Apple Is a Different Kind of Monopoly

In what is yet another demonstration of Apple's outsized market power, the tech giant has said it cannot distribute a brand new subscription-based email app Hey — developed by the team behind all-in-one productivity tool Basecamp — via its App Store unless the makers offer a subscription option that can be purchased from within the iOS app during sign ups.

The timing of this development is all the more incredible, what with Apple's WWDC developers conference kicking off in less than a week and the E.U. opening a twin antirust probe into its App Store and Apple Pay practices, calling out the company for its alleged "gatekeeper role when it comes to the distribution of apps and content to users of Apple's popular devices." Let's break this down -

• Third-party apps that offer some kind of a subscription typically need to route the transactions through Apple's payments system (section 3.1.1) every time a user signs up, for which the iPhone maker takes a 30 percent commission. But for subscribers who already have an account with the platform and are simply signing in, the policy doesn't apply. To account for this cut, companies raise the subscription fees, passing on the burden to the customers. For example, Google sells its YouTube Premium service for $11.99 per month via the web, but for $15.99 per month on the App Store.
• Also, the App Store rules have a carve-out for paid subscriptions in "reader" categories like music, video, and magazines, thereby exempting major services like Netflix, Dropbox and Spotify from having to allow customers to sign up for or subscribe to their services on the iPhone or the iPad. This is also the same reason why you can't buy Kindle ebooks directly on iPhones and iPads.
• The Hey app does the same thing by not offering sign ups, but in giving select popular subscription apps preferential treatment and by inconsistently enforcing App Store policies, Apple is clearly putting itself in antitrust warpath and only succeeding in making the case against it stronger. While Apple has all the rights to attach a price tag to allow developers to join the lucrative platform that it's painstakingly built and demand them to play by its rules, its inconsistent treatment of apps belonging to different categories is a fine line that needs to be more transparent.
• The real issue here, then, isn's the arbitrary interpretation of the App Store policy (although it is), but the 30 percent cut Apple takes for every sign up on an iOS device. Allowing a few apps from powerful players to circumvent the rules is one thing, but it's altogether a different issue if this gate is opened for more apps, thus fundamentally altering the iOS ecosystem as we see it. (Google's Android, in contrast, doesn't impose this restriction, nor does it prohibit users from installing apps from non-Play Store sources — although it's not always secure.)
• Compounding the matter is the matter of defaults, which Apple has time and again used to lock users into its ecosystem and "allegedly" crush competition. Apple Music is by default integrated with Siri and HomePod, making playback using rival streaming services a cumbersome process. Although one can now say "play Beach House on Spotify," it isn't as easy as mouthing "play Beach House," which pulls the catalogue off Apple Music. What's more, auto-enrollment and strategic defaults can be set in ways that leave users worse off, potentially leading to invasive privacy violations.
• Apple isn't a monopoly in a typical sense, and iOS market share is nowhere closer to Android, but it does benefit from from being a monopoly on iOS: Unlike Android, the only way to use iOS (or iPadOS) is to buy an iPhone or an iPad, and the only legitimate way to download and install apps is through the App Store. Apple has a virtual monopoly over its phones and tablets. Viewed in that light, Apple is a different kind of monopoly — which becomes all the more crucial as it pivots to a Services business.

Read more:

• The Flimsiness of 'Business vs. Consumer' as a Justification for Apple's Rejection of Hey From the App Store for Not Using In-App Purchases - Daring Fireball
• The App Store Commandments - M. G. Siegler
• Dear Apple: Here's How to Stop the Antitrust Investigations - Savannah Reising