Software: Apple keeps its walled garden
Apple is eagerly hailing a “resounding victory” for the future of its App Store, said Kif Leswing in CNBC. For two years, Apple has been fighting a lawsuit from Epic Games “after the gaming company introduced its own payment system into Fortnite,” one of the world’s most popular games. Epic had been banned from the App Store after trying to circumvent Apple’s 15 to 30 percent fees. The games maker argued that Apple behaved as a monopolist by not allowing competing app marketplaces on iPhones. However, a lower court and then last week a 9th U.S. Circuit appeals panel disagreed, signaling that “Apple’s control over the App Store and the fees it charges likely won’t significantly change” anytime soon. The iPhone maker did lose on one count: Developers can now “place links inside their apps so users can make purchases outside the App Store.”
Epic made a big bet “taking on Apple’s business model” and has little to show for it, said Eleanor Tyler in Bloomberg Law. The gaming company “wanted the ability to provide alternative payment methods in-app through iOS, and it wanted the ability to run its own store through iOS.” It failed to succeed on either measure—and even has to pay Apple’s legal costs. By opening up more ways to pay for apps on the web, Epic may have created an opportunity for other software makers to save on some of Apple’s fees. That still won’t help Epic directly, “because the company’s been kicked out of Apple’s systems.” This feels like Epic was hoping the courts would help it negotiate its Apple contracts, said Mike Masnick in TechDirt. Consumers like the App Store and the security it provides, and weren’t asking for this. Epic bet that a court would rule that “‘big’ is automatically bad and anti-competitive.” So far, the courts have not.
While Apple is winning for the moment, it has still been steadily “ceding ground,” said Mark Gurman and Malathi Nayak in Bloomberg. Intense pressure from rivals like Epic, Spotify, and Match Group have inspired other changes that have “opened the App Store like never before in its 15-year history.” In 2021, it finally announced it “would let people sign up on the web for subscriptions in so-called reader apps—cloud services, video and music players, and book readers”—bypassing Apple’s fees. Apple has also made other concessions, such as letting app developers advertise lower prices outside the App Store. But for now, even with the changes, Apple’s services revenue—mostly App Store fees—hit $78 billion last year, and the money train is rolling on.