Today, it is theoretically impossible to install an application on an iPhone or iPad from a platform other than that controlled by the brand, the famous AppStore. It contains 3.6 million applications (including one million games) duly approved by the brand. This ranges from modest and free apps like a small game or a utility, to services like GoogleMaps, also free, and which is essential in the dissemination of Google’s navigation service. In the AppStore, we find all the prices: if 92% of the apps are free, some intended for professionals are worth hundreds of dollars.
But the main feature of the AppStore is the 30% tax – recently introduced – imposed on all paid services, whether single payment apps or those operating with a subscription (for example the press which does not has never really digested having to retrocede to Apple a third of the turnover generated by its subscribers).
A stroke of genius from Steve Jobs
Opening up the iPhone to third-party developers was a stroke of genius by Steve Jobs. This choice has allowed the creation of an ecosystem of extraordinary granularity since each most specific need corresponds – with more or less relevance – to an application. Initially, the control of the AppStore obeyed security imperatives dictated by the concern to preserve from any external contamination the central software of the iPhone (theOperating Systembaptized iOS at Apple). Since the very beginnings of the AppStore in 2008, Apple has screened the applications submitted to it. From the initial version to the slightest update, the code is checked in detail.
For Apple, this is a complex and expensive device to operate: it was necessary to create development tools, set up procedures for verifying candidate apps for the AppStore, deploy a payment system operating in more than a hundred countries with a multitude of currencies… To Apple’s credit, it must be recognized that this imposing device which employs hundreds of engineers has preserved the security of the AppStore – Pegasus-type spyware attacks go through d other channels.
On the other hand, Apple has not managed to offer users easy navigation in this profusion of applications, a large part of which is simply of no interest (hence the fact that a third of the apps are uninstalled immediately after downloading ). For obscure reasons, no media or service in the world has imposed itself as the dominant prescriber of the app market. The AppStore has never had its Michelin guide and it is considerably lacking.
The whole system was so far locked. At the beginning of the iPhone, during the years 2007-2011, some users managed to break through the fortress and install on their device third-party applications, not approved and not hosted by Apple. But the disadvantages quickly prevailed: Apple engineers deployed countermeasures, in particular through updates to the central system of the iPhone and iPad, iOS.
Financially, the tax on the AppStore has proven to be a great source of revenue for Apple. Rather comically, during a hearing before the US Congress, Tim Cook, the CEO of Apple was struck with amnesia when a parliamentarian asked him the turnover achieved by the AppStore. Since then, various analysts have estimated the revenue generated by the platform at 20~24 billion dollars annually, or a third of the firm’s services branch. For comparison, it is equivalent to the turnover of companies like Danone or Michelin in the CAC 40…
The possible big change of 2023
According to Bloomberg which revealed the information, the switch could be announced early next summer, during Apple’s annual developer conference. But it would still be in debate at Apple.
This possibility calls for four comments:
1. It is a major challenge for the European Commission and more particularly for Thierry Breton. The Commissioner for the Internal Market has been carrying out his dual legislation for years, the Digital Market Act (DMA) and the Digital Service Act (DSA), which aim to regulate the digital space by setting it, as far as possible, the same constraints as the physical space for commerce and services. In this case, it is the DMA which is invoked to require the opening of the AppStore. If Apple gave in to Brussels’ injunction, it would profoundly change the dynamics of tech regulation in the world by putting the European Commission on par with American regulatory authorities.
2. Apple will do everything to avoid this change by deploying the full force of its lobbying in Europe. The brand will invoke security imperatives, the need to protect the integrity of its ecosystem, and of course the protection of the privacy of its users; this is an essential marketing position for future major growth drivers in the years to come, such as the health sector.
3. At the same time, Apple will seek to contain the effects of this measure. It is first possible that its implementation is limited to the European market, which represents 95 billion dollars, or a quarter of the firm’s 394 billion income. Nor should you expect to be able to load anything and everything on your iPhone or iPad at the start of the 2023 school year. Apple will continue to impose technical verification – antivirus, obligation to remain within a well-defined software perimeter, do not go beyond its functional scope, do not suck up superfluous data… And it will inevitably make the developers pay for this service (which is normal).
4. The big question is what impact this change will have on the AppStore economy. There is no doubt that countless large application operators in the areas of gaming, services or media will jump at the chance. Epic Games, the publisher of the Fortnite game, which in 2020 took Apple to court – winning half a victory – should be the first to take the plunge.
Services like Spotify could follow. The attitude of the mainstream media will be interesting to watch; the FinancialTimes (FT) for example, once spent a fortune to evade Apple’s toll and maintain an independent “Web app” based on an interesting technology, but offering the user a user experience that is clearly inferior to the application “native” that the FT will end up adopting later. It is too early to assess the impact of this change on AppStore revenue.
This offensive from Brussels is in any case bad news for Apple’s business. It comes after supply disruptions on certain iPhone models, a daily more difficult situation in China and a costly redeployment of the brand’s huge manufacturing and logistics machine in more stable countries such as India or Vietnam. . Next year promises to be tricky for Apple.