App Store Under Fire: Should We Expect Apple to Change?

The Supreme Court has ruled that an antitrust lawsuit against Apple and its App Store can move forward. Now users and developers can sue Apple for monopolistic practices. At the core of the lawsuit is that any apps for iOS must be downloaded from the App Store (unless you jailbreak, which is a dying practice anyway).

This is a direct attack on Apple’s business model. As-is, the company takes a 30 percent cut of all App Store revenue, be it sales or in-app purchases. But if you think a Supreme Court ruling will lead to more equality in revenue sharing and the ability to download apps from anywhere, think again. Here’s the good, bad, and reality of it all.

Red (The Bad Stuff)

  • A flashy court case would likely damage public opinion of Apple and the App Store. That’s bad for developers, too.
  • The 30 percent cut may get worse if Apple has to “prove” its revenue split is fair.
  • A workaround for publishing apps to the App Store would likely be clumsy.
  • Apple would likely restrict any third-party app download portal.

Green (The Good Stuff)

  • App Store revenue sharing could become more equitable if Apple fails to demonstrate that a 30 percent cut is ‘fair.’
  • Developers may be able to self-host apps for download and have Apple ‘notarize’ them.
  • If Apple loses the lawsuit, possible damages could be retroactive.

Refactor (Our Take)

Here’s Apple’s retort to the court:

Today’s decision means plaintiffs can proceed with their case in District court. We’re confident we will prevail when the facts are presented and that the App Store is not a monopoly by any metric.

We’re proud to have created the safest, most secure and trusted platform for customers and a great business opportunity for all developers around the world. Developers set the price they want to charge for their app and Apple has no role in that. That vast majority of apps on the App Store are free and Apple gets nothing from them. The only instance where Apple shares in revenue is if the developer chooses to sell digital services through the App Store.

Developers have a number of platforms to choose from to deliver their software – from other apps stores, to Smart TVs to gaming consoles – and we work hard every day to make our store is the best, safest and most competitive in the world.

In a nutshell, the lawsuit says that because iOS apps must be distributed via the App Store, Apple has created a funnel it controls mouth to stem… and has created a revenue sharing and pricing scheme that is unfair.

Apple was banking on a 1977 case involving price fixing and concrete blocks to frame its argument; in that case, the Supreme Court decided only direct customers can sue for antitrust violations. Apple asserts users buy apps from developers, and its App Store is simply a conduit. The Supreme Court insists that customers pay Apple, which then distributes funds to the developers after taking a 30 percent cut. If users paid developers, who were then billed by Apple for using the App Store, things would be very different.

“The plaintiffs purchased apps directly from Apple and therefore are direct purchasers,” the court opinion states, citing the aforementioned ‘Illinois Brick’ case. “At this early pleadings stage of the litigation, we do not assess the merits of the plaintiffs’ antitrust claims against Apple, nor do we consider any other defenses Apple might have. We merely hold that the Illinois Brick direct-purchaser rule does not bar these plaintiffs from suing Apple under the antitrust laws.”

The Supreme Court also didn’t rule on anything specific to the App Store; it simply said Apple’s argument that the ‘Illinois Brick’ case applied directly to the App Store was misguided, and customers could sue Apple as they see fit.

As we’ve noted before, Apple is actually daring developers to sue. This all comes down to whether developers are Apple’s true customers, something the court touches on in referencing the $99 annual fee and $0.99 bottom-level pricing for paid apps. And as we’ve said before, developers suing Apple is highly unlikely. All Apple would have to do is relax its 30 percent cut to, say, 15 percent, and developers would forget this lawsuit was ever a thing. (I’m not being glib; better revenue sharing would make everyone from indie devs to the Spotifys of the world very happy.)

Still, Apple has one silver bullet in its revolver: the web. The iPhone was launched without the App Store, in part because Steve Jobs thought web apps would work just fine. Many apps in the App Store would work as web apps, and this removes Apple from the equation altogether. Apple doesn’t monitor or control web apps, has nothing to do with pricing of services on the web, and allows anyone to save webpages to their iPhone home screen for use as web apps. (If you dislike the App Store, you’re going to hate trying to keep up with JavaScript libraries for web apps, though.)

Finally, developers should know that, if there’s ever the opportunity to distribute apps via some third-party app portal to iOS, they shouldn’t expect a smooth experience. Though there are plenty of really solid complaints about the process of distributing apps via the App Store, the overall experience is good. If Apple were forced to create a side door for app distribution because of a future lawsuit, expect the resulting scheme to make AWS look simple and user-friendly. If it were to allow a secondary source to launch an app distribution service, the fight for notarization, security, and privacy would bog that process down immediately.