For years, the App Store has been something of a closed shop. It fits perfectly into Apple's idea of a closed ecosystem and has strict rules regarding apps. Apple would argue its concept of that closed system allows security to be tighter and prevent fragmentation. It seems the European Union disagrees, and this week started an investigation into the App Store.
“They impose requirements that increasingly say there is only one way to get on to our platform and that is to go through the gate that we ourselves have created. In some cases they create a very high price per toll — in some cases 30% of your revenue has to go to the toll keeper.”
It is worth noting Smith did not reference Apple directly. However, only one company currently takes a 30% share from app revenue so it's clear who the exec was talking about.
Since Microsoft closed its own Windows Phone division, the company has become a major mobile player, albeit through software. On both Android and iOS, Microsoft is one of the biggest contributors to the App Store and Google Play Store. Microsoft apps are also hugely popular and have been downloaded billions of times.
While Microsoft apps are mostly free, any subscriptions made through apps means Microsoft must pass on revenue to Apple and Google. For example, when someone signs up to Microsoft 365 through an App Store app, Microsoft pays 30% to Apple.
“The time has come — whether we are talking about D.C. or Brussels — for a much more focused conversation about the nature of app stores, the rules that are being put in place, the prices and the tolls that are being extracted and whether there is really a justification in antitrust law for everything that has been created,” Smith added.
The European Union is investigating whether Apple is giving itself an unfair advantage. While the company is free to charge what it wants and rival companies can choose whether to be on iOS or not, it's interesting that Apple does not have to pay a 30% cut. Of course, there's an obvious reason why that is but some regulators believe this provides an unfair advantage.
Apple has accused companies of wanting access to its platform and users for free.
“It's disappointing the European Commission is advancing baseless complaints from a handful of companies who simply want a free ride, and don't want to play by the same rules as everyone else.”