Hmm.
So, okay. Apple/Valve/Google/GoG/etc run digital storefronts. I believe that the industry standard today is a 30% cut for the vendor.
So one option is what the vendors would like to do, which is that all purchases should go through them.
Apple is probably a special case, because Apple both owns the platform and doesn’t allow for alternate app stores. If you want to sell software to iOS users, you must go through Apple.
Google also owns a platform. Google does permit for alternate app stores, but doesn’t default to adding any. In practice, I suspect that the defaults are very powerful – only a small percentage of users will probably add a non-default app store – but people who do want to can add alternate app stores.
Then you’ve got Valve and GoG. They don’t own any platforms (well, okay, I guess Valve does in the form of the Steam Boxes and the Steam Deck, but they’re a small portion of the actual consumers using the digital store; doesn’t really work the same way). Basically, the bulk of people using these needed to “opt in”. In the case of Windows users, I guess the default is the Microsoft Store, which I’ve no familiarity with. Steam is packaged in Debian and I assume most Linux distros, but not installed by default on any distro that I’m aware of.
I don’t know what policies for non-Apple platforms are on in-app purchases, whether the digital storefront needs to get a cut. I suspect that at least for Steam, they likely do, just because Bethesda sells credits for their in-app purchases on Steam, but I haven’t read up on that. I dunno about this “steering” stuff. I know that Valve has cut deals to let other people “link” purchases on other stores to Steam, but I don’t think that they’re obliged to do that – they’re doing it because they think that it’s worthwhile to miss out on some sales revenue if they can help build the userbase that they can put a store in front of.
So there are varying levels of ways in which the vendor is privileged by the platform to which they are selling software, from “nearly guaranteed a monopoly on selling for that platform” to “no benefit at all”.
But all of them rely on a commission from the software that’s being sold through them.
I’m onboard with the idea of them getting a percentage take. I dunno if 30% is the right number – my own gut feeling is that that’s high – but they’re legitimately providing services. And for at least Steam and GoG, they’re competing against each other (and I guess Microsoft Store, for some platforms), so that’s even in the presence of competition.
Another option is to have no constraint on a cut for in-app sales (or “steering”, which I think is probably functionally pretty similar). That is, have app stores obligated to permit listings even if apps direct someone to use another purchasing method, and allow that method to not let the app stores have a cut.
The problem with this route is that the end game would, to me, seem to be that publishers simply do a $0 “demo” listing to market their product on a digital store, and then have someone “pay to purchase” full game content in-game or via another payment mechanism. The app store operator isn’t going to get any cut then. Like, that’s not really a viable route for them.
Hmm.
I think that a viable solution should have the following characteristics:
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If someone’s buying the product through the app store, then the app store vendor should be able to get a percentage take of that revenue. That’s basically how brick-and-mortar retail works. The publisher shouldn’t be able to just route around the app store’s payment mechanism to avoid that. It’s not clear to me that what the EU presently is asking for is compatible with that.
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The app store should not be able to have a monopoly on a platform. I don’t think that there’s any justifiable business case for letting companies set up that kind of vertical monopoly. While Apple doesn’t lose money on phones, console vendors do lose money on hardware and run a market that they have a monopoly over, so this constraint would break their existing business model. I’m okay with breaking that, though I can see maybe phasing it out over a generation, since they made their existing investments based on the expectation that they could do so.
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I’d like buying from one app store not to force a user to be unable to use that purchase with services from another app store in the future. Maybe one way to deal with this would be to mandate that app store permit “transfers” of ownership, but be permitted to charge a percentage fee for that transfer. Like, if I buy something from GoG, then Valve has to let me transfer that purchase to Steam. That still lets app stores compete on and pay for things like services (e.g. Valve provides Proton and Steam Input and stuff like that), and lets them compete on price, but doesn’t let them lock a user in permanently just because they bought a product on that service. It also has some other nice perks, like dealing with app stores that go out-of-business – and while no big ones have gone under, that is going to happen in the future at some point.
Apple allows alternative marketplaces on iOS in the EU.
Alternative app marketplaces are unique kinds of iOS apps that you can use to install other apps on your iPhone. You might alternatively be able to download an app directly from a developer’s website through web distribution. Alternative app marketplaces and web distribution can be used in addition to the App Store. Users in the European Union can install an alternative app marketplace on iPhone by downloading it directly from the website of the alternative app marketplace developer.
I dont believe you valve or gog takes hold any merit since they are entirely opt in, even on the steam deck it runs linux meaning you can get gog on it.
For Apple and Alphabet, this lawsuit does not seem to be addressing the no other app stores argument, but the fact that they promote their own apps and services over competitors. I don’t personally have an issue with this and do not believe it needs to be a law that you cannot promote your own services over competition in your own appstore.
My opinions are similar with hardware. Selling the iPhone gets you IOS with the apple appstore. If you want another appstore you shouldn’t be looking for the iPhone. If this feature was truly important to customers another phone company would have came along and created an os with this feature.
For Apple and Alphabet, this lawsuit does not seem to be addressing the no other app stores argument, but the fact that they promote their own apps and services over competitors.
I agree that the EU stuff here seems not to be aimed at that, but I’m thinking through what makes the current situation for iOS problematic, and to me, that seems like it’s a big part of it (and maybe addressing that would be more important than changing policy associated with a store). Like, the current situation on iOS, as I understand it, is that:
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Apple doesn’t let other app stores than their own offer apps for iOS.
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Apple sets a 30% take of all revenue in their app store.
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Apple disallows in-app purchases without that 30% cut.
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Apple doesn’t allow apps to direct someone to some other mechanism for feature activation or similar that bypasses that 30% cut.
When you combine all of those, Apple’s got a pretty potent monopoly over iOS users, and is leveraging that pretty hard. Like, once you’re in the iOS ecosystem, you’re basically totally locked in: Apple has no competition.
But the point then becomes, where do you make changes to address that? I am not sure that the EU is aiming at the right spot, because I suspect that if app vendors are simply allowed to direct people to another activation route, that you’ll wind up, down the line, with $0 “demo” apps and then all sales taking place outside Apple’s app store. That’s also problematic.
That’s why I was suggesting, instead of disallowing app stores from preventing app vendors from directing people to alternate payment routes, that it’s better to disallow app stores from having a monopoly on a platform and mandate that app stores permit “transfers”, but permit for a fee to be charged for those. Like, if I want to buy an app from an alternate app store and then transfer that purchase to my app purchase from Apple’s app store, I can…but Apple can charge a fee for that transfer. That makes for a competitive app store environment, and avoids both the monopoly situation that exists today and the “store full of $0 apps” scenario.
Selling the iPhone gets you IOS with the apple appstore. If you want another appstore you shouldn’t be looking for the iPhone.
Ehhh. The problem with this is that it’s incredibly expensive to create a mobile phone ecosystem. Like, there are basically two options today: Google and Apple, with some fringe providers out there with far smaller ecosystems. Yes, there’s a choice…but the choice is basically between Google or Apple, and whichever you choose is locking you into one of those. Yeah, okay, Google is less-restrictive than Apple today, but if they can do what Apple does and chooses to do so, then you’re basically looking at Monopoly A or Monopoly B.
Like, I think that being a platform provider is basically a case where being a natural monopoly arises. Yes, no one platform provider may control the whole phone market, but each essentially can control their platform.
A natural monopoly is a monopoly in an industry in which high infrastructural costs and other barriers to entry relative to the size of the market give the largest supplier in an industry, often the first supplier in a market, an overwhelming advantage over potential competitors. Specifically, an industry is a natural monopoly if the total cost of one firm, producing the total output, is lower than the total cost of two or more firms producing the entire production. In that case, it is very probable that a company (monopoly) or minimal number of companies (oligopoly) will form, providing all or most relevant products and/or services. This frequently occurs in industries where capital costs predominate, creating large economies of scale about the size of the market; examples include public utilities such as water services, electricity, telecommunications, mail, etc.[1] Natural monopolies were recognized as potential sources of market failure as early as the 19th century; John Stuart Mill advocated government regulation to make them serve the public good.
Most of Apple’s costs are fixed – the engineering work to do an OS or hardware is the same no matter how many users you have. But the revenue is variable, depends on how many users you have. That makes it really hard to unseat an incumbent, because you have to come in from a position of no revenue.
Every iOS user has a lot of lock-in – not just due to familiarity with the OS’s UI, but due to all the money they’ve spent on the platform. It’s not easy to walk in with a new platform and get those users.
If a platform vendor is also allowed to control retail sales for that platform, then it permits for vertical monopolies: you can use dominance in one area to extend to dominance downstream and upstream. Like, Apple is off doing CPUs and controlling sales of products for their platform.
https://en.wikipedia.org/wiki/Vertical_integration
A monopoly produced through vertical integration is called a vertical monopoly
Apple has used the vertical integration strategy for 35 years and is one of the most successful companies in the technology industry. Apple centered its business strategy on its own development of integrated hardware, software, and latterly services. They design most of their products in-house, and do not allow their hardware and operating system to be licensed out, which allows the company to apply its company vision to its products.
Large companies such as Apple are more likely than smaller companies to employ vertical integration, as they have more resources to manage each stage of production (e.g. major expansion and funding). Implementing a vertically integrated strategy has helped Apple become a leading platform company; integrating their software (through APIs for third-party application developers) with their own hardware, across all the devices and services they offer.
Vertical integration allows Apple to control production from beginning to end. Other companies may follow the Apple model, but may not see success for some time, both due to the cost of entering the market and taking on the currently successful incumbent, but also by innovating their products to make them more appealing in the marketplace than the current incumbent. Vertical integration requires a company to focus not only on its core business, but also on several difficult areas such as sourcing materials and manufacturing partners, distribution, and finally selling the product.
Another major success of Apple’s, is the forward integration with their retail stores, allowing them to sell their products directly to customers (helping customers to buy and use Apple’s products and services), additionally helping them to control the prices of their products, and thus to maintain high-profit margins when they do.[20] Apple is also known as one of the world’s leading “orchestrators” as they exert control over the entire value chain, but do not do everything in-house (e.g. assembly of iPhones by manufacturing partner Foxconn).[21]
Like, that’s a huge vertical monopoly. Monopolies lead to market failure. If you’re Apple, that’s just peachy. But if you’re a consumer, that’s awful. And if you’re a market regulator, avoiding market failure, whether due to monopoly or another factor, is one of the major reasons for your existence.
I still feel you are not forced to buy apple, so therefore the idea of an IOS monopoly does not hold water because every apple user has the choice of android which has alternative app stores. Alternatively, another work around which concedes to both of our points is allowing iPhones and android devices to run other os’, meaning a new company does not need to have the hardware and existing apple users can switch if they want.
I still feel you are not forced to buy apple, so therefore the idea of an IOS monopoly does not hold water because every apple user has the choice of android which has alternative app stores.
Well, today. But let’s say that we say “it’s okay for a platform provider to not allow alternate app stores”. Then, let’s say that users do what I expect you’d want them to do – choose Android as the “less walled garden” option, so they have access to alternate app stores. What happens if Google waits until they’re well and entrenched, down the line, and then does what Apple’s doing today? I mean, you’re picking them based on what they’re doing today. That doesn’t mean that Google has any contractual obligation to provide you with the option of alternative app stores.
I guess maybe a market regulator could say “well, we’ll cross that bridge when we come to it”.
Another issue is that my guess is that a number of people don’t understand the future costs of their purchasing decisions. I suspect that a lot of people buying their first iPhone don’t really have a handle on the specific policies (or potential future policies) of their platform vendor and its economic implications. I mean, yeah, I’m willing to place a certain onus of individual responsibility on people, but I bet that the typical person just doesn’t have the information to make that call at the time that they’re making it. Like, if I’m buying a particular Android phone, purchasing one doesn’t lock me into that vendor down the line. I can say “I was unhappy with my experience with a Samsung phone” and get a phone from some other vendor next time I buy a phone There’s pretty limite lock-in there, just to whatever phone-specific configuration the phone vendor sets up. But my platform decision has a very large amount of lock-in to that platform.
Alternatively, another work around which concedes to both of our points is allowing iPhones and android devices to run other os’, meaning a new company does not need to have the hardware and existing apple users can switch if they want.
That does help, in that it breaks the hardware-software vertical monopoly. But my bet is that being even an OS provider is something of a natural monopoly as well – think of how sticky Microsoft’s presence was on the desktop. So being able to extend one’s presence as an OS provider to controlling retail for that platform is a pretty significant way to extend a vertical monopoly.
If an iOS user can run Android on their iPhone, yeah, they don’t have to buy a new device…but they lose out on their iPhone app library, which along with UI familiarity is I think where the real barrier to switching is.
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