Apple's Secret App Store Monopoly – Epic Games vs. Apple Lawsuit Explained
Apple has one secret monopoly that it uses to dominate consumers and competitors: the Apple app store. This monopoly has even led to Epic Games suing Apple over the iOS app store and led to a length court fight. This monopoly is not just affecting big companies – it’s potentially costing you extra money too if you purchase things through Apple’s app store.
Have you ever wondered why you can’t buy Spotify Premium when on an iPhone or iPad? When you go to upgrade to premium, the app simply says “You can’t upgrade to Premium in the app. We know, it’s not ideal.” with no further explanation and no direction on where to go to actually upgrade to premium. They aren’t the only ones either. You also cannot purchase Netflix, Kindle books, or subscribe to Amazon Prime in any of their respective iOS apps.
On its own, that’s pretty annoying and inconvenient that you often can’t buy certain things in an App on an iOS device, but it’s not the biggest deal. But that’s not the ONLY way that consumers are being affected here. Other companies sometimes will charge you more money to purchase things in the iOS app than if you were to buy it on their website. This is the case for apps like Audible and YouTube Music who charge consumers more money to purchase their service on an iOS device. This even led Forbes to say in an article that “Purchasing subscriptions through Apple’s App Store could be costing you hundreds of dollars each year.”
So you’re probably wondering what gives? Why are so many major companies either not letting you purchase things on the Apple app store or charging you extra money to buy through iOS apps? The answer is actually really simple but not well known by most people. Apple takes 30% of the revenue that is made from in-app purchases on anything it deems to be digital services as part of its app store conditions. This 30% revenue cut also includes all recurring revenue like subscriptions.
This gives companies that want to have an iOS app but are unwilling to pay the 30% cut two main options: they can either force users to make purchases like subscriptions off of the app which is the route that companies like Spotify, Netflix, and Amazon have taken. The alternative is that companies can pass on Apple’s 30% fee to the consumer in the form of higher prices for any in-app purchases.
If companies want to offer any App at all to people who have an iPhone, they have to go through Apple’s App Store. From there, Apple can force companies to use their payments system for in-app purchases and take a 30% cut of all of that revenue on digital services. If companies don’t like it, then they can’t let potential customers make any purchases in the app at all. This means Apple has effectively built a monopoly through their app store that most people are completely unaware of.
There has been no bigger critic and opponent to Apple’s app store monopoly than Fortnite developer Epic Games. The Company made Fortnite’s in-game currency 20% cheaper when purchased directly through Epic Games instead of through Apple’s payment system. Within just hours Fortnite was taken down from Apple’s App store with the company saying that the way Epic Games was bypassing their payments system violated their terms of service.
In response, Epic games filed a lawsuit against Apple seeking injunctive relief from the court in what Epic Games said was to allow fair competition in mobile app distribution. Epic Games vs. Apple has been a landmark case ever since.
The first ruling for the case was issued in September of 2021. Both sides would end up appealing the rulings that they lost in the case, but now Epic Games has a group of 35 state attorneys general, Microsoft, and the Electronic Frontier Foundation which have filed briefs in support of their case against Apple. This is lending support to the view that Apple does have a monopoly.
On November 14, 2022 oral arguments for the appeals case began at U.S. Court of Appeal for the Ninth Circuit. The appeal case is yet to be resolved, but it certainly seems like an uphill battle for Apple all things considered with their current app store policies.
Disclaimer: Opinions expressed in this video are my personal opinion and are for information and entertainment purposes only. It is not intended to be investment advice and you are responsible for doing research and making your own investment decisions. Seek a licensed professional for investment advice.
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