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Apple: Benevolent dictator or dragon lord?

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Sasha Planting is a seasoned financial journalist and Associate Business Editor at Daily Maverick Business.

Apple has largely avoided the regulatory scrutiny of its peers, but recent criticisms are drawing the wrong kind of attention. Everyone is watching to see how it responds.

It’s hard to imagine a life without apps, those little software programs that run on your cellphone and help to bring the world closer – whether its ordering food, playing games, listening to music, reading the news, learning the piano or chatting to family and friends – the list is endless.

We download these apps from one of two places – Google or Apple – companies that are worth a staggering $1.08-trillion and $2.05-trillion, respectively.

The late Steve Jobs, visionary that he was, saw the opportunity in 2008 when he launched the App Store for iPhone software. At the time the store offered about 500 apps. He recognised that the abundance of software could help to make the iPhone the dominant phone.

At the time he spoke of “partnerships” with developers and the creation of an ecosystem free of bugs, malware and where the privacy of users was protected.

Today, the Apple App Store has 2.2 million apps available for download while Google’s Play Store, which services the rest of the phone market, has 2.8 million apps available.

But success creates its own problems. Application developers, from Amazon and Walmart to Netflix and Spotify, have come to resent the 30% commission that Apple charges.

While it’s not strictly a fair comparison, bear in mind that credit card companies charge about 3% to process payments.

Facebook recently claimed that the commission hurt small developers (though it probably has a vested interest in saying so). But two small developers went so far as to file a class-action suit in 2019 claiming that Apple stifled innovation. 

In June, complaints by Spotify, whose music streaming service competes with iTunes, led the European Commission to open formal antitrust investigations to assess whether the App Store violates EU competition rules. 

This type of scrutiny is not new in the tech world. Other giants like Google, Facebook and Amazon have faced regulatory scrutiny for their outsized market shares. But Apple, whose iPhones make up a smaller proportion of the smartphone market, has largely avoided the controversies plaguing its social network-owning rivals.

However, as the trickle of criticism becomes a torrent there is one battle – between it and Epic Games, the developer of the best-selling game Fortnight – that could have Apple wishing it had compromised a little.

Epic got tired of complaining about the 30% commission that Apple, Google and Steam (an online games platform) charged to distribute its games. 

It was also peeved that this fee also applied to in-app purchases. These sales drive revenue for Epic (and others) who give the basic app away for free.

So it bypassed Apple and Google by developing its own payment system that makes it 20% cheaper for players to make purchases from within Fortnite. 

Predictably, Google and Apple banned Fortnite from their stores and Epic responded by suing the pair for monopolistic behaviour.

The outcome is not yet known, but it is quite likely Epic would have lost the case and the whole thing would have died down. 

Except that Apple added fuel to the fire by banning Epic’s Unreal Engine tool from the App Store. 

Unreal Engine is a gaming engine that makes it easier to create sophisticated 3D graphics. 

In one small step innocent developers, some of them small businesses, were caught in the cross-fire of two powerful companies. 

Regulators watching this space could view this as evidence that Apple has too much power and by acting in monopolistic ways, can hurt small businesses. 

Ironically it was Microsoft that leapt to the defence of the developers, warning in a court filing that Apple’s move would impact and harm the work of other developers that rely on Epic’s Unreal game engine.

There is no doubt that Apple’s App Store has become a multi-million dollar, sprawling economy that sustains not just Apple, but an entire ecosystem of developers and small companies.

How healthy this is, and how healthy it remains will depend on Apple: will it adapt and change or will it harden its attitude? 

If the latter it will draw greater oversight and probably interference from the regulators which are less disposed to the tech-giants than ever before. BM/DM

Sasha Planting is a seasoned financial journalist and Associate Editor at Business Maverick 

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