way Epic approached this, and the resulting public discussion, has conflated many different topics. They are getting intermingled in the public debate.

My opinion on the overall situation is:

• Yes, Apple takes anti-competitive action in it’s management of the App Store.
• I believe they exert too much control on the devices that people have already spent thousands of dollars for through their actions and policies with the App Store.
• Yes, there should still be guidelines and app review, however
• this “review” should not be permitted to unfairly limit competition, or be used to give Apple services an unfair advantage.

The individual issues, as I see them, are as follows:

Sideloading

I do not agree with allowing the general user to sideload applications. I do think it should be possible, but should require a developer license. It is well known that sideloading applications can be dangerous, and general users should be protected from that. Capable users who understand the risks should not be prevented.

3rd Party App Stores

At this time, I do not agree with third-party app stores on iOS. I also do not agree with the high level of gatekeeping that exists on the current App Store. I believe that there should be a difference between “Verified/Approved” apps, which may be searchable and discoverable on the store, and “Unverified” apps, which are installable only by either direct link, invitation, or by explicitly enabling a “search unverified apps only” option. If an end-user is not explicitly looking for a particular “Unverified” app, they should not discover it in the App Store.

Perhaps applications, after threshold of downloads/users/purchase volume would be required to pay for verification, with a required path to the “Full” App Store.

These “Unverified” apps should still have passed the basic automated safety/privacy checks that Apple conducts, but with more lee-way in terms of IAP usage. A developer would be able to use this option to distribute “Private” applications.

These would be apps that Apple clearly does not support, and there would be no user-belief that Apple would support these apps.

Note that this is, in theory, how TestFlight works.

Independent Payment Methods

The current status quo here is purely anti-competitive, especially coupled with the commission they set. Preventing other payment options negates any argument that their arbitrarily-set 30% commission is a “fair price” for the service they offer.

Claims that the end-user is willing to pay a 30% premium in order to use Apple’s subscription management can not be confirmed if there is no alternative to be able to compare against.

Allowing other payment options (while still requiring IAP to be an option) gives the end-user the option to choose what is right for them.

Notwithstanding, I do believe that if payment are offered, then IAP should be required to be one of them. There is a section of Apple’s user base which will pay a premium on their purchases to have their experience managed entirely through Apple, and they should not lose that option. I’m also not strongly against requiring Apple IAP to be the first option.

30% “commission”

The main thing is the anti-competitive 30% cut. I definitely don’t think it should be free, but should, at minimum, include known rate-drops that scale down as revenue increases. This way it can actually be standard across developers.

Apple is selling a subscription management and payment service, with a selling point that it is cheaper to buy Apple’s than build your own. This does not apply when hit the level of having to pay out hundreds of millions of dollars per year.

Other options that I would like to see would be:

• Baseline should be < 30%
• Phase in payments, with a set amount of revenue per year which is “free” (first $X year/month/etc is free)
• Lower rates for In-App Purchases vs Subscriptions. The fact that commissions on Subscription purchases drop to 15% after the first year does not impact IAP, which is the majority of payments in question.

But is Apple a monopoly?

I think this argument is fundamentally flawed no matter which side of the debate you find yourself. What really matters is if they have a dominant market position which allows them to unilaterally take anti-competitive action. I think the answer to that is unequivocally yes, they have a dominant market position and unilaterally take anti-competitive action.

Current market share by-the-numbers:

Note that all market share numbers are scoped to the United States. For a United States court case centered on anti-competitive behaviour, “global” numbers do not matter. All numbers are from statscounter.

US market share of Mobile OS : iOS: ~58%

US market share of Desktop OS: Windows: ~67%

US market share of Desktop OS: macOS: ~27%

US market share of Tablet OS : iOS: ~64%

Let’s briefly compare Apple’s current position to Microsoft, who has face anti-trust action for lesser behaviour in the past. The issue central to that case was whether Microsoft was allowed to bundle Internet Explorer with Windows. This did not actively prevent the use of an alternative web browser, and it in no way required Microsoft to be paid a percentage of all revenue earned through the end-user use of Windows. There were questions at the time around whether or not Microsoft designed APIs to favor IE over other web browsers, whereas today Apple explicitly uses private APIs that alternative applications are prohibited from using.

In comparison, it is shocking how the Apple ecosystem has gotten away with this for as long as it has.

Even today, Windows is considered the dominant player in the desktop computer space, but it is not a monopoly. According to statscounter.com, the Windows market share of desktop Operating Systems (OS) is ~67%. Apple’s iOS market share of the Mobile space is ~58% (~64% for the Tablet market). Both are majorities, and the difference is not large enough to apply different sets of rules to the two. Should Microsoft be allowed to being to force that all software that runs on Windows adhere to arbitrary rules they make up? Should Microsoft be allowed to decree that 30% of all payments made using a Windows machine be given to Microsoft as a fee? Even the concept of that is ridiculous, however it is what Apple is being allowed to enforce on iOS.

But think of the Users!

Many arguments defending Apple’s strict control of all devices is that it is done for the protection of the user, in order to prevent scams and bad software. There is no doubt some truth to this, however if Apple’s true concern was in preventing scams, and preventing bad software, the same actions should be taken regardless of platform, meaning these restrictions should be present on macOS. These restrictions do not exist on macOS, a market which Apple only has a ~27% market share. It is telling that Apple does not enforce the same restrictions where it does not have a dominant position in the market.

There is an argument to be made that Desktop and Mobile are different sized markets, and the Desktop should have anti-competitive protection while Mobile is still too small. I reject that premise with the fact that mobile usage has exploded in the last 10 years. Mobile accounted for 58% of all web visits in 2018, and the introduction of 5G has the potential to unlock a previously unimaginable level of mobile connectivity.

If either market is larger, and more in need of protection going forward, it is the mobile market. Apple (and Google) has positioned it’s App Store as a central piece of this market, and used it’s market dominance to unilaterally enacted policies to prevent itself from facing any competition.

I don’t know what the outcome of Epic v Apple/Google is going to be, but I can only hope that it leads to a set of guidelines and regulations which allow the App Store utilities to benefit all.