Let me start by saying I prefer physical books to ebooks, but I keep novels on my phone in the hope they’ll distract me from scrolling Instagram – and, when it comes to work, searchable ebooks are handy for research. So now and then I try to buy an ebook on my phone. It goes like this: see an ad or post about a book, search it, click the Amazon listing in the Google results, causing the Amazon app to open. The marvels of living in the future, a book in a matter of clicks!
But wait. Under “Kindle Edition”, the following message appears: “This app does not support purchasing of this content.” Sigh, then open the Amazon website and again search for the book so that I can actually purchase it.
What’s with the friction? Because Kindle books are digital purchases, Amazon would have to give as much as 30% of the in-app sales price to Apple. Now, it’s perfectly understandable that Amazon doesn’t want to do that. But it’s also reasonable for Apple to want to be paid for running the App Store, as it comes with costs. There is surely a price that would placate them both, but unpicking what that is – and what it would be for less gigantic app-based companies, such as yoga studios and game developers – is no easy task.
“It’s reasonable for Apple to want to be paid for running the App Store, as it comes with costs
The EU is trying and so far failing to fix this problem. Earlier this year, the European Commission (EC) slapped Apple with a €500 million fine for running foul of anti-steering rules in the Digital Markets Act by banning developers from telling customers they can buy services cheaper on their website rather than in the app.
Apple is appealing that fine, but has introduced a new fee structure to avoid the EC demanding more extensive changes to the App Store. Instead of a 30% slice off the top (or 15% for smaller developers), Apple now charges a mix of 2% acquisition fee on new users, 5% to pay for “core technology”, and store charges between 5% and 13%. That means developers could end up paying between 10% and 20% – less than before, but still a hefty fee.
Apple’s response: “The EC is mandating how we run our store and forcing business terms which are confusing for developers and bad for users.” Fair enough, but on the other hand, 30% plus the inability to tell customers where to get a better deal is surely even worse.
It seems clear that Apple intends to nitpick these rules into such a complex system that it becomes ridiculous. And there’s little that regulators can do to force Apple to behave. That €500 million fine is about half a day’s revenue for Apple. And though the EC can force a daily fine of 5% of revenue for failure to comply, Apple will drag its feet making the smallest possible changes while fighting even those in court.
In the meantime, consumers are left with a situation akin to the cookie law. Back in the early 2000s, regulators were trying to fight a real problem: web giants using digital surveillance that infringed personal privacy to boost online advertising. But the solution, generally in the form of annoying pop-up banners, was irritating to users and didn’t actually prevent web stalking. People weren’t protected, they were annoyed.
The App Store battle looks set to follow that lead. Apple is making its own App Store worse rather than offering a reasonable solution, while regulators trying to find a balance between what corporations want and laws demand are degrading the situation for consumers. To anyone who thinks capitalism and the hunt for extreme margins and profits always lead to better services or products, here is evidence that’s not true.
Of course, Apple should be compensated for running the App Store. Apple doesn’t break down such financial details, but in another app case, a witness for Epic Games claimed Apple had an operating margin just shy of 78% in 2019 – which has been denied by the company – with annual profits of around $23 billion.
“To anyone who thinks capitalism and the hunt for extreme profits always lead to better services or products, here is evidence that’s not true
So I get it: the golden goose must be protected at all costs. If Apple charged between 12% and 20% – as per its EC-mandated fee structure – it would make between $9.2bn to $15bn instead. Although perhaps more developers would eat the difference and keep sales in-app, or consumers would be more willing to spend a smaller premium for the convenience.
Of course no business will cross its fingers and hope for such best-case scenarios given the sums involved – they’ll call their lawyers first. The EU and Apple must be shelling out millions in legal fees, not to mention way too much intellectual energy, fighting over how much to hike the price of an ebook or yoga class or gem-shuffling game, while making it harder to buy the very digital services that tech giants harass and stalk us to advertise in order to convince us to buy.
No wonder I prefer a book made out of paper. At least it makes sense.
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