Thursday, Oct 07, 2021, 16:06 Economy

App Store Business Model Probably Falls - Comment: How Apple Gambled it Away Itself

In many respects, the signs on the IT market are pointing to change, because never before have international competition regulators been more serious about significantly restricting the tech giants' freedom of action. Apple, too, has been targeted for some time and has had to come to terms with the fact that it can no longer do what it wants. It has had to deal with several blows in recent months. The long-standing ban on developers being allowed to refer to external store systems has already largely lapsed. First, courts in Japan and South Korea threw a spanner in the works, followed by a ruling in the USA.

Now it's Europe's turn. Currently, just a Dutch court ruled against Apple, but in view of the EU-wide efforts, the course now seems clear. Thus, the ruling states that Apple is guilty of anti-competitive behavior due to the store conditions. The parent company of the dating portal Tinder had filed the lawsuit, arguing that Apple was unlawfully preventing direct communication with customers regarding payment processing. Although no specific penalty has been imposed yet, the outcome is almost dramatic for Apple. It seems very likely that the provision to have to use Apple's in-app system has thus fallen across Europe.

Why Apple simply gambled it away.
With every unfavorable decision for Apple, the same behavior was observed: Apple always reacted with minimal possible movement. It really seems as if the company is fighting for every single day on which they can still force a 30 percent commission on store sales. The "agreement" with developers, according to which no reference to an external store should be allowed - but the specification of a mail address in order to inform about alternative payment methods, was particularly ridiculed.



Apple thus missed the chance to take the reins of action itself. The matter might have escalated much less if Apple had implemented the half-baked and unnecessarily complicated "Small Business Program" more consistently. An early "Everyone only pays 15 percent" or an even more daring "We'll lower the fees for everyone to the usual 10 percent, but processing via the store remains mandatory" would have taken the wind out of the sails of the legal efforts. If Apple was really primarily concerned with security and not with easy-earned billions, this reduction would have largely refuted the arguments against the store requirement. Apple, on the other hand, showed the competition regulators what its real interest is.

Current development: no side wins
Currently, on the other hand, it looks like the worst possible outcome for all parties involved. Apple will probably have to unconditionally allow external purchase processing very soon - which means that customers will increasingly have to register with third-party providers for in-app purchases and deposit payment data there, opening the door to scammers even more than ever. At the same time, all the major companies, who are responsible for the majority of store sales, are likely to abandon their own payment systems in the near future. Apple will not only lose billions in revenue, but the quality of the App Store could also suffer further. "Commission gone, security gone," would then be the conclusion.

It has already been officially announced that references to external stores will be officially permitted from January under certain conditions. At the same time, Apple has to react to the US ruling, according to which the release has to be even more far-reaching. At this point, it is not yet known how Apple will proceed exactly. In view of the tactics of the last months and years, it is to be feared that Apple will continue to do everything to make providers use the Store system and make alternatives uncomfortable. This in turn, however, could have further repercussions. In the US, there is even talk of forcing alternative app stores - in this case, Apple would have lost completely and the iPhone world would change rapidly.

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