Apple versus Epic Games: 5 Reasons to Care
Some change, but not too much, would be the perfect outcome.
The Epic Games versus Apple case that is being argued before a federal court is the largest anti-trust trial in the US in decades. The lawsuit centers on two main issues:
- Apple’s App Store policies. Epic Games contends that Apple’s policies are anti-competitive by forcing app developers to use the App Store if they wish to access users of Apple devices.
- Apple’s App Store fee structure. Epic Games argues that the 30% commission that Apple charges developers for app downloads on the App Store is unfair and exorbitant.
The court’s ruling, whether in favor of Epic Games or Apple or somewhere in between, is expected to have far-reaching implications for Apple, the big tech firms (many of which are facing anti-trust lawsuits), the future development of apps marketplaces, and the digital economy more broadly.
ONE CONSUMER’S CONCERNS
The court case is naturally focused on legal issues, in particular those surrounding Apple’s “monopoly” position and its alleged abuse of that monopoly position with respect to the App Store.
As an average consumer, the following are the issues and implications of the lawsuit that I am most concerned about.
1. QUALITY OF APPS
Whenever I install an app, my primary concern is the quality of that app, which I tend to view in terms of functionality, performance, ease of use, and innovation.
The priority placed on quality is one of the reasons that have driven me to acquire and use a growing array of Apple products over the years. App quality is rightly regarded as the App Store’s comparative advantage over its competitors, including the Google Play Store. The App Store itself is well-designed to direct users to the most interesting and relevant apps. The apps themselves tend to be of high quality.
The App Store’s edge on quality can be attributed to Apple’s thorough and rigorous review process, which preemptively detects potential violations of App Store policy. As Apple CEO Tim Cook recently related, Apple rejects 40,000 out of 100,000 submissions to the App Store every week because “they don’t work or don’t work like they say that they work.”
In contrast, one of the main shortcomings of the Android ecosystem is the relatively higher proportion of low-quality apps. Even the Play Store, which Google devotes significant resources to developing and overseeing, is beleaguered by low-quality apps (400,000 out of 3 million) as well as unreliable user reviews.
The situation is even bleaker elsewhere, where unauthorized or minimally supervised app stores facilitate the proliferation of not only low-quality but potentially malicious apps.
In the current lawsuit, Epic Games is asking the court to require Apple to allow users to side-load apps, for example via developers’ websites (like Epic Games’ own Epic Games Store) or third-party app stores.
The proposal is not without merit, as it could theoretically increase the options available to consumers, including the number and variety of apps.
However, I am skeptical about the probable quality of apps offered on third-party app stores. These third-party operators, with the exception of major players like Amazon and Samsung, are unlikely to have the financial or technical wherewithal to review and screen apps as closely as Apple. The result will be a proliferation of low-quality apps that will not only diminish the consumer experience over time but expose the user to unnecessary risks such as mobile malware.
2. SECURITY
With the list of mobile malware lengthening by the day, security is a growing priority for many consumers. I consider myself fortunate to live in the relatively safe Apple ecosystem. There are occasional reports of malicious apps on the App Store but Apple has on the whole done a good job at protecting its users. The 30% commission charged by Apple to developers, to the extent that it is eventually passed on to consumers, is not an unreasonable price to pay for trust, security, and peace of mind.
Outside the Apple ecosystem, however, the apps marketplace resembles the Wild West. There are reportedly at least 300 app stores worldwide. Many are thriving in areas where (i) Apple has a weaker market position (typically in developing countries) or (ii) Google and the Play Store it operates are not available. Using these app stores is associated with a higher risk of exposure to malware, spyware, privacy threats, and vulnerable apps.
It might also be pointed out that some of the larger app stores not operated by big tech are in jurisdictions (notably Mainland China and Russia) that have a questionable track record when it comes to cybersecurity.
If the court were to require Apple to allow the side-loading of apps onto iPhones, this could theoretically increase the variety and lower the cost of apps to consumers. However, it appears reasonable to expect the risk of malware exposure to rise, perhaps exponentially. There are risks regardless of whether the side-loading is done through custom-built apps, third-party app stores, or games installers.
3. PRIVACY
Apple has correctly identified privacy as one of the biggest issues that consumers will be preoccupied with in the future. In this regard, Apple has staked its position as the standard-bearer for privacy protection, at least among the big tech firms. Last year, Apple introduced “privacy nutrition labels” that required developers who submit a new app or an update to an existing one to disclose information about how the app collects and uses data about its users. Last month, it launched App Transparency Tracking, where apps are required to seek permission to track the user’s activity across other companies’ apps and websites.
This has prompted Google and others to consider similar action. As a consumer, I would prefer a company that is proactively searching for better and more innovative solutions to the evolving privacy challenges, rather than one that is pressured to do so out of competitive pressure.
To illustrate how strongly Apple users feel about privacy protection, consider that the opt-in rate for the App Transparency Tracker stands at 13% globally and 5% in the US. As such, a court ruling that compels Apple to allow the side-loading of apps could compromise its privacy protections and run counter to consumer preferences.
4. COST & VALUE-FOR-MONEY
No rational consumer wants to pay more than they have to for any good or service. However, it is not a mere issue of absolute cost; consumers are often willing to pay more if a particular product offers greater value for money.
It does appear that there is a price differential between the App Store and Google Play Store and other third-party app stores in the Android ecosystem. There are apps that are available for free on Google Play but have to be purchased on the App Store.
Nevertheless, I think that the App Store remains price-competitive, given how well the apps generally perform, whether on their own or with the rest of iOS. Even Android Authority concedes that iOS outperforms Android on key metrics, including speed, efficiency, ease of use, timeliness of updates, system integration, security, and customer support.
That said, a ruling that requires Apple to lower its current 30% commission charged on app developers could benefit consumers if the savings are passed on, whether in whole or in part, to App Store users.
On the other hand, I am more ambivalent about a possible ruling that requires Apple to relinquish the App Store’s “monopoly” over iOS devices. This could provide users with cheaper apps but at greater risk in areas of quality, security, and privacy.
Ultimately, users do not use Apple devices — at least not for extended periods — because of absolute cost considerations. Unless the potential new app stores can offer similar or better value for money, including in the metrics described earlier, users like me will prefer to stick to the guaranteed safety, security, and satisfaction offered by the App Store.
5. FAIRNESS
Finally, there is perhaps an unusual ethical dimension to what should have been a boring anti-trust lawsuit. It boils down to a question of fairness.
Epic Games alleged that Apple makes a profit of 80% from App Store fees. This is far above the 30% charged that Apple argues is necessary to safeguard the privacy and safety of apps on Apple devices. Epic Games CEO Tim Sweeney further charged that Apple was making more money from its App Store fees than the developers who created the apps. If true, many users might feel that this is unfair and support action to reform the App Store fee structure. Apple has disputed Epic Games’ claims. More evidence will hopefully be presented in the next two weeks to clarify the issue.
The question of fairness applies equally to Epic Games. It had a full understanding of what it signed up for in order to sell Fortnite on the App Store. It had benefited from doing so for a long time until it decided that it did not want to anymore. By Sweeney’s own admission in court, Epic Games deliberately breached its obligations in order to trigger its own ban from the App Store, sue Apple, and seek a ruling to compel Apple to change its App Store policies. That struck me as being particularly sneaky and undercuts Epic Games’ efforts to portray itself as the warrior for justice and rally allies among app developers and users alike to its side.
THE OTHER BATTLES
The court case with Epic Games should also be viewed against the backdrop of an expanding series of anti-trust investigations and lawsuits against Apple. Depending on how they play out, individually as well as collectively, the landscape of the global apps marketplace and the digital economy could change dramatically in the years to come.
- The US Justice Department and state attorneys have launched anti-trust investigations into Apple’s App Store policies. This is part of a series of investigations by the US government into big tech.
- Congress. Following the publication of “Investigation of Competition in Digital Markets” by the House Subcommittee on Anti-trust, Commercial, and Administrative Law of the Committee on the Judiciary last year, there have been sustained calls to reform the US anti-trust laws.
- Federal Trade Commission (FTC). The FTC has been looking at big tech, in particular their unreported acquisitions and mergers between 2010 and 2019, as well as how they amass power and use data. The FTC’s findings could then influence enforcement by agencies and/or provide additional ballast to Congressional efforts to reform anti-trust laws with respect to the digital economy.
- European Union (EU). The European Commission has launched anti-competition proceedings against Apple. The first charges are over music streaming (read: Spotify), where the Commission found that Apple’s rules “distort competition in the market for music streaming services… lead(ing) to higher prices for consumers”. The Commission is also investigating separate cases for e-books and the App Store in general.
- Other parts of the world. Anti-trust investigations have been launched against Apple in other major economies, including the UK. The case in Korea was recently settled via a US$90 million investment by Apple into local support programs.
FINAL THOUGHTS
From the perspective of an Apple consumer, the ideal outcome would perhaps be a ruling which does not require Apple to allow side-loading (hence preserving the quality, security, and privacy of iOS and its apps) but which encourages or compels Apple to review its App Store fee structure. A reduction of the 30% commission can have positive effects in terms of supporting app developers, encouraging innovation, and ultimately improving the variety, quality, and cost of apps available to consumers. If some of those savings can be passed on to consumers, this will drive more downloads, revenues, and ultimately profits for Apple and app developers alike.