App Store monopoly case may run into 2020 and beyond

Posted:
in iPhone
Although the U.S. Supreme Court is allowing the Apple v. Pepper App Store lawsuit to proceed, the case will take at least another year to resolve, analysts with Macquarie Research claimed on Monday.

App Store


Headed back to lower courts, the case will take "at least one more year to be decided and possibly longer," the firm's sources said. The Supreme Court voted 5 to 4 in a ruling that crossed party lines -- Justice Brett Kavanaugh for example voted in favor, despite being a Republican nominated by President Donald Trump.

"Most lawyers we spoke with about the case had expected AAPL to prevail and then thought it was likely that a similar case would be filed on behalf of developers," Macquarie wrote.

The case dates back to 2011, and accuses Apple of creating artificially inflated app prices through its control of iOS downloads. The App Store is the only sanctioned place to buy iOS apps, and since Apple takes a 15 to 30% cut, some developers may increase their pricing to compensate. A key example is Spotify, which launched a complaint with the European Commission over the matter.

Apple v. Pepper was dismissed in 2013, but allowed to revive in 2017 through the Court of Appeals for the Ninth Circuit. Apple has continually fought back, ultimately bringing that challenge to the Supreme Court.

Apple argues that developers are the ones who set prices, and that it's not in violation of any antitrust laws. It moreover claims that by paying its commission, developers are "buying a package of services which include distribution and software and intellectual property and testing."

If it loses, Apple could be forced to allow third-party app stores and/or reduce its commission. Pressure for that sort of change has been mounting from competition, legal, and regulatory angles, Macquarie wrote, noting that lower commission at either Apple or Google could lead the other to follow suit.

"We believe that if AAPL were to lower its 30% rate to 12%-20%, AAPL's total 2020 EBIT [earnings before interest and taxes] (NOT just App Store or Services, but total EBIT) would fall 7%-15%," the firm projected, suggesting similar results for Google.

Macquarie is maintaining a "neutral" rating for Apple stock with a $190 price target.
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Comments

  • Reply 1 of 22
    cintoscintos Posts: 113member
    No good deed goes unpunished. How about Apple simply dropping the gracious hosting of free apps?
    n2itivguy
  • Reply 2 of 22
    It's nearly impossible to predict what happens if Apple loses this case.  It won't be as a simple as Apple lowering the commission.

    Between this case and the China trade war escalation, not a good day for AAPL.
  • Reply 3 of 22
    iOS_Guy80iOS_Guy80 Posts: 198member
    Ridiculous.
    n2itivguy
  • Reply 3 of 22
    canukstormcanukstorm Posts: 1,960member
    It's nearly impossible to predict what happens if Apple loses this case.  It won't be as a simple as Apple lowering the commission.

    Between this case and the China trade war escalation, not a good day for AAPL.
    The last time Apple was sued for anti-competitive behavior it was related to the pricing of books on their iBook store and that didn't end well for them.  Not only did they lose, that case single-handedly gave Amazon a monopoly in the download of digital books.  This App Store case is much bigger than that and has serious ramifications for not only Apple's App Store but app stores on all platforms.
    edited May 13 n2itivguy
  • Reply 5 of 22
    nealc5nealc5 Posts: 19member

    cintos said:
    No good deed goes unpunished. How about Apple simply dropping the gracious hosting of free apps?

    Exactly. A large number of apps are a dollar or free. Apple could have charged a hosting fee for free apps, but they didn't. Apple could also show that before the iPhone, the price of apps was much higher, and the iPhone's app store actually lowered the cost of entry and the price to consumers.  I remember Blackberry apps costing around $3-5, or even more, for a lot less functionality and safety.

    I suppose at some point, Apple mayhave to open up the iPhone to 3rd party stores. Or allow Netflix and Spotify to use the Apple app store, but charge them a fixed fee for hosting, rather than a 15% cut of the subscription revenue.

    However, I will never use a third party app store, since I wouldn't trust it to be safe.  And the idea that the app store causes higher prices is ridiculous! 


  • Reply 6 of 22
    sdw2001sdw2001 Posts: 17,044member
    It's nearly impossible to predict what happens if Apple loses this case.  It won't be as a simple as Apple lowering the commission.

    Between this case and the China trade war escalation, not a good day for AAPL.

    First, as someone who doesn't think SCOTUS allowing the suit to go forward is crazy, I also don't think Apple loses the case.  The only thing Apple is doing is taking a commission from developers in a closed system.  Granted, it's a monopoly in the iOS world.  But there are alternatives to iOS and Apple products.   

    Secondly, if they ultimately lose, I don't see their profitability being affected.  They will find another way to make up for any lost revenue as a result of lower commissions/opening up iOS/whatever the remedy.   

    Third, the China trade war thing is completely overblown.  Right now, Apple isn't affected directly.  As things ramp up pre-deal (which I think will happen), there may be some short term mild to moderate pain for Apple and consumers.  But the trade war damages China far more than it damages us, today's DOW numbers notwithstanding.  They have to make a deal.  We have a massive trade deficit with China, which works in our favor.  They depend on us buying nearly 20% of their exports.  Their GDP growth is already 30% lower than their 20 year average.  
    radarthekat
  • Reply 7 of 22
    spice-boyspice-boy Posts: 889member
    internet explorer was a monopoly in the pc world 
  • Reply 8 of 22
    sflocalsflocal Posts: 4,675member
    nealc5 said:

    cintos said:
    No good deed goes unpunished. How about Apple simply dropping the gracious hosting of free apps?

    Exactly. A large number of apps are a dollar or free. Apple could have charged a hosting fee for free apps, but they didn't. Apple could also show that before the iPhone, the price of apps was much higher, and the iPhone's app store actually lowered the cost of entry and the price to consumers.  I remember Blackberry apps costing around $3-5, or even more, for a lot less functionality and safety.

    I suppose at some point, Apple mayhave to open up the iPhone to 3rd party stores. Or allow Netflix and Spotify to use the Apple app store, but charge them a fixed fee for hosting, rather than a 15% cut of the subscription revenue.

    However, I will never use a third party app store, since I wouldn't trust it to be safe.  And the idea that the app store causes higher prices is ridiculous! 


    These modern app developers were probably still being spoon-fed by mommy before Apple came out with the App Store.  They have zero clue what is was like prior to the App Store, and how much of a rip-off things were, let alone even trying to market one's piece of software.  Try competing for shelf space at places like CompUSA and BestBuy.  Try marketing your software on your own and pushing out CD's.  Bunch of spoiled brats the developers are nowadays.  Apple charging 30% to run it all is an easy business decision for most.  If you can't make a viable business with 70% of that revenue, given the hundreds of millions of potential customers then perhaps your app is crap and not Apple's fault.

    That rant being said, I don't understand why people are harping on Apple having a "monopoly" with the App Store.  Of course it's a monopoly.  It's THEIR phone and THEIR App Store.  I really believe the people complaining and raising a stink are app developers that feel they should get a bigger piece of the Apple pie, and not everyday Joe-iPhone-User.  They're just disguising themselves as regular users.

    This is entirely different from what Microsoft did ages ago and has zero relation to it.  Microsoft forced companies to use their software exclusively on PC hardware.  Vendors were forced to pay Microsoft even though they didn't install Windows on their machines.  

    Apple owns their hardware, and it alone controls what software runs on it.  You want 3rd-party apps on your phone?  Go the Android route and not only enjoy complete freedom with what you put on it, but also the security nightmare as well.

    I hope Apple (legally) bans theses whiners from the App Store.  If life is so rough on the iOS side, go elsewhere.
    doctwelve
  • Reply 9 of 22
    apple ][apple ][ Posts: 8,687member
    People use and like Apple's products and the app store precisely because of the tight control that Apple has over it.

    It's Apple's store, they built it, they made it, they run it, they maintain it, and they pay for it.

    If somebody doesn't like it, go someplace else.
    edited May 13 macseekermacxpress
  • Reply 10 of 22
    22july201322july2013 Posts: 741member
    It "may run into 2020"? 2020 is only 7.5 months away. 7.5 months sounds like a "fast-track" to me. Especially if it "may not" run into 2020.
    edited May 13
  • Reply 11 of 22
    NotsofastNotsofast Posts: 407member
    Please correct your use of Spotify as an example of a company that has raised its prices to compensate for the commission. Spotify charges the exact same price if you sign up via their web site or the Apple store. Indeed, it is an example of the opposite point. If the App store forced an increase in prices, then it would be cheaper to sign up via their web site! I am also amazed that the articles about this frivolous lawsuit fail to mention how ludicrous is the claim that consumer prices on the App store are artificially high because it's the only place to buy Apps. How can you not point out that the cost of software has plummeted since the App store came into existence. My gosh. 85% of them are free and the average price of the others is 99 CENTS! The jury is going to be laughing their butts off when the plaintiff's attorney argues that prices are "artificially high" and consumers should only be paying around 75 CENTS! LOL.
    edited May 13
  • Reply 12 of 22
    zoetmbzoetmb Posts: 2,470member
    What these app developers don't realize (and why the suit should not have been allowed to proceed) is that before the App Store, when most apps were sold via physical retail, most software developers sold via Ingram Micro-D (a distributor).    And you generally had to give them 45% to 55%.    Furthermore, it should be quite obvious that prices of software were much higher back then.   A few hundred dollars for a good app was considered a great deal back in the day.   I'm pretty sure I paid something like $1000 for the original version of Pagemaker in 1986, which is the equivalent of $2347 in today's dollars.  

    They should be careful what they wish for.  

    What's also strange is that it was the Supreme Court that allowed manufacturers to establish not only minimum advertised prices, but minimum selling prices.   Isn't that price fixing that increases prices for consumers?

    30% selling commission is a bargain and it was a bargain for books as well.  

    Allowing Amazon to continue their business, which is clearly becoming a monopoly due to their market power to the point where they're also opening physical retail (and Whole Foods) while claiming the AppStore gives Apple monopoly power is clearly absurd on the level of Alice In Wonderland.  


  • Reply 13 of 22
    looplessloopless Posts: 106member
    Though "Biting the hand that feeds you" comes to mind,  I doubt any "real" developers are behind this as any real developer would know what a bargain the 30% is. It has to be just a lawyer driven money grab.
  • Reply 14 of 22
    sflocal said:
    nealc5 said:

    cintos said:
    No good deed goes unpunished. How about Apple simply dropping the gracious hosting of free apps?

    Exactly. A large number of apps are a dollar or free. Apple could have charged a hosting fee for free apps, but they didn't. Apple could also show that before the iPhone, the price of apps was much higher, and the iPhone's app store actually lowered the cost of entry and the price to consumers.  I remember Blackberry apps costing around $3-5, or even more, for a lot less functionality and safety.

    I suppose at some point, Apple mayhave to open up the iPhone to 3rd party stores. Or allow Netflix and Spotify to use the Apple app store, but charge them a fixed fee for hosting, rather than a 15% cut of the subscription revenue.

    However, I will never use a third party app store, since I wouldn't trust it to be safe.  And the idea that the app store causes higher prices is ridiculous! 


    These modern app developers were probably still being spoon-fed by mommy before Apple came out with the App Store.  They have zero clue what is was like prior to the App Store, and how much of a rip-off things were, let alone even trying to market one's piece of software.  Try competing for shelf space at places like CompUSA and BestBuy.  Try marketing your software on your own and pushing out CD's.  Bunch of spoiled brats the developers are nowadays.  Apple charging 30% to run it all is an easy business decision for most.  If you can't make a viable business with 70% of that revenue, given the hundreds of millions of potential customers then perhaps your app is crap and not Apple's fault.

    That rant being said, I don't understand why people are harping on Apple having a "monopoly" with the App Store.  Of course it's a monopoly.  It's THEIR phone and THEIR App Store.  I really believe the people complaining and raising a stink are app developers that feel they should get a bigger piece of the Apple pie, and not everyday Joe-iPhone-User.  They're just disguising themselves as regular users.

    This is entirely different from what Microsoft did ages ago and has zero relation to it.  Microsoft forced companies to use their software exclusively on PC hardware.  Vendors were forced to pay Microsoft even though they didn't install Windows on their machines.  
    This case isn’t about developers. It’s a consumer suing Apple.

    Also, I think people forget that there is nothing illegal about having a monopoly (in the US). It’s the abuse of monopoly power that gets corporations into trouble.
  • Reply 15 of 22
    rogifan_newrogifan_new Posts: 4,151member
    Here’s a simple fix: allow developers to offer a link to an alternative payment method in-app. If you can do it via the web you should be able to do it via the app. Those that want all of their payments and subscriptions to go through Apple can use iTunes billing, those who don’t can use the developers billing. It’s ridiculous that I can buy thousands of things via the Amazon app but if I want to buy a digital book I have to go to a web browser to do it.
  • Reply 16 of 22
    I do not think Apple should be allowed to control what runs on the hardware that customers purchase

    But throughout the entire chain, Apple does exactly that

    They only allow their own operating system to run on the hardware, they only allow their app store on their operating system, and they only allow apps they deem appropriate on their app store.

    A perfect example of software that is legal but not allowed is Kodi, Retroarch, and any app that has gained reputation as a way to get stuff illegitimately.

    I use an iPhone because the hardware is some of the best out there and I hope 100% that Apple is forced to allow apps to be distributed outside of the confines of the App Store.
  • Reply 17 of 22
    radarthekatradarthekat Posts: 3,114moderator
    I do not think Apple should be allowed to control what runs on the hardware that customers purchase

    But throughout the entire chain, Apple does exactly that

    They only allow their own operating system to run on the hardware, they only allow their app store on their operating system, and they only allow apps they deem appropriate on their app store.

    A perfect example of software that is legal but not allowed is Kodi, Retroarch, and any app that has gained reputation as a way to get stuff illegitimately.

    I use an iPhone because the hardware is some of the best out there and I hope 100% that Apple is forced to allow apps to be distributed outside of the confines of the App Store.
    Apps don’t run on the hardware.  Apps run on the OS; it’s the OS, and only the OS, that interfaces with the hardware.  No iOS app can directly write to an iPhone screen, no iOS app can directly read the accelerometer data.  Access is enabled through calls to the OS via APIs.   And guess what...  you don’t own the OS; you license it.  So yes, go ahead and write software that directly controls the hardware; your app will need to replace all of the operating system in order to run on the hardware. 

    And because Apple licenses the operating system and owners of iPhones and other Apple products do not own their copy, Apple is entirely within their right to control what apps can be installed and how developers must pay to play.
    edited May 13
  • Reply 18 of 22
    Johan42Johan42 Posts: 163member
    sflocal said:
    nealc5 said:

    cintos said:
    No good deed goes unpunished. How about Apple simply dropping the gracious hosting of free apps?

    Exactly. A large number of apps are a dollar or free. Apple could have charged a hosting fee for free apps, but they didn't. Apple could also show that before the iPhone, the price of apps was much higher, and the iPhone's app store actually lowered the cost of entry and the price to consumers.  I remember Blackberry apps costing around $3-5, or even more, for a lot less functionality and safety.

    I suppose at some point, Apple mayhave to open up the iPhone to 3rd party stores. Or allow Netflix and Spotify to use the Apple app store, but charge them a fixed fee for hosting, rather than a 15% cut of the subscription revenue.

    However, I will never use a third party app store, since I wouldn't trust it to be safe.  And the idea that the app store causes higher prices is ridiculous! 


    That rant being said, I don't understand why people are harping on Apple having a "monopoly" with the App Store.  Of course it's a monopoly.  It's THEIR phone and THEIR App Store.  I really believe the people complaining and raising a stink are app developers that feel they should get a bigger piece of the Apple pie, and not everyday Joe-iPhone-User.  They're just disguising themselves as regular users.
    And it’s MY $1000 that I used to buy MY iPhone. And since it’s MY iPhone I’d like to do whatever the HELL I want with it but can’t because Apple is a control, censor freak and a greedy company that wants to charge for EVERYTHING, and allowing anything that doesn’t come from their store is a loss of revenue. MONOPOLY!

    And no, I’m not buying Android, so shove the rhetoric right up where the sun don’t shine.
  • Reply 19 of 22
    22july201322july2013 Posts: 741member
    Johan42 said:

    And it’s MY $1000 that I used to buy MY iPhone. And since it’s MY iPhone I’d like to do whatever the HELL I want with it but can’t because Apple is a control, censor freak and a greedy company that wants to charge for EVERYTHING, and allowing anything that doesn’t come from their store is a loss of revenue. MONOPOLY!

    And no, I’m not buying Android, so shove the rhetoric right up where the sun don’t shine.
    Are you not aware that you CAN run anything you want on your iPhone? Just get a developer license. I have one. It cost $99 from Apple. I can compile, install and run under iOS anything I create. I can even install and run anything that anyone else creates and shares with me (although I'm somewhat unclear if that's against the license agreement, it may only be against the agreement if you charge for it.) I think there's even another situation where I *might* agree with you: perhaps Apple should let you install and boot your own OS on the device. That way you can also run anything you want, excluding iOS. What I won't agree with is your wish that Apple must modify its iOS license agreement to be whatever you want it to be. Microsoft has license agreements; Google has license agreements - do you also want those companies to throw them away? Microsoft even charges for their OS! Do you want Microsoft to give it to you for free too? Software wouldn't be as advanced as it is today with license agreements or profits. I'm being nice to you - and constructive - please be nice back.
  • Reply 20 of 22
    bestkeptsecretbestkeptsecret Posts: 3,366member
    Johan42 said:
    sflocal said:
    nealc5 said:

    cintos said:
    No good deed goes unpunished. How about Apple simply dropping the gracious hosting of free apps?

    Exactly. A large number of apps are a dollar or free. Apple could have charged a hosting fee for free apps, but they didn't. Apple could also show that before the iPhone, the price of apps was much higher, and the iPhone's app store actually lowered the cost of entry and the price to consumers.  I remember Blackberry apps costing around $3-5, or even more, for a lot less functionality and safety.

    I suppose at some point, Apple mayhave to open up the iPhone to 3rd party stores. Or allow Netflix and Spotify to use the Apple app store, but charge them a fixed fee for hosting, rather than a 15% cut of the subscription revenue.

    However, I will never use a third party app store, since I wouldn't trust it to be safe.  And the idea that the app store causes higher prices is ridiculous! 


    That rant being said, I don't understand why people are harping on Apple having a "monopoly" with the App Store.  Of course it's a monopoly.  It's THEIR phone and THEIR App Store.  I really believe the people complaining and raising a stink are app developers that feel they should get a bigger piece of the Apple pie, and not everyday Joe-iPhone-User.  They're just disguising themselves as regular users.
    And it’s MY $1000 that I used to buy MY iPhone. And since it’s MY iPhone I’d like to do whatever the HELL I want with it but can’t because Apple is a control, censor freak and a greedy company that wants to charge for EVERYTHING, and allowing anything that doesn’t come from their store is a loss of revenue. MONOPOLY!

    And no, I’m not buying Android, so shove the rhetoric right up where the sun don’t shine.

    Speaking of "up where the sun don't shine", you definitely are talking from there when you say you own an iPhone.
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