(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 is now a nearly $ 2 trillion company that sells more than 200 million iPhones annually. In the time it took to read these two cents, Apple sold 60 handsets.
Although the most valuable company in the world has changed, the rules by which it governs the App Store are not. It’s like a 120 pound Great Dane who still thinks it’s a puppy. It has failed to adapt to the increased role it plays in the smartphone market. A dispute with the makers of the popular Fortnite game app – in addition to new Apple antitrust probes by the European Union and the US Department of Justice – brings that failure to light.
App developers, such as the owner of Fortnite Epic Games Inc., have two complaints. First, Apple takes a 30% cut of all revenue they make through the App Store (the fee drops to 15% for subscription-based apps after the first 12 months). Second, the App Store is almost the only way to get your product on an iPhone. So unless you uninstall your app for free, you will have to pay Apple to run it on devices that have their iOS operating system. Developers call this “the Apple Tax.”
This was less difficult when Apple was the challenger in mobile devices. Nokia sold 468 million mobile phones in 2008, almost 40 times as many as Apple. By exercising greater control, Apple was able to create a compelling user experience, and if customers or developers did not like it, there were plenty of alternatives. Besides, third-party apps were still a relatively new phenomenon on smartphones. In the pre-4G era, mobile devices had not yet replaced so many of the features of the personal computer.
Today, Apple has a foreign attitude towards many of the smartphone market, but it insists on the same rules. Its defense is “consistency.” This is a bad argument. It was once illegal in Britain to house a Catholic priest, but rules change if they stop making sense.
Fortnite has handed over so much of its cash to the owners of the smartphone operating system, and Fortnite has made a standoff with Apple and Alphabet Inc.’s Google (which operates its own app store for Android devices). The game developer, including Tencent Holdings Ltd. has a 40% stake, says it will stop paying Apple and Google all share of revenue. The giants of Silicon Valley responded, as Epic knew for sure they would, by throwing their app out of their stores.
Google has been in Europe’s anti-trust cross-hairs for some time, but Apple also guarantees control over the pressure it puts on independent app developers, as my colleague Tae Kim wrote. Facebook Inc., a frequent target of Apple Chief Executive Officer Tim Cook, joined the rally on Friday.
Apple’s refusal to compromise is part of the integrity that characterizes the company, but there’s something else as well: It’s never encountered a serious anti-trust calculation. Maybe it’s thinking it’s bulletproof.
Just last week, a beta version of its next mobile and desktop device operating system demonstrated Apple’s plans to get news story readers by clicking on a link in a web browser to its News app, and away from news organizations’ own websites . This seems characteristic of a company that does not seriously consider whether its behavior can be considered anti-competitive.
Apple says its market has room for costs that need to be covered. But if it is convinced that its App Store guarantees the best experience, then it might have to let competing stores operate on their devices as well. Then users can decide for themselves. Perhaps the best response to accusations of anti-competitiveness is the introduction of competition.
This column does not necessarily reflect the opinion of the editors or Bloomberg LP and its owners.
Alex Webb is a Bloomberg Opinion columnist covering Europe’s technology, media and communications sector. He previously dealt with Apple and other technology companies for Bloomberg News in San Francisco.
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