Two recent developments within the mobile ecosystem seemed independent of each other at first but now appear to be correspondent consequences of a new world order having taken root on mobile:
- Apple announced the deprecation of its device identifier, the IDFA, at WWDC. The IDFA is fundamental to mobile advertising technology: advertisers, publishers, and ad platforms alike have been left scrambling to implement new advertising infrastructure ahead of the implementation of privacy changes coming to iOS14, which were recently postponed;
- Epic Games integrated its own native payments system into Fortnite, causing the game to be promptly banned from the App Store (among other things). Epic subsequently (immediately) sued Apple, seeking to have the company labeled as a monopoly over its App Store practices. Yesterday, it was revealed that Apple is counter-suing Epic Games over breach of contract, with Apple having disabled its single sign-on functionality from all Epic Games following the shuttering of Epic’s iOS developer account last month.
What unifies these incidents into a theme is the extreme control that Apple exerted in both cases over the form and function of its App Store. The new world order is one in which Apple enjoys total authority over the iOS ecosystem, from editorial curation to distribution to in-app monetization.
Something of a Perestroika appeared to be taking root over the past few years:
- More allowances for in-app monetization (eg. the Reader App rule) and out-of-app monetization (eg. how Calm and other subscription-based apps collect the subscriptions on the web to avoid Apple’s 30% platform fee on IAPs);
- The expansion of Apple’s program that allows video apps to utilize proprietary payment methods with the addition of Amazon Prime;
- The discounted in-app subscriptions product that Apple released in 2019.
But what Apple is showcasing through deprecating the IDFA and engaging Epic Games in total war is an abandonment of the reformation mentality that many hoped was progressing via the examples above, albeit at a glacial pace. I’ve written at length about why Apple was motivated to deprecate the IDFA for the purposes of regaining editorial control over the App Store, and I won’t rehash those arguments here. But I do think the Epic Games case study exemplifies how a developer’s zeal and naked self interest can reverse the progress towards openness that a marketplace is experiencing.
Epic gambled massively when it instrumented its own, proprietary payment system into Fortnite: it knew that it was contravening App Store guidelines — specifically, section 3.1.1 — but it bet that a groundswell of developer support would pressure Apple into relenting and changing those guidelines. Epic cannot win its legal fight with Apple; the company was hoping that Apple would be swayed by developer (and consumer) opinion and acquiesce over the bad PR wrought by Epic’s lawsuit.
But consumers don’t care about a 30% fee that they never see. There’s little evidence to suggest that IAP prices would decrease by 30% if Apple ended its platform fee: IAPs are priced to maximize revenue, because they incur no marginal cost of production. Similarly, consumers don’t actually dislike closed, sandboxed app ecosystems — it’s why Epic brought Fortnite to Google Play after initially releasing it with a stand-alone launcher.
I don’t think anti-trust arguments against Apple hold up to scrutiny. Epic is fighting an impossible battle through the courts that it hoped would never manifest: it wanted Apple to cave to developer and consumer pressure, which never materialized.
And now Apple has dug in, counter-suing Epic Games and showing no signs of relenting. If Epic Games truly cared about the mobile app ecosystem at large, it wouldn’t have aggressively flaunted App Store rules and would simply have supported and encouraged the slow and measured trajectory of change along which Apple was moving.
With Apple retrenched, it seems unlikely to capitulate to any developer demands. Because if Epic Games, a company worth billions of dollars that oversees one of the biggest hit games of all time, can’t influence Apple, then Apple surely believes that no company can. Why should Apple relent at all? The 30% fee will never go away or be reduced once this precedent — of a developer suing Apple over anti-trust concerns and losing — is set.
The payout of Epic’s gamble will be meaningful for Epic if it wins because Epic is actually pushing for competitive app stores to exist on iOS. If Epic wins, it will launch an Epic Store on iOS and charge developers some percentage of revenue for the privilege of publishing their games.
But if Epic loses, the consequences will be dire for the entire app ecosystem. Apple will feel emboldened by its victory and will rigidly defend its practices. Perestroika will end; Apple will have no incentive to make concessions to developers because its legal victory will stand as a symbol of its unassailable authority on iOS. Epic’s reckless gamble is bad for the app economy.
Photo by Stephanie LeBlanc on Unsplash