Apple estimates there are around one billion active iPhones worldwide, used by their owners to stay in touch with friends, make payments, check emails, take photos, listen to music, watch videos and browse online. In just over 14 years, iPhones have become central to the lives of billions of people and have helped make Apple one of the richest and most powerful companies on the planet.
Much of the success derives from the choice – more or less conscious – of the numerous users to enter a system that is often defined as “closed”, where an endless choice and at the same time a strong control exercised by Apple coexist. in this way to be able to guarantee the safety of its customers and services.
The high level of control is not a problem in itself, but it can become so when it depends on a single large company that manages it, with a monopoly logic and with the risk of abusing its dominant position. This is why in recent times Apple has gradually become the focus of the attention of the main antitrust authorities in the United States, the European Union, South Korea, Japan, Australia and several other countries. The investigations, and some measures already taken, intend to reduce the risk that the strong control by Apple damages the competition, especially in the sector of the distribution of applications for smartphones.
App Store
On iPhones (and iPads) the only way Apple allows to install applications is through the App Store, its online store on which There are around 1.8 million apps to choose from. Initially Steve Jobs, the co-founder of the company, was not very keen on allowing users to install apps other than those produced directly by Apple: he believed that they could be less secure and above all that they could compromise the functioning of iPhones at the time. recently born and with some stability problems of their operating system.
Finally Jobs was persuaded when the new distribution system was perfected and, later, the purchase of the applications. The App Store was introduced in 2008: for the first time it gave the possibility to producers other than Apple to publish and distribute applications, after having passed a series of tests on their reliability and safety by Apple. It was an instant hit, and over the years it became a major source of revenue for the company, following the introduction of a fee of up to 30 percent that developers must pay for every paid download of their application by users.
Hardware + software
The path chosen by Apple mirrored that previously adopted for computers based on controlling every aspect of its products as much as possible. All in all a simple principle, but which has always distinguished the company from its competitors: to produce devices (hardware) that are strongly integrated with the operating system and the programs (software) that will make them work.
Only iPhones can use the iOS operating system also produced by Apple, unlike the Android operating system which can instead be used on very different smartphones and of various brands (there are more than 1,300 types in circulation).
This deep integration had shown some limitations in the computer sector, with few programs available for a less popular Apple operating system than Microsoft's Windows (usable on many different computers), while it proved successful in the case of iPhones. Especially in the early period, iPhones were much more stable than numerous Android models, which used an operating system not specifically designed for their characteristics, consequently requiring some compromise.
Rules
This was one of the reasons that prompted Apple to introduce very strict rules for its App Store, asking developers to respect them to the letter, under penalty of removing the their applications from the service and consequently the inability to sell them to users. Not a small limitation, especially now that every app has the potential to be installed on hundreds of millions of iPhones around the world.
The iPhones and the App Store have made possible the birth of a new market, that of applications, which has since expanded thanks to the introduction of similar models on Android and other operating systems for smartphones. On the latter, the constraints for developers are lower than those imposed by Apple, not only from the point of view of security rules, but also of fees.
For those who produce paid apps for iPhones, there is no way to avoid commissions on each sale by up to 30 percent, just as there are no very simple possibilities to divert payments outside the App Store, so as to avoid the fee charged by Apple. Some developers have also found themselves having the company as a direct competitor in several industries, and it's not always a pleasant experience.
Competition
Years ago, when iPhones existed for a few years, a small market niche had formed with several developers offering applications on the App Store to transform the flash of smartphones in a small torch. Some of these apps were paid, while others were financed through the advertising displayed within them, guaranteeing considerable revenues to those who had created them. In 2013, Apple introduced a “flashlight” function, directly within iOS, suddenly decreeing the end of those applications and destroying the business model of their developers.
There are also other forms of competition that the managers of some of the most popular apps do not like. Spotify, one of the largest music streaming services, has long complained that Apple is competing unfairly by offering the Music app pre-installed on iPhones to access its paid music services. These are inevitably promoted more prominently than those of Spotify, which for this reason has launched several legal initiatives against Apple.
Commissions
The company does not disclose its revenues linked to the App Store, but according to various market analyzes it is estimated that in 2020 alone the service earned 22 billion dollars. It is a huge figure and much higher than the management costs (however not small) of the infrastructure that Apple has to face to maintain the service of control, distribution and sale of the applications produced by the developers.
The closed system does not seem to be perceived as a problem by millions of Apple users, but according to various observers and consumer associations this is due to the lack of awareness of the savings opportunities that could arise from a more open system. Lower developer fees, for example, could translate into lower app prices and save iPhone owners some bucks.
Apple claims that the fee of up to 30 percent is required to maintain the quality of the App Store and has consistently noted that the percentage is in line with what other application delivery systems require. In principle this is true, but the company fails to report that the first successful application store was the App Store and that it was Apple who chose the commission costs, then imitated by the others.
Over the years, however, the company has softened these positions, giving the developers something, as pressure from antitrust authorities increases and the risks of finding themselves with more rigid and binding regulations by lawmakers. For example, Apple has reduced the commission for all developers who produce less than a million dollars in revenues per year from their App Store to 15 percent, a choice that has in any case received criticism because in fact it only marginally affects video games, that is. the most profitable applications.
Epic Games vs Apple
In August last year, the company Epic Games, producer of the famous video game Fortnite, tried to undermine this system by suing Apple. The charge was to disallow the download of the video game from services for applications other than the App Store on iPhones (the App Store is the only system available) and to prohibit payments from systems other than those managed by Apple, which had removed Fortnite following some attempts by Epic Games to circumvent those rules. Last September, a judge acknowledged that Apple had acted within the terms of the contracts, although it noted that the company has control over much of the sales of video game apps, producing large revenues.
Antitrust
Beyond the ruling, for which Epic Games will appeal, the legal matter recalled how much of the competition laws, especially in the States United, are not opposed to de facto monopolies, as long as companies do not exploit their dominant position to harm final consumers, even before competing companies.
That doesn't mean Apple and the other big tech companies are completely free to do what they want. In recent times, legislative and antitrust initiatives have been launched in various countries to regulate a sector that has grown very quickly, often exploiting gray areas in existing laws, conceived when the business world was very different from the current one, especially in the technological and communication.
The most immediate risk for Apple is to suffer heavy fines from the European Union, which is investigating various areas of the large US technology companies, and other countries that are analyzing their business practices. However, Apple has enormous financial resources and even multi-billion dollar fines are likely not to scratch its balance sheets too much.
New laws
On the other hand, things could get complicated for the company in the case of the introduction of new laws, especially oriented to services for smartphones starting with those for the distribution and sale of applications.
In the United States, for example, the Open App Markets Act is under discussion, a legal initiative carried out with the collaboration of Democrats and Republicans to force companies like Apple to offer alternatives to their App Store, giving the possibility to install a different one. managed by third parties. The bill also includes a change that makes it possible to purchase services within applications through different payment systems.
The US Congress is also working on other legislative initiatives to reform “Big Tech”, that is, the sector of large technology companies which in addition to Apple includes Facebook, Amazon and Alphabet (Google), to name a few of the most famous. Proposals range from preventing smartphone operating systems manufacturers from providing pre-defined applications with special treatments, at the expense of competing apps, to the need for companies to separate their application stores into separate entities from the rest of their businesses.
Although the commitment to their implementation is two-party, it is not certain that these proposals actually become law. “Big Tech” exerts a strong influence on Congress and among US lawmakers there is always the concern that an excessive amount of rules could damage or slow the development of companies that have become central to the economic system, guaranteeing millions of jobs. Similar initiatives could be more successful in the European Union, where the need to better regulate a sector mostly held by foreign companies and with interests that do not always coincide with those of European countries is increasingly shared.
Preferences
Apple has always argued that changing the current system would harm users in the first place, making iPhone services less secure and reliable and exposing them to increased privacy risks. Store for applications alternative to the App Store will not be able They should guarantee the same level of control and security as Apple does, company officials say. It is no coincidence that in recent years the company has greatly promoted the aspects related to the protection of the privacy of its users, making it one of the key points of its commercial communication.
Also thanks to this approach, Apple has received, after all, less criticism than other large technology companies such as Facebook (Meta) and Google, which almost entirely base their revenues on the sale of online advertising based on systems to track (more or less in depth). user activities. Using Google's services or Meta's social networks is almost inevitable, an obligatory choice, unlike iPhones and other Apple products that derive from a deliberate choice on the part of those who buy them.
Beyond the awareness of this type of choice, the iPhones in circulation clearly show what the preferences of hundreds of millions of people are. Most of these would likely continue to use the App Store even if there were workarounds to install on their iPhones. Apple would lose some revenue, but still continue to be one of the largest and most powerful companies on the planet.
