To me, this whole case involving the App Store is based on a lack of understanding: -- If you look at the App Store as simply and strictly and only a market place then, YES! It is a monopoly. -- If you realize that the App Store provides numerous services critical to well being of Apple, its products and its reputation, then you realize it is NOT a marketplace.
Allowing anybody to install anything on Apple products would make those products no more stable, reliable and secure than a Windows machine. Apple's reputation for reliability, security and privacy depend on the App Store and, without it, both Apple and its developers will suffer immeasurable economic harm. And, we the users will be deprived of a lone island of safety in sea of Googles and Microsofts.
That issue is irrelevant here. The law is designed to protect consumers and limit monopoly power, not protect a company’s reputation and/or business model.
On a personal level I agree with you. I think the exclusivity of the App Store protects the security and stability of the platform. On a broader level I can see the plantiff’s point as well.
It's not irrelevant. Courts can and do look at why companies do what they do. A compelling business justification is a valid defense in an antitrust case.
Finally, the monopolist may have a legitimate business justification for behaving in a way that prevents other firms from succeeding in the marketplace. For instance, the monopolist may be competing on the merits in a way that benefits consumers through greater efficiency or a unique set of products or services. In the end, courts will decide whether the monopolist's success is due to "the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident."
Here's Ben Thompson's take on the App store as having a monopoly position, take it or leave it. In a nutshell for those with zero interest in really reading about the why's:
"To put it another way, Apple profits handsomely from having a monopoly on iOS: if you want the Apple software experience, you have no choice but to buy Apple hardware. That is perfectly legitimate. The company, though, is leveraging that monopoly into an adjacent market — the digital content market — and rent-seeking. Apple does nothing to increase the value of Netflix shows or Spotify music or Amazon books or any number of digital services from any number of app providers; they simply skim off 30% because they can.
To be clear, Apple absolutely did create the modern app marketplace, and, as the company loves to brag, an entire new economy full of new types of jobs. That, though, is precisely the problem: the App Store is not a fun side diversion; it is one of the largest platforms we have ever seen, on which hundreds of thousands of people are seeking to build real businesses, and that carries different types of responsibilities — and legal limitations — than an OS feature. It is bad for society generally and, I strongly believe, illegal for Apple to have crafted App Store rules such that it can leverage its smartphone share into monopoly profits on digital goods and services that are on iOS not because iOS is anything special, but because that is the only possible way to reach nearly 50% of the U.S. population."
I will disagree with Mr. Thompson about the chances of SCOTUS coming down on the side of Apple and dismissal, but on the larger case of Apple and monopoly he makes common sense arguments IMHO.
Thanks for sharing that. Is he right though? I have a Netflix account (and others) and I watch lots of Netflix programming on my Apple devices. And I've never paid Apple a dime for this digital content. I subscribed through the Netflix website and Netflix gets 100% of their monthly fee. If Apple is using it's market power in the device arena to gain market power in this other market, they aren't doing a very good job of it. A better example would be if Apple didn't allow Netflix or Pandora on iOS in order to improve their market power in the media market.
I did the same as you re:Netflix but I’m sure the majority buy via IAP because of the convenience. Or because they don’t know they can go to Netflix’s website to sign up (not allowed to mention it or provide a link in app). In my opinion Apple shouldn’t be taking a monthly cut of streaming services where they’re not hosting any of the content. I didn’t sign up for Netflix because of anything Apple did and I’m currently watching it via my smart TV which is using Roku software. In the Amazon app you can purchase anything except digital media because Apple would get a cut of those transactions. For anyone who thinks Apple deserves a cut of Netflix, Amazon, Spotify etc. do you also think they deserve a cut of Uber and Lyft? I think the latter two companies are way more dependent on the App Store than Netflix is.
To me, this whole case involving the App Store is based on a lack of understanding: -- If you look at the App Store as simply and strictly and only a market place then, YES! It is a monopoly. -- If you realize that the App Store provides numerous services critical to well being of Apple, its products and its reputation, then you realize it is NOT a marketplace.
Allowing anybody to install anything on Apple products would make those products no more stable, reliable and secure than a Windows machine. Apple's reputation for reliability, security and privacy depend on the App Store and, without it, both Apple and its developers will suffer immeasurable economic harm. And, we the users will be deprived of a lone island of safety in sea of Googles and Microsofts.
That issue is irrelevant here. The law is designed to protect consumers and limit monopoly power, not protect a company’s reputation and/or business model.
On a personal level I agree with you. I think the exclusivity of the App Store protects the security and stability of the platform. On a broader level I can see the plantiff’s point as well.
It's not irrelevant. Courts can and do look at why companies do what they do. A compelling business justification is a valid defense in an antitrust case.
Finally, the monopolist may have a legitimate business justification for behaving in a way that prevents other firms from succeeding in the marketplace. For instance, the monopolist may be competing on the merits in a way that benefits consumers through greater efficiency or a unique set of products or services. In the end, courts will decide whether the monopolist's success is due to "the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident."
That’s really the key part. Apple is successful because of a superior product, not because of shady business practices. I don’t know how they would ever be able to show Apple abused their position to get where they are today.
The Apple Discussion forums are full of users complaining about their Macs being slow, bricked, useless. They rant about losing files and rage at Apple as being the cause of their troubles. When skilled troubleshooters try to help and get to the bottom of the real cause it’s ALWAYS some piece of crap software installed on their Macs and most of those enraged users either don’t remember installing it or claim they didn’t. The EtreCheck reports they post are full of crap, kernel extensions, AV software, malware, key loggers and myriad other nasties. Those same users are also the ones always asking how to disable Gatekeeper so they run this stuff. It will be a sad day for iOS users if Apple loses control of the security of their platform and their reputation will suffer for it because people will blame Apple, not the crappy app, for their pain. But the drive to force Apple to conform to everybody else’s business model is strong, from Right to Repair to obtaining apps from anywhere.
To me, this whole case involving the App Store is based on a lack of understanding: -- If you look at the App Store as simply and strictly and only a market place then, YES! It is a monopoly. -- If you realize that the App Store provides numerous services critical to well being of Apple, its products and its reputation, then you realize it is NOT a marketplace.
Allowing anybody to install anything on Apple products would make those products no more stable, reliable and secure than a Windows machine. Apple's reputation for reliability, security and privacy depend on the App Store and, without it, both Apple and its developers will suffer immeasurable economic harm. And, we the users will be deprived of a lone island of safety in sea of Googles and Microsofts.
That issue is irrelevant here. The law is designed to protect consumers and limit monopoly power, not protect a company’s reputation and/or business model.
On a personal level I agree with you. I think the exclusivity of the App Store protects the security and stability of the platform. On a broader level I can see the plantiff’s point as well.
It's not irrelevant. Courts can and do look at why companies do what they do. A compelling business justification is a valid defense in an antitrust case.
Finally, the monopolist may have a legitimate business justification for behaving in a way that prevents other firms from succeeding in the marketplace. For instance, the monopolist may be competing on the merits in a way that benefits consumers through greater efficiency or a unique set of products or services. In the end, courts will decide whether the monopolist's success is due to "the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident."
Here's Ben Thompson's take on the App store as having a monopoly position, take it or leave it. In a nutshell for those with zero interest in really reading about the why's:
"To put it another way, Apple profits handsomely from having a monopoly on iOS: if you want the Apple software experience, you have no choice but to buy Apple hardware. That is perfectly legitimate. The company, though, is leveraging that monopoly into an adjacent market — the digital content market — and rent-seeking. Apple does nothing to increase the value of Netflix shows or Spotify music or Amazon books or any number of digital services from any number of app providers; they simply skim off 30% because they can.
To be clear, Apple absolutely did create the modern app marketplace, and, as the company loves to brag, an entire new economy full of new types of jobs. That, though, is precisely the problem: the App Store is not a fun side diversion; it is one of the largest platforms we have ever seen, on which hundreds of thousands of people are seeking to build real businesses, and that carries different types of responsibilities — and legal limitations — than an OS feature. It is bad for society generally and, I strongly believe, illegal for Apple to have crafted App Store rules such that it can leverage its smartphone share into monopoly profits on digital goods and services that are on iOS not because iOS is anything special, but because that is the only possible way to reach nearly 50% of the U.S. population."
I will disagree with Mr. Thompson about the chances of SCOTUS coming down on the side of Apple and dismissal, but on the larger case of Apple and monopoly he makes common sense arguments IMHO.
Thanks for sharing that. Is he right though? I have a Netflix account (and others) and I watch lots of Netflix programming on my Apple devices. And I've never paid Apple a dime for this digital content. I subscribed through the Netflix website and Netflix gets 100% of their monthly fee. If Apple is using it's market power in the device arena to gain market power in this other market, they aren't doing a very good job of it. A better example would be if Apple didn't allow Netflix or Pandora on iOS in order to improve their market power in the media market.
I did the same as you re:Netflix but I’m sure the majority buy via IAP because of the convenience. Or because they don’t know they can go to Netflix’s website to sign up (not allowed to mention it or provide a link in app). In my opinion Apple shouldn’t be taking a monthly cut of streaming services where they’re not hosting any of the content. I didn’t sign up for Netflix because of anything Apple did and I’m currently watching it via my smart TV which is using Roku software. In the Amazon app you can purchase anything except digital media because Apple would get a cut of those transactions. For anyone who thinks Apple deserves a cut of Netflix, Amazon, Spotify etc. do you also think they deserve a cut of Uber and Lyft? I think the latter two companies are way more dependent on the App Store than Netflix is.
Good points. I've been with Netflix since the DVD-by-mail era, so it didn't occur to me that people would think of Netflix as an app and pay that way. A court case about in-app purchases would be more compelling.
To me, this whole case involving the App Store is based on a lack of understanding: -- If you look at the App Store as simply and strictly and only a market place then, YES! It is a monopoly. -- If you realize that the App Store provides numerous services critical to well being of Apple, its products and its reputation, then you realize it is NOT a marketplace.
Allowing anybody to install anything on Apple products would make those products no more stable, reliable and secure than a Windows machine. Apple's reputation for reliability, security and privacy depend on the App Store and, without it, both Apple and its developers will suffer immeasurable economic harm. And, we the users will be deprived of a lone island of safety in sea of Googles and Microsofts.
Agree. Web browser now warns users of dangerous web site. So taking good care of users is a responsibility of a product. The accusers need to show that there is a way that Apple can warn users of bad apps. If they cannot show that, then Apple App store is perfectly legal.
There are very large group of iPhone users that are idiots of using hi-tech products such as kids. It is Apple's responsibility to protect them when using iPhone.
It is bad for society generally and, I strongly believe, illegal for Apple to have crafted App Store rules such that it can leverage its smartphone share into monopoly profits on digital goods and services that are on iOS not because iOS is anything special, but because that is the only possible way to reach nearly 50% of the U.S. population."
The problem with that argument from Ben Thompson is that all other software marketplaces operate the same way as Apple, regardless of whether it's a digital or a physical copy. There is a markup charged regardless, and it's usually in the 25-30% range. Buying a physical copy of a new console game from Amazon? You're paying a significant markup. Buying a digital copy of a new console game from the PS4 store? You're paying a significant markup. It's pretty obvious that having choices for where you get the software hasn't actually eliminated this type of practice. Apple's approach is standard for the entire industry. So are the plaintiffs in this particular case actually going to get relief from markups if they won? No. They'll just get a greater range of stores that charge the same markup.
Every time I read about this topic I feel how I get involuntarily angry. Same like when reading about right to repair. This is a very personal viewpoint: I like when stuff just works. And it’s one go-to place. I don’t want to have to spend lots of time to first find out which store offers which app, if the app is legit, doing what it should with the quality it should have, and needing to subscribe to 20 stores to download. I prefer to read a good book instead of doing all this research. Same with car parts. Yes, an oem part costs more. It it Justs works. Obviously I could save quite some money. But honestly I am too lazy for this , or rather I prefer to spend my time differently with more personal value. This is why I’m strong into the Apple ecosystem. Not perfect. But personally for me the best.
It is bad for society generally and, I strongly believe, illegal for Apple to have crafted App Store rules such that it can leverage its smartphone share into monopoly profits on digital goods and services that are on iOS not because iOS is anything special, but because that is the only possible way to reach nearly 50% of the U.S. population."
The problem with that argument from Ben Thompson is that all other software marketplaces operate the same way as Apple, regardless of whether it's digital or a physical copy. There is a markup charged regardless, and it's usually in the 25-30% range. Buying a physical copy of a new console game from Amazon? You're paying a significant markup. Buying a digital copy of a new console game from the PS4 store? You're paying a significant markup. It's pretty obvious that having choices for where you get the software hasn't actually eliminated this type of practice. Apple's approach is standard for the entire industry. So are the plaintiffs in this particular case actually going to get relief from markups if they won? No. They'll just get a greater range of stores that charge the same markup.
Right. And that's why the Illinois Brick case is important. That case says that the someone indirectly harmed by a monopolists actions can't sue, only the directly impacted party can. In this case, Apple argues that they aren't the one's charging the consumers, they are charging the developers. If the developers are harmed by this, they should sue. The end users shouldn't be able to sue because Apple isn't directly charging the consumer the 30%. If Apple wins this argument, then they get the easy case to make, showing that they aren't using their market power to charge a "supracompetative" fee for selling developers' apps.
Unfortunately for Apple, a number of the justices don't see Apple as the indirect party since the consumer has a direct purchasing relationship with Apple. This kinda makes sense, Apple is the intermediary between the developer and the consumer, so it's tricky to argue that the developer is the middle man. (The argument is that the developer sets the price, so the chain of "harm" goes from Apple to the developer (in the form of the 30%) to the consumer (in the form of passed-on price increases).)
There are very large group of iPhone users that are idiots of using hi-tech products such as kids. It is Apple's responsibility to protect them when using iPhone.
Yes people are idiots including the kid's parents. Apple gives you a full suite of apps, including parental controls. You can't protect people from everything because they provide a web browser which can get you in trouble in a number of ways. but you really don't need to buy anything. There are tons of very useful third party apps that are free. I've had an iPhone and iPad since day one and I have very few paid apps, maybe 5 or so and all of them were very inexpensive. Pixelmator is probably the most expensive app I own. If you don't want to pay for apps, then don't buy any. The iPhone is completely robust right out of the box.
To me there are two questions that I haven’t seen asked.
Do application developers need to pass on the 30% cost to their consumers?(I don’t believe they do but I’m not all that knowledgeable in the subject)
The second question is, out of all of the AppStore developers which ones are actually charging their customers the 30%?
Of course you have the Spotify’s that want to be vocal about it, however from what I’ve seen they don’t have to pass the 30% markup on to you.
Just two questions I was wondering about, I won’t get into the “is the AppStore a monopoly or not a monopoly” argument.
Yes they do pass it on, you just don't 'see it'.
A developer has to recover the costs to develop... so if that cost is say $100k to develop, and they anticipate selling 100,000 copies, the price of the app would need to be $1.43 on the app store ($143 - 30% = $1.) This scenario just covers the costs to develop, before they make a profit. But what if the market will only bear pricing at $1, why should only the developer by market forces be "forced" to lower their margin by 30% but apple keep theirs?
Shouldn't the developer be entitled to negotiate the 30% commission based on the value of Apple's 'package pricing' delivered to the individual developer?
And as a developer you don't care if your client (the end consumer) has an android or iphone, you just want/need to sell as many as possible. But you have to make it available to both or you miss out on 50% of the global market. And to be consistent you, in most cases, have to have the same price on both platforms. So in turn it also distorts the Android price of the app.
This all happens before we even get into app visibility and ranking in the App store.
It is bad for society generally and, I strongly believe, illegal for Apple to have crafted App Store rules such that it can leverage its smartphone share into monopoly profits on digital goods and services that are on iOS not because iOS is anything special, but because that is the only possible way to reach nearly 50% of the U.S. population."
The problem with that argument from Ben Thompson is that all other software marketplaces operate the same way as Apple, regardless of whether it's digital or a physical copy. There is a markup charged regardless, and it's usually in the 25-30% range. Buying a physical copy of a new console game from Amazon? You're paying a significant markup. Buying a digital copy of a new console game from the PS4 store? You're paying a significant markup. It's pretty obvious that having choices for where you get the software hasn't actually eliminated this type of practice. Apple's approach is standard for the entire industry. So are the plaintiffs in this particular case actually going to get relief from markups if they won? No. They'll just get a greater range of stores that charge the same markup.
Right. And that's why the Illinois Brick case is important. That case says that the someone indirectly harmed by a monopolists actions can't sue, only the directly impacted party can. In this case, Apple argues that they aren't the one's charging the consumers, they are charging the developers. If the developers are harmed by this, they should sue. The end users shouldn't be able to sue because Apple isn't directly charging the consumer the 30%. If Apple wins this argument, then they get the easy case to make, showing that they aren't using their market power to charge a "supracompetative" fee for selling developers' apps.
Unfortunately for Apple, a number of the justices don't see Apple as the indirect party since the consumer has a direct purchasing relationship with Apple. This kinda makes sense, Apple is the intermediary between the developer and the consumer, so it's tricky to argue that the developer is the middle man. (The argument is that the developer sets the price, so the chain of "harm" goes from Apple to the developer (in the form of the 30%) to the consumer (in the form of passed-on price increases).)
Back in 2016 Apple themselves put forth the notion that they are more than an intermediary. As Ben Thompson points out if you actually read his IMO well-considered narrative:
Apple's Luca Maestri:
Each quarter, we report results for our Services category, which includes revenue from iTunes, the App Store, AppleCare, iCloud, Apple Pay, licensing, and some other items. Today, we would like to highlight the major drivers of growth in this category, which we have summarized on page three of our supplemental material. The vast majority of the services we provide to our customers, for instance, apps, movies and TV shows, are tied to our installed base of devices, rather than to current quarter sales.
For some of these services, such as content, we recognize revenue based on transaction value. For some of the services, such as the App Store, we share a portion of the value of each transaction with the app developer and only recognize revenue on the portion that we keep. To fully comprehend the scale of the services that we are delivering to our installed base and how fast this business is growing, we look at purchases in addition to revenue. When we aggregate the purchase value of services tied to our installed base during fiscal 2015, it adds up to more than $31 billion. That’s an increase of 23% over fiscal 2014.
" (Ben Thompson quoted) First off, it is striking that when Apple was facing one of its most challenging years in the stock market, its first response was to basically make the plaintiff’s point in Apple v Pepper: suddenly the company wanted to recognize all of the App Revenue, “a portion” of which is shared with developers. That sounds like a company in the middle!
Secondly, though, the reason Apple wanted to include all app revenue is that the “Services Narrative” has always been first and foremost the App Store narrative. Apple makes a huge amount of money, with massive profit margins, by virtue of its monopolistic control of the App Store. It doesn’t make the games or the productivity applications or the digital content; it simply skims of 30%, and not because its purchasing experience is better, but because it is the only choice."
As an aside but perhaps more important in Mr. Thompson's view:
...it seems incredibly worrisome to me anytime any company predicates its growth story on rent-seeking: it’s not that the growth isn’t real, but rather that the pursuit is corrosive on whatever it was that made the company great in the first place. That is a particularly large concern for Apple: the company has always succeeded by being the best; how does the company maintain that edge when its executives are more concerned with harvesting profits from other companies’ innovations?
rogifan_new said: I did the same as you re:Netflix but I’m sure the majority buy via IAP because of the convenience.
Which would then call into question the idea that Apple isn't actually providing anything of value to Netflix by it's app being on the App Store...
But only because Apple doesn’t allow any other payment method in-app. If Netflix could have a link inside their app which which would take you to their website to set up payment that would be just as convenient. And for those who want all of their subscriptions managed by Apple they could allow Apple to handle the billing. Once you download an app on to your device is that still considered part of Apple’s store? I would argue not. And for those that argue Apple deserved a cut of App Store sales then should they get a cut of anything I buy in the Target app?
It is bad for society generally and, I strongly believe, illegal for Apple to have crafted App Store rules such that it can leverage its smartphone share into monopoly profits on digital goods and services that are on iOS not because iOS is anything special, but because that is the only possible way to reach nearly 50% of the U.S. population."
The problem with that argument from Ben Thompson is that all other software marketplaces operate the same way as Apple, regardless of whether it's digital or a physical copy. There is a markup charged regardless, and it's usually in the 25-30% range. Buying a physical copy of a new console game from Amazon? You're paying a significant markup. Buying a digital copy of a new console game from the PS4 store? You're paying a significant markup. It's pretty obvious that having choices for where you get the software hasn't actually eliminated this type of practice. Apple's approach is standard for the entire industry. So are the plaintiffs in this particular case actually going to get relief from markups if they won? No. They'll just get a greater range of stores that charge the same markup.
Right. And that's why the Illinois Brick case is important. That case says that the someone indirectly harmed by a monopolists actions can't sue, only the directly impacted party can. In this case, Apple argues that they aren't the one's charging the consumers, they are charging the developers. If the developers are harmed by this, they should sue. The end users shouldn't be able to sue because Apple isn't directly charging the consumer the 30%. If Apple wins this argument, then they get the easy case to make, showing that they aren't using their market power to charge a "supracompetative" fee for selling developers' apps.
Unfortunately for Apple, a number of the justices don't see Apple as the indirect party since the consumer has a direct purchasing relationship with Apple. This kinda makes sense, Apple is the intermediary between the developer and the consumer, so it's tricky to argue that the developer is the middle man. (The argument is that the developer sets the price, so the chain of "harm" goes from Apple to the developer (in the form of the 30%) to the consumer (in the form of passed-on price increases).)
And it’s hard for people to defend Apple here using a re-seller argument when Apple is not positioning itself that way.
I am on Apple's side on this one: 1- The App Store is part of the product, the same way iOS is part of the product. 2- App Store competes with Google Play. If Google Play decides not to charge their developers a free, Android apps could cost 30% less than iOS apps.
That is not a valid legal argument. Since Google Play doesn't work on an Apple and the App Store doesn't work on Android that's not competition.
Apple isn't a monopoly. There are other choices if you don't want to use the App Store. Get Android. No one is forced to use the iPhone.
Can I sue my car company for not allowing apps being installed in my car?
No, but you could sue your car company if they stated they would brick it at your expense and void your warranty if you didn't fill up at the gas station of their choice and only use the brand of tires they said, and even if you bought an air freshener that wasn't approved by them.
To me, this whole case involving the App Store is based on a lack of understanding: -- If you look at the App Store as simply and strictly and only a market place then, YES! It is a monopoly. -- If you realize that the App Store provides numerous services critical to well being of Apple, its products and its reputation, then you realize it is NOT a marketplace.
Allowing anybody to install anything on Apple products would make those products no more stable, reliable and secure than a Windows machine. Apple's reputation for reliability, security and privacy depend on the App Store and, without it, both Apple and its developers will suffer immeasurable economic harm. And, we the users will be deprived of a lone island of safety in sea of Googles and Microsofts.
That issue is irrelevant here. The law is designed to protect consumers and limit monopoly power, not protect a company’s reputation and/or business model.
On a personal level I agree with you. I think the exclusivity of the App Store protects the security and stability of the platform. On a broader level I can see the plantiff’s point as well.
It's not irrelevant. Courts can and do look at why companies do what they do. A compelling business justification is a valid defense in an antitrust case.
Finally, the monopolist may have a legitimate business justification for behaving in a way that prevents other firms from succeeding in the marketplace. For instance, the monopolist may be competing on the merits in a way that benefits consumers through greater efficiency or a unique set of products or services. In the end, courts will decide whether the monopolist's success is due to "the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident."
Here's Ben Thompson's take on the App store as having a monopoly position, take it or leave it. In a nutshell for those with zero interest in really reading about the why's:
"To put it another way, Apple profits handsomely from having a monopoly on iOS: if you want the Apple software experience, you have no choice but to buy Apple hardware. That is perfectly legitimate. The company, though, is leveraging that monopoly into an adjacent market — the digital content market — and rent-seeking. Apple does nothing to increase the value of Netflix shows or Spotify music or Amazon books or any number of digital services from any number of app providers; they simply skim off 30% because they can.
To be clear, Apple absolutely did create the modern app marketplace, and, as the company loves to brag, an entire new economy full of new types of jobs. That, though, is precisely the problem: the App Store is not a fun side diversion; it is one of the largest platforms we have ever seen, on which hundreds of thousands of people are seeking to build real businesses, and that carries different types of responsibilities — and legal limitations — than an OS feature. It is bad for society generally and, I strongly believe, illegal for Apple to have crafted App Store rules such that it can leverage its smartphone share into monopoly profits on digital goods and services that are on iOS not because iOS is anything special, but because that is the only possible way to reach nearly 50% of the U.S. population."
I will disagree with Mr. Thompson about the chances of SCOTUS coming down on the side of Apple and dismissal, but on the larger case of Apple and monopoly he makes common sense arguments IMHO.
Thompson is wrong. Apple charges 30% so the app seller may use Apple’s distribution system, aka the App Store. There is a huge economic benefit to using the App Store. In case people are not aware, sellers pay a premium to be given a good location to real-world retailers Walmart, Target, and other retail chains. It’s the height of stupidity that people should think otherwise.
It is bad for society generally and, I strongly believe, illegal for Apple to have crafted App Store rules such that it can leverage its smartphone share into monopoly profits on digital goods and services that are on iOS not because iOS is anything special, but because that is the only possible way to reach nearly 50% of the U.S. population."
The problem with that argument from Ben Thompson is that all other software marketplaces operate the same way as Apple, regardless of whether it's digital or a physical copy. There is a markup charged regardless, and it's usually in the 25-30% range. Buying a physical copy of a new console game from Amazon? You're paying a significant markup. Buying a digital copy of a new console game from the PS4 store? You're paying a significant markup. It's pretty obvious that having choices for where you get the software hasn't actually eliminated this type of practice. Apple's approach is standard for the entire industry. So are the plaintiffs in this particular case actually going to get relief from markups if they won? No. They'll just get a greater range of stores that charge the same markup.
Right. And that's why the Illinois Brick case is important. That case says that the someone indirectly harmed by a monopolists actions can't sue, only the directly impacted party can. In this case, Apple argues that they aren't the one's charging the consumers, they are charging the developers. If the developers are harmed by this, they should sue. The end users shouldn't be able to sue because Apple isn't directly charging the consumer the 30%. If Apple wins this argument, then they get the easy case to make, showing that they aren't using their market power to charge a "supracompetative" fee for selling developers' apps.
Unfortunately for Apple, a number of the justices don't see Apple as the indirect party since the consumer has a direct purchasing relationship with Apple. This kinda makes sense, Apple is the intermediary between the developer and the consumer, so it's tricky to argue that the developer is the middle man. (The argument is that the developer sets the price, so the chain of "harm" goes from Apple to the developer (in the form of the 30%) to the consumer (in the form of passed-on price increases).)
Seems to me Apple’s legal team isn’t making the right argument. They need to assert they are not a monopoly since developers may choose other means to create and distribute their products/apps and that Apple is not required to carry any or all apps submitted.
Comments
Can I sue my car company for not allowing apps being installed in my car?
That’s really the key part. Apple is successful because of a superior product, not because of shady business practices. I don’t know how they would ever be able to show Apple abused their position to get where they are today.
Unfortunately for Apple, a number of the justices don't see Apple as the indirect party since the consumer has a direct purchasing relationship with Apple. This kinda makes sense, Apple is the intermediary between the developer and the consumer, so it's tricky to argue that the developer is the middle man. (The argument is that the developer sets the price, so the chain of "harm" goes from Apple to the developer (in the form of the 30%) to the consumer (in the form of passed-on price increases).)
A developer has to recover the costs to develop... so if that cost is say $100k to develop, and they anticipate selling 100,000 copies, the price of the app would need to be $1.43 on the app store ($143 - 30% = $1.) This scenario just covers the costs to develop, before they make a profit. But what if the market will only bear pricing at $1, why should only the developer by market forces be "forced" to lower their margin by 30% but apple keep theirs?
Shouldn't the developer be entitled to negotiate the 30% commission based on the value of Apple's 'package pricing' delivered to the individual developer?
And as a developer you don't care if your client (the end consumer) has an android or iphone, you just want/need to sell as many as possible. But you have to make it available to both or you miss out on 50% of the global market. And to be consistent you, in most cases, have to have the same price on both platforms. So in turn it also distorts the Android price of the app.
This all happens before we even get into app visibility and ranking in the App store.
" (Ben Thompson quoted) First off, it is striking that when Apple was facing one of its most challenging years in the stock market, its first response was to basically make the plaintiff’s point in Apple v Pepper: suddenly the company wanted to recognize all of the App Revenue, “a portion” of which is shared with developers. That sounds like a company in the middle!
Secondly, though, the reason Apple wanted to include all app revenue is that the “Services Narrative” has always been first and foremost the App Store narrative. Apple makes a huge amount of money, with massive profit margins, by virtue of its monopolistic control of the App Store. It doesn’t make the games or the productivity applications or the digital content; it simply skims of 30%, and not because its purchasing experience is better, but because it is the only choice."
As an aside but perhaps more important in Mr. Thompson's view:
...it seems incredibly worrisome to me anytime any company predicates its growth story on rent-seeking: it’s not that the growth isn’t real, but rather that the pursuit is corrosive on whatever it was that made the company great in the first place. That is a particularly large concern for Apple: the company has always succeeded by being the best; how does the company maintain that edge when its executives are more concerned with harvesting profits from other companies’ innovations?
But only because Apple doesn’t allow any other payment method in-app. If Netflix could have a link inside their app which which would take you to their website to set up payment that would be just as convenient. And for those who want all of their subscriptions managed by Apple they could allow Apple to handle the billing. Once you download an app on to your device is that still considered part of Apple’s store? I would argue not. And for those that argue Apple deserved a cut of App Store sales then should they get a cut of anything I buy in the Target app?