Elon Musk and others’ complaints about the fees Apple and Google ‘s App Stores charge developers are putting pressure on Congress to act in its lame-duck session. One legislative option the tech companies’ critics favor is the Open App Markets Act. The bill seeks to set new rules for how app stores operate, but the bill is based on a flawed premise. Proponents claim that regulations are needed because the two biggest app stores, Apple ‘s and Google’s, are monopolies and that allows them to charge inflated fees. Neither of those things are true.
Whether the Apple App Store and the Google Play Store have monopolist market shares depends on how narrowly one defines their market. You could make a case for McDonald’s having gatekeeper power over Big Macs and Disney over Mickey Mouse if you defined the market narrowly enough. Similarly, advocates of this legislation focus solely on mobile devices to show a high enough market share to indicate these two app stores having monopoly power.
But defining the market that way ignores the average 22 connected devices in Americans homes, those devices’ attendant app stores, and the opportunities they afford developers to offer products in alternative distribution devices. These devices include desktop computers, laptops, tablets, smartphones, gaming consoles, smart displays, smart speakers, digital media players, vehicles, smart TVs, smart watches, appliances, and home voice assistants, among other devices. These devices come with their own app stores that stretch far beyond the Apple App Store and the Google Play Store.
The majority of app revenue comes from gaming, subscription-based video, and music streaming services, so it would be a mistake to disregard these competing devices and platforms when evaluating the current app market.
Instead, what is needed is a much wider policy lens that provides the full picture of what can (and could yet) be used as a substitute for an iPhone or a phone running the Android operating system.
As for the assertion that Apple App Store and Google Play Store are charging inflated fees because of their monopolist power to do so, the app store commissions charged by both companies are in line with commissions charged by other app stores. This rough consistency across the industry at least suggests a lack of monopoly power and profits by Apple’s and Google’s app stores.
Indeed, far from being exploited by the scope and size of the two largest app stores, developers derive significant advantages from the economies of scale inherent in the massive distribution systems of the Apple App Store and Google Play.
As of January 2022, Apple has paid out $260 billion to iOS developers, a figure that has increased steadily for years. As of July 2021, Google has paid out $120 billion to Android app developers. The size and scope of Google’s and Apple’s app stores enable developers to achieve distribution and profitability that would otherwise be unlikely or perhaps even impossible. These two roads to success at scale exist alongside all the other options for developer success in the marketplace.
The Apple App Store provides an additional benefit to developers by enabling them to piggyback on Apple’s valuable reputation for security. Developers whose apps meet Apple’s high standards for inclusion in its app store can skip starting from scratch to earn that trust with consumers. This increases their efficiency in catering to consumers who place a premium on heightened security and quality in apps. Again, this path sits alongside Google’s more open and permissive model and all the other options for app developers to distribute their products.
Read the full article at Barrons.