7 Myths Apple Is Using to Justify Their 30% Tax on AppsPavel Durov
Apple spends a lot of money on PR and lobbying in order to keep their monopoly power. If you follow the debate around Apple’s 30% cut that results in higher prices and worse apps, you are guaranteed to encounter at least one of the false narratives disclosed below.
Myth 1. 30% commission allows Apple to maintain the App Store.
In fact, running an app store costs only a fraction of what Apple takes from app developers. Every quarter, Apple receives billions of dollars from third-party apps. Meanwhile, the expenses required to host and review these apps are in the tens of millions, not billions of dollars. We know that because we at Telegram host and review more public content than the App Store ever will. Actually, any company running a massive video platform will need both more servers and more moderators than a company running an app store.
Myth 2. 30% commission allows Apple to reinvest in building better iPhones.
In reality, Apple has around $200 billion in cash on hand – and has no idea what to do with it. The money that Apple takes away from startups that need it for growth is parked seemingly forever in Apple’s offshore accounts. For the last few years, Apple has been trying to catch up with Android phones in features and hardware. Since Cupertino no longer innovates, and copying stuff doesn’t require a large R&D budget, the $200 billion (which includes the funds taken from developers) is not used on improving iPhones.
Myth 3. Anyone can compete with Apple if they don’t like their 30% commission.
The problem is not to create a rival mobile Operating System (OS), but to get third-party developers build apps for this new OS. There’s a vicious circle: devs don’t build apps if the OS doesn’t have enough users, and users don’t buy phones if there aren’t enough third-party apps for them. Even Microsoft, with its huge influence among developers, failed to have apps (such as Instagram) built for their Windows Phone, and Microsoft had to shut down their OS. So no matter how much you invest in building an alternative, the 2020 mobile OS market is closed to new entrants.
Myth 4. Without the iPhone, mobile app developers wouldn’t have a way to distribute their apps.
Not only is this false, but the reverse is true: without third-party apps, few people would buy an iPhone in 2020. Apple didn’t invent native mobile apps, and if it hadn’t been for Apple, another company would have filled the demand for a touch-based mobile OS, maybe a few years later. Before the world switched from desktop to mobile, app developers already had hundreds of millions of users and paid zero commission to desktop OS creators. For developers of consumer services, the arrival of the App Store was a change for the worse.
Myth 5. Any developer who doesn’t like the 30% commission on iPhones can just build apps for Android.
Developers don’t really have a choice between iOS and Android: if they want to create a service that is socially relevant, they will have to build apps for both platforms in the mobile duopoly. Try to imagine Telegram or TikTok as Android-only apps and you will quickly understand why avoiding Apple is impossible. You can’t just exclude iPhone users. As for the iPhone users, the costs for consumers to switch from an iPhone to an Android is so high that it qualifies as a monopolistic lock-in (more about this in The Antitrust Case Against Apple, a study done by Yale University).
Myth 6. App Store’s 30% commission is in line with what other platforms are charging.
Apple just published a study that says that other platforms such as Android’s Google Play also have a 30% commission. This comparison is irrelevant, because Android allows its users to install apps from sources other than Google Play. One can even run competing app stores on Android. As for the other platforms mentioned in the market overview, they have nothing to do with mobile operating systems and are nowhere near iOS and Android in terms of the number of users / number of third-party apps / switching costs for consumers.
Myth 7. Having regulators look at Apple’s practices goes against the free market and fair competition.
As seen in Myth 3, there’s no real competition in the mobile OS market, but Apple is also not a “free market” player, because it extensively uses the power of regulators to criminalise jailbreaks and ensure complete control over every phone they sell. Since Apple’s monopoly is enforced by the regulators in the first place, it is difficult to justify a libertarian approach to their practices. As long as governments help Apple retain their monopoly, they are also responsible for dealing with the negative side effects of it.
Now that anti-monopoly investigations against Apple have started in the EU and the US, I expect Apple to double down on spreading such myths as described above. We shouldn’t sit idly and let Apple’s lobbyists and PR agents do their thing. At the end of the day, it is up to us – consumers and creators – to defend our rights and to stop monopolists from stealing our money. They may think they have tricked us into a deadlock, because we’ve already bought a critical mass of their devices and created a critical mass of apps for them. But we shouldn’t be giving them a free ride any longer.