
Apple’s “monopsony” power, and the woman who named it - moorage
https://www.npr.org/sections/money/2019/06/18/733510647/apples-buying-power-and-the-woman-who-named-it
======
braythwayt
Amusingly, there are two sets of people arguing about why Apple is bad, and
each have their own argument:

1\. Android sells more, and offers more variety of mobile and wearable devices
than Apple. And here’s the data to prove it.

2\. Apple is a monopoly/monopsony and should be forced to allow more user
choice of apps, allow sideloading, lower their prices, lower their app store
cut, &c.

Which one is is?

Apple is like Tesla. They don’t sell more cars than anyone else. They don’t
have a stranglehold over vendors. They sell more _luxury_ cars than a bunch of
other people. And while you see lots of Teslas on the road, you still see more
F-150s.

Their market is insanely profitable, and for many developers, their little
market is highly profitable. But how is it their fault that app developers
don’t shun them for Android-only, or Windows (do they still make a phone OS?)

Apple make their own devices. They don’t license an OS and then use
shenanigans to force vendors not to offer consumers a choice, like Microsoft
did.

They make a desirable product, and offer developers a desirable market. But
they don't have enough of the market to do whatever they like.

They can’t charge $5,000 for a phone and succeed because of network effects.
Android phones can call and text Apple phones.

They don’t tell developers that apps must be iOS-exclusive to be in the app
store.

Apple’s current success is exactly what the free market is for. People may
grumble about the price of a phone or the keyboards, or the app store cut, but
those who pay it do so because the value is there, not because of arbitrary
constraints.

They aren’t Facebook. Nobody has to buy an iPhone to keep in touch with all
their friends who have iPhones.

~~~
hkhanna
> They aren’t Facebook. Nobody has to buy an iPhone to keep in touch with all
> their friends who have iPhones.

I have a different perspective.

Many of my different friend groups use the "group messaging" feature on their
phones. If everyone is using an iPhone in that group, it defaults to using
iMessage.

I switched to Android about 18 months ago, and it broke all of the group text
message chains I had because some of their phones continued to use iMessage
even though my phone no longer supported it. Sometimes their messages came
through to me, sometimes they didn't. I would see half of a conversation, and
many of my messages wouldn't reach members of the group. Eventually, people
stopped including me in group text messages because it made the chats
unreliable.

After 18 months of being increasingly isolated from all my friends, I switched
back to an iPhone. I switched only for the reason that it was difficult to
keep in touch with people without it.

One-to-one messaging worked fine, but I was left out of group chats, a
critical way my friends and I stay in touch.

~~~
joefourier
I've only heard of this happening in the US and Canada. Outside of North
America, everyone uses Whatsapp, which supports group messaging on every
platform. I'd be curious to know why it hasn't penetrated into those
countries.

~~~
teekert
I think it has to do with the fact that the US (and Canada) very early on had
unlimited texting plans, and iMessage would make use of that (iPhones just
send texts for iMessages in absence of a data connection). WhatsApp can only
use data, which is cheaper and used to be unlimited (that's gone) in the EU.
In contrast, texting was and still is insanely expensive in the EU (per byte
it is staggering even, compared to normal data). Since data coverage was poor
in the US in the 2G days (is this true? In the EU 2G was GPRS, meaning
available when normal voice was available... I think it differs for US
networks?) and texting was often included in a subscription, iMessage made a
lot if sense and was very reliable.

I remember early iPhone users complaining here in the EU that their iPhone
unpredictably would sent iMessages either for free over wifi or for
50ct/message over sms/text (us EU citizens avoid sms/texting like the plague,
allthough unlimited plans are now more commonplace, it's just too late). I
recently set Signal to deal with my sms/text messages. Boy was that an
expensive mistake when I accidentally texted my friend in Curacao instead of
sending a normal Signal message.

~~~
simias
>WhatsApp can only use data, which is cheaper and used to be unlimited (that's
gone) in the EU. In contrast, texting was and still is insanely expensive in
the EU (per byte it is staggering even, compared to normal data).

You need to specify where in the EU, because it doesn't mirror my experience
in France for instance. Data used to be very expensive while there were no
shortages of plans with near-unlimited texts. It also isn't the case in many
other countries in the world in my experience. AFAIK the advantage of WhatsApp
over plain texts isn't that it's cheaper per-se, it's that it works over wi-fi
which means that as long as you find a hotspot anywhere in the world you can
use it. No need to worry about roaming fees, no need to worry about how many
texts or MB of data are in your plan.

~~~
teekert
In the Netherlands 10 euro for truly unlimited was commonplace. I held on to
that plan from 2011 until last year, when they decide I couldn't have 4G and
unlimited data.

------
pornel
Apple made themselves an exclusive payment provider for all iOS in-app
subscriptions and payments for digital products. Merely mentioning anywhere
that cheaper payment options exist is an AppStore ToS violation.

~~~
zionic
I generally support Apple but this is inexcusable. Regulators need to come
down hard on this kind of payment monopoly.

~~~
mikhailt
It makes perfect sense to me.

If I was a businessman running a store, I definitely would NOT allow anyone
that wants to sell in my store any mentions that they could be found cheaper
elsewhere or get a discount somehow that could reduce my cut.

------
lilyball
Something odd about this argument is the fact that 30% is pretty much an
industry standard. Apple isn't jacking up the price.

~~~
smilespray
I thought Apple was the originator of the 30% cut for app stores, and
everybody else followed suit?

~~~
stuaxo
Yes, this is true.

People forget that there were phones before the iPhone decided all phones
would be rectangles with touchscreens.

Those phones ran apps and games, and you downloaded them from app stores...
there was in fact a cambrian explosion of app stores, when you made software
you had to publish it to hundreds of them.

I can't remember the %, but it seems unlikely, in the fact of all that
competition that it was as high as 30%.

~~~
DagAgren
There were not really any public app stores like the Apple one. And cuts were,
in general, much higher. Apple's app store took off so well because it offered
a much better deal than the competition.

~~~
zorked
"App stores" were run by telcos back then. Usually a storefront selling J2ME
apps via WAP and charging money to your phone bill. To be fair the most
popular content was ringtones (of the MIDI type).

I think the BREW ecosystem had some solution to set up a store of this kind
that they used to supply to carriers?

~~~
e_y_
I have to give credit to Apple for taking power away from the telcos. They
wanted to nickel and dime you for every app and feature. Getting even a dumb
feature phone out the door required months of certification and the OS might
get an update once in the device lifetime if at all.

Sometimes it takes an 800 lb gorilla (with fresh iPod $$$$$) to take on the
other 800 lb gorillas, even if it mostly meant we spent the first 8 years or
so paying ridiculous 2-year contracts for "subsidized" $700 phones.

~~~
soperj
>OS might get an update once in the device lifetime if at all.

And some how the lifetime of those phones were much longer than the iPhones,
until they had to stop forcing updates which degraded performance.

~~~
DagAgren
Apple's updates often improve performance, and very rarely degrade it.

------
GeekyBear
Next up: Nintendo, Microsoft and Sony's game consoles?

~~~
notduncansmith
As the only buyer of goods sold to me, and the only seller of goods sold by
me, I suppose I'm running a monopsony and then some. May as well add me to the
list.

On a serious note: would a judgement in this case have immediate impact on
other companies, or would it set a precedent? Also, what are the proposed
damages? How is Apple supposed to repair the situation?

Honestly, this feels entirely arbitrary (Apple is far from the only one that
leverages their position as digital goods market makers). I'm not saying
conspiracy or anything, but I wonder if this is related to the POTUS's
vendetta against AAPL.

~~~
stuaxo
It's not arbitrary, the appstore is a de-facto monopsony, the ordinary user
doesn't install apps from anywhere.

Most Android phones come with an alternate appstore installed (e.g. Samsung
come with their own one as well as google play) and you can easily install
others.

To install alternates on the iPhone you have to root it.

~~~
Razengan
That applies to game consoles too, since the 1980s.

~~~
ernesth
In the 80s, the game console makers did not operate the store where you were
buying games. Even, you could buy second-hand games without Atari or Nintendo
receiving any part of the fee!

~~~
scarface74
Even back in the 80s, the console makers “controlled distribution”. Nintendo
forced third parties to use their manufacturing facilities and they all force
third parties to distribute their haves with a license key.

Console makers have always forced third parties to pay a fee to distribute
their games.

~~~
naikrovek
Yes, and for distribution, that's fine.

The ruling is less about Apple forcing consumers to buy only through the
AppStore, and more about only allowing sellers to _sell_ through the AppStore.

If I make a PS4 game, or a Nintendo Switch game, I can sell it on the PSN
store and/or Nintendo e-Shop, sure, but I can also produce a physical copy
that I can obtain outside of the store, and that is definitely not the case
for Apple software developers.

Apple software developers MUST go through the AppStore and they MUST pay that
fee, no matter what.

It is that specific lack of competition; the lack of other places to sell your
iOS applications, that the USSC judged against, by my reading.

~~~
scarface74
What’s the practical difference? The console makers still control physical
distribution by forcing third parties to obtain a key, they have to approve
all software that goes on their console, and they get a cut of each game sold.

Today, almost all games have an online component - that only work on console
controlled networks.

------
vturner
The key point I presume is the definition of "market" here; and I'm not
convinced the market "software that runs on iOS" is so large that
monopwhatever can be declared there and used to justify price control.

Though as a thought experiment Apple is like a wealthy landed gentleman who
sets up a well maintained outdoor market for the tradesmen to bring goods and
the lower classes to buy them. If Apple owns so much land they are the only
ones capable of setting up a large enough market, maybe we should regulate
that gentleman's fees to the tradesmen? By virtue of people's need to be
fashionable and the enormous cost to develop a smartphone and OS, Apple
effectively controls enough "land" to warrant regulation. I don't know...

Finally, this rationale also it seems causes a dilemma with B2B relationships.
What if your market is quite specialized? Are you a "monopsony"?

~~~
e_y_
I don't think we need to divide the market into specialized segments (iOS
devices, luxury smartphone, etc) to make the case against Apple. They have
somewhere around 50% of the global market in terms of smartphone revenue (not
devices shipped).

For the App Store, which is what matters to developers, revenue was around $25
billion in the first half of 2019, vs $14 billion for Google Play Store.

It's not literally mono- but as the article notes, just having a significant
share of the market (I would say 30% would be enough) allows companies to
dictate prices, and iOS has more like 2/3rds of the revenue.

That's not even getting into all the restrictions that Apple puts on third-
party developers, including categories of apps that you can't even make if you
wanted to -- unless you're willing to sit out half the market, and assuming
that Google doesn't do the same thing. As a software guy, I consider that a
bigger deal than the % cut (which is not entirely unreasonable given how much
of that goes to credit card fees for low-dollar-amount transactions)

~~~
thaumasiotes
> They have somewhere around 50% of the global market in terms of smartphone
> revenue (not devices shipped).

On a monopoly/monopsony theory, devices shipped is the relevant metric, and
revenue isn't.

~~~
JamesBarney
Are you sure? I was looking for this and everything mentioned market share but
it didn't specify unit vs revenue market share.

~~~
hellofunk
This has been well documented for years, the average iOS app earns nearly a
multiple of close to 10 what other mobile platforms earn. Their share of
revenue from apps is massive compared to their market share of devices.

------
RandallBrown
So, since Apple is the only company "buying" apps from developers, they could
raise their cut as high as they want and developers can do nothing about it.

Could Apple then argue that they aren't the only game in town because of
things like subscriptions and web apps? (e.g. I don't pay for Netflix or
Spotify through Apple, but the apps work fine)

~~~
throwGuardian
Also, please omit webapps on iOS Safari as an alternative. Apple gives no
explanations on why it cripples Safari's W3C compatibility, especially
features around PWA, but everyone knows it's to drive developers, users and
hence revenue/profits to the app store.

Someone needs to sue Apple for this, and the truth will be revealed when the
case enters discovery mode, when Apple internal communications on this are
laid bare

~~~
dwaite
Progressive Web Apps aren't a standard but a Google web strategy term.
Different browsers just have different priorities.

For example, Apple prioritized service workers over web app manifests (which
BTW are not yet a W3C recommendation). I can only assume this is partly
because there have been so many failed attempts at static web app manifests in
the past. Them prioritizing other features for earlier release doesn't mean
that Web App Manifest support isn't in active development (
[https://bugs.webkit.org/show_bug.cgi?id=158205](https://bugs.webkit.org/show_bug.cgi?id=158205)
).

~~~
throwGuardian
Missing in iOS Safari:

1\. Binary WebRtc data channel messages

2\. Browser notifications that a PWA can use

3\. Web App storage beyond 50MB, and guarantee that the OS won't whimsically
delete storage, despite being below 50 MB

4\. You've already cited Web App Manifest

There's probably a ton of other W3C standards not in compliance, but the above
list is pretty damning.

------
m463
so:

\- monopoly: the only seller

\- monopsony: the only buyer

So app store customers can only buy from apple.

And the app developers can only sell to apple.

~~~
olliej
PlayStation, Xbox, Nintendo, sega, ... are the same:

You can only sell for those devices with manufacturer licensing (that includes
profit sharing and mandatory annoyances like “achievements”), and consumers
can only buy games licensed by those manufacturers.

The only difference is that PC developers haven’t experienced that before. It
seems like this would have been established in the 80s/90s, so I’m surprised
we’re getting to court - is there a change in judicial philosophy?

That said, as far as I can tell every platform charged the same ~30% so I’m
sure any company can simply point to the entire market as having established
that under fair conditions (after all, if there was a cheaper platform surely
they’d prioritize that?)

~~~
simion314
Or maybe we could get side loading on console.

~~~
wheelie_boy
The fixed hardware that is long-lived and affordable is possible because the
hardware manufacturer subsidizes it, especially at the beginning. If they were
not able to rely on money from game sales, the hardware would be much more
expensive.

An alternative way for companies to make money manufacturing gaming hardware
is to keep the prices low until there are a lot of great games for the system,
and then jack up the hardware prices later on.

So you might want a hardware standard that multiple companies could produce,
which games could interface with and be portable between..

Eventually it just turns back into PC gaming.

~~~
simion314
The PS4 was as expensive as a regular PC so any idea how much the latest
consoles were actually subsidized? I assume Sony and Microsoft can negotiate
with AMD for giant discounts so IMO they made profits when selling the
consoles but I do not know if they would admit this.

Other issue I have with digital games is that the physical game is the same
price but the digital game I do not own(I have less rights) so why don't we
get same rights on digital games or cheaper digital games.

------
dfsdfklgjljg
This title is complete bs, and the court ruling (linked in the article) only
mentions monopsony very briefly.

The question addressed by the court is regarding who is the cause of any
overcharging to the customer. The opinion argues that because Apple is
exclusively dealing with the customer, it is able to sell on whatever terms it
wants to the customer, so any overcharge is their fault. The dissent argues
that because the developer has the power to dictate the price of the app on
the store, any overcharge the customer pays is directly caused by the
developer, because the developer could have chosen to sell the app at a fair
price.

It is true that the ruling mentions that developers may sue apple, but that
was never in question. Both the opinion and dissent agree on that fact.

~~~
abduhl
This is an unfair treatment of the decision. The question addressed by the
court isn’t “who is the cause of supracompetitive prices?” but rather “if
Apple is the cause, can consumers sue?”

Apple’s defense argued that only the app developers could sue under a certain
view of the precedent where Apple’s role as a pass through is essentially
transparent to the law. Their argument attempted to shift who the customer was
ultimately doing business with: Apple or the app developer.

One of the theories underpinning the precedential rule is that not stopping
impacted downstream parties from suing may potentially subject Apple to
multiple liability. Apple argued that they were already liable to app
developers so shouldn’t also be liable to consumers. The Court is saying here
that that theory does not hold water because Apple, as a middleman, may be
liable to both upstream and downstream parties (damages from app developers
and consumers, respectively).

------
_-dobe-_
In the EU we had a ruling that forced Microsoft to offer choices for web
browsers when installing Windows for the first time. I.e. IE wasn't set as the
default browser by default. They were forced to do this for 5 years, I think
so people become aware that there are other choices out there besides IE. They
should do the same for the AppStore. When you set up your iPhone, it should
give you an option of AppStores, not just the Apple one.

~~~
Zenst
But you have that choice at purchase. Hence this aspect does feel akin to
somebody buying a Tesla and the customer expecting the ability to switch to
diesel, petrol instead of being stuck with electric.

Also remember how long that Microsoft rulling took and what it actualy ended-
up being in the end - which for most was an annoying popup for those who
already knew how to change web browsers. These days what happens is EU will
start the long process and before it hits court some agreement is made.

But the difference for Android and Apple is that Android is `open source`, IOS
is not.

Buy an android phone and change the app store - kinda entails rooting the
phone in most if not all cases in some way and that for most phone sellers
does void the warranty.

So say Apple did offer you to change app store - but in doing that voided your
warranty, which would be fair from their perspective. May even be case of,
well you have non Apple app store - no Apple services for you as we do not
trust your device as you have modified it - enjoy. Again, something that they
could justify and in a way which would be fair from their perspective. After
all, nobody wants to open up a system in a way that may expose it to outside
security or stability issues now. Remember Apple is more about reputation than
the products, though they do go hand in hand, it is the reputation that
carries them as much if not more than any individual product.

Another way to view this is a hotel has a nice inhouse restaurant, should they
be forced to allow McDonalds to open a store in their hotel or leave that
choice to the guests who can go to another hotel if they want that experience.

~~~
viklove
It's more like only being able to use Tesla rims and tires if you want to
replace the stock ones. Or only being able to put Tesla coffee in the cup
holder.

~~~
Zenst
Maybe, but it is a case of aftermarket expectations post point of sale. So
more like buying a car without aircon and complaining it don't have aircon as
the seller don't sell aircon and had they asked when they brought it, they
would of been told clearly they don't offer that.

So if anything we get the term of mis-buying as nothing was mis-sold with such
expectations the customer later acquired after the sale.

------
runeks
So, via legislation (e.g. DMCA), we give Apple the right to tightly control
the use of its “intellectual property” (the iOS software), which results in
Apple being the only entity that can legally offer iOS apps for purchase.

And now, via legislation, we want to remove this power, first given to them
via some other legislation.

How about we critically assess current legislation, instead of just piling
more on top of it?

------
andoju
Arstechina published similar article regarding Apple's monopsony in
2005...nothing changed from last 15 years

[https://arstechnica.com/gadgets/2005/09/1190/](https://arstechnica.com/gadgets/2005/09/1190/)

------
Animats
If you don't know what monoposony is, ask a farmer.

------
alfonsodev
I think 30% (15% after a year) would be all right if there was another way for
the user to install the app by downloading from vendor website.

I know part of the value proposition of Apple is actually not letting user
download apps from sites, but then something like Udemy model where the cut
varies if you bring the user or they bring the user, could make sense.

Then Apple taking the cut as referral wouldn't feel that bad.

------
LockAndLol
> But Kavanaugh went further. He said Apple could also be sued by app
> developers, most of whom are forced to fork over a big percentage of their
> potential revenue, "on a monopsony theory."

Is it possible for users to easily install alternative app-stores? Wouldn't
that solve the problem?

~~~
sangnoir
> Is it possible for users to easily install alternative app-stores?

No, not on iOS

> Wouldn't that solve the problem?

Yes, because Apple will cease to be a monopsony for iOS apps. That is, if
SCOTUS rules that Apple does have a monopsony. Kavanaugh only suggested they
_might_ have.

------
musicale
How do Apple's licensing and payment policies for the (iPhone, iPad, Apple TV)
compare with those of other game and streaming device manufacturers?

------
generalpass
Modern definition of all definitions in the United States:

See: SCOTUS decisions.

------
oleganza
"Merchants at Macy's can only sell at Macy's".

There are many options for you as an app developer. You can enjoy the scale
and tooling provided by Apple, at one cost. Or you can write apps for any
other computer at some other cost.

Or you may choose not to be an app developer at all and do something else
useful.

~~~
JamesBarney
Monopsony doesn't mean option-less. Just because you can take a horse doesn't
make standard oil not a monopoly.

~~~
52-6F-62
And that's where the argument is:

Standard Oil had a monopoly on oil itself.

Apple doesn't have a monopoly on phones. They've just dictated how _their_
phone is going to work.

The options aren't Apple iOS ecosystem, or no phone dev at all. There are
numerous other smartphone companies out there. Apple isn't even close to the
largest share of operating systems used in the market—by far
([https://www.statista.com/statistics/266136/global-market-
sha...](https://www.statista.com/statistics/266136/global-market-share-held-
by-smartphone-operating-systems/))

------
mikece
Having Apple take a 30% cut of sales in exchange for not having to run an
e-commerce operation is far less odious than having to pay $5,000 for a
MacBook Pro which has less RAM, a smaller SSD, and less powerful processor
than $2,500 worth of Dell, Lenovo, HP, or Acer gear. The hardware is the real
rip-off to me. I would gladly pay a reasonable fee if I could write my apps in
VS Code on Debian and then ship the code to an Apple service to compile the
code.

~~~
simonh
I just can't get my head around this argument. To write software for a
computer platform, shock horror, you need to develop and test it on that
platform. To develop software using Apple's OS, services and libraries, you
need to buy that OS, those services and those libraries that Apple sells.

I don't get why that is a contentious issue, or even a question.

~~~
mcv
That you need to have the hardware and OS you're developing for is not the
issue. That you're not allowed to sell and distribute software for the
platform without the permission of the creator of the platform is the real
problem here. It's a kind of vendor lock-in. iPhone users aren't allowed to
install apps on their own phones without permission from Apple. This gives
Apple the power to make or break businesses.

We never had this problem Mac and Windows. Those are also created by companies
and providing a platform for all sorts of applications, but anyone can develop
for them. You don't need anyone's permission to install apps on your laptop.
But for your phone, somehow you do.

~~~
simonh
It clearly is the issue raised in the comment I am replying to.

Anyway we have always had this on games consoles, and had it on phones for
many years before Apple even made a phone. We have it on some embedded
platforms too.

There is nothing at all novel or special about this business model, and
braking it will kill the business model of a lot of companies, including all
the console makers. In fact compared to them iOS is a paradise of openness and
market competition for software. Yet for some reason, I never see anyone
rolling out this argument against Nintendo.

~~~
mcv
I'm not big into consoles, but yeah, when I first heard that a developer
needed to pay Nintendo to be allowed to make a game for their console, I
thought that was stupid. The whole thing of consoles being sold at a loss
because they make their money back on selling the right to make games for it,
is a bad business model in my opinion, and I wouldn't mind seeing it die. Just
sell your hardware for a fair price and let developers sell their software for
a fair price.

Open platforms, open standards.

~~~
simonh
I just don’t see how you get to dictate to people what products they are
allowed to develop, what terms they are allowed to sell them on and how they
are or are not allowed to make money. As long as the customer has a range of
choices and understands what the deal is, it’s up to them whether to accept it
or not.

Im all for consumer protection from harmful or misleading, or abusive products
but I just don’t see this here. It just seems like you are upset that someone
didn’t develop their product the way you want them to, and resent how popular
they are. Tough. Develop one that way yourself, or pay someone else to. I
don’t get to tell Ford what kinds of car they are or are not allowed to make.
As long as they are safe and perform as advertised, that’s up to them.

As fro consoles, even a $100 price difference in the price can kill a product,
they are incredibly price sensitive. Trippling or quadruping the price of
consoles would almost certainly kill the category, putting them beyond the
financial means of huge swathes of consumers that can't afford such a steep up
front cost. But apparently that's your decision to make.

~~~
mcv
> _" I just don’t see how you get to dictate to people what products they are
> allowed to develop, what terms they are allowed to sell them on and how they
> are or are not allowed to make money."_

Exactly my point.

Yet these companies do want to dictate exactly that.

