The push back Apple has received over the years with its App Store policies has been steadily increasing, but two events in the last two weeks may finally have reached the tipping point. Apple’s refusal to allow game streaming services like Google Stadia and Microsoft’s Cloud Streaming in Xbox Game Pass (what a terrible name.....) , followed by Epic’s move to get Apple to remove its immensely popular Fortnite game from the App Store have caused a wave of backlash against Apple that is the biggest I’ve seen yet. This doesn’t even take into account the controversy over the Hey email service from a few months ago. But gaming represents a massive market on mobile, being the biggest revenue generator for Apple on the App Store. But between Microsoft and Epic, Apple may have finally met its match.
Much of Apple’s power and control over the App Store during the early days of its existence the App Store was proving that a model could work. Yes, apps for mobile devices existed before the App Store, but it was nothing like the model that Apple popularized. Apple made it easy for developers to distribute apps either for free, or for a price. There is no doubt that many smaller companies have come into existence and thrived because of the App Store, but over the last 12+ years, Apple’s practices have been called into question. The issues that Microsoft and Google face with Game Streaming are separate from the issue Epic Games has, but the common thread is that there is an increasing sentiment that Apple’s policies are causing harm to developers large and small, as well as consumers. First
Apple’s statement for Microsoft’s Cloud Gaming service is that it does not allow it because it cannot independently verify all of the content in the service, and that Microsoft would need to submit every game individually into the store. This completely negates the purpose of the service, and also Netflix exists. Apple does not independently verify every single movie or TV show available on Netflix, but yet Apple allows Netflix to exist in the App Store. Apple does not independently verify every song in the world, and yet apps like Spotify exist, and are allowed in the store. Apple’s claim is that video games are interactive mediums, which movies and music are not. However, Netflix has experimented with interactive content in the past, and yet Netflix remains in the App Store.
Apple’s arguments here are very thin and show the flaws in its role as the first, last, and only judge on what can be on its platform. Microsoft literally has no recourse, even though Apple is applying a double standard and it not allowing a competing company to use its platform. It begs the question if a Netflix tried to launch today, would Apple allow it in the App Store? What about Spotify? Microsoft and Google’s services have really forced Apple to show its true hand here, and in doing so is writing the antitrust case against itself.
When it comes to Epic Games, the reason for the push back against Apple is different, but gets to the same end result. Epic Games does not like that Apple takes 30% of every transaction, even on in app purchases. The argument that Epic, and many other companies have had about this is that a 30% fee on in app purchases is too much. No one is saying that Apple should not receive compensation for hosting apps and processing transactions, but 30% on in app purchases is believed to be a number that is dis-proportionally high. Credit card companies charge a fraction of that, with the highest transaction fee in the area of 3%. Apple charges 30% for essentially the same service. Smaller developers have grumbled about this for years, but too many businesses are reliant on Apple’s app store to risk poking the bear. Larger companies like Netflix and Spotify has been careful in their criticism of the policy, but also understand that consumer backlash in a public fight between them an Apple would be split, and hurt both.
Epic Games is not a small company. Its market value is roughly $17.4 Billion US. It can afford this fight, and CEO and majority shareholder Tim Sweeny has decided it is a fight he wants to have. Epic Games has the financial capacity to take this court fight all the way to a conclusion, whatever it is. Epic is saying it is doing this for all developers big and small. Epic obviously has a vested interested in this, and their motives are not entirely altruistic. But If Epic eventually prevails, it will benefit the entire mobile ecosystem, not just Epic Games. Customers will win, all developers will win.
Apple will, of course, fight this until the end. This entire case comes down to control. Apple believes that as the company that has sole ownership of the hardware and software platform, it should have full control over what is and is not allowed on that platform. They claim it is to ensure the highest quality platform possible, but in reality, Apple makes huge amounts of money off the iPhone and the app store, and changes to that model will hurt the company’s bottom line.
The argument could likely come down to how much control there should be over what many consider a “general computing platform.”. Phones, and to a lesser degree tablets, have replaced traditional PC’s and Macs as our most used and most important computer. Gone are the days that a mobile phone is nothing more than a simple phone. They are all in one devices. Communication, camera, media consumption, media creation, gaming, productivity, and a business tool. There are entire businesses that are run on smartphones and the scary reality is that Apple could at anytime put thousands of small businesses out of business if it wanted to simply by changing a few simple policies on their platform. The belief from companies like Epic Games is that an entity like Apple being the first, last, and only arbiter of what can be on a general computing platform causes harm to the consumer.
Where does it go from here? Honestly, I don’t know. If this makes its way through every level of the courts, all the way to the Supreme Court in the US, this will take years, likely well over 5 years until we have a final conclusion. That is a significant amount of time, and the landscape could be very different even 5 years from now. What this may end up coming down to is governments needing to step in. Apple is under anti-trust investigation in the European Union over the App Store. Tim Cook faced significant scrutiny in front of the US House of Representatives a few weeks ago. Governments are notoriously slow to respond to new technology, but this seems to be different. Apple may be forced to change their practices by government regulations. Whether that happens before or after this lawsuit makes its way through the courts is unclear.
What is clear, however, is that the status quo is officially over. Apple has opened a Pandora’s box by engaging in public fights with Epic Games, Microsoft and Google. This Pandora’s box will not be closed, and changes are coming. Only time will tell as to what those changes will be.