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Why a Supreme Court decision means Apple's App Store is as powerful and profitable — as ever

Peter Kafka   

Why a Supreme Court decision means Apple's App Store is as powerful — and profitable — as ever
  • At first glance, a new Supreme Court decision looks like bad news for Apple.
  • But that's not true at all: Apple's control of its incredibly lucrative App Store is fully intact.

If you were scanning headlines yesterday you might have seen something about the Supreme Court forcing Apple to open up its powerful App Store.

And if you've paid any attention to Apple over the past few years, you might have concluded that this was bad for Apple, since it has been fighting efforts to open up its powerful App Store.


What yesterday's court decision — and, crucially Apple's response to the decision — means is that Apple's control over its powerful and very profitable App Store remains 100% intact. For now. And that Apple will spend a lot of time and money trying to fight any effort to loosen that control.

Yesterday's news came out of a long-running fight between Apple and Epic Games, the company that owns Fortnite, the game every teen and pre-teen played for a couple of years. In 2020, Epic argued that Apple's control of its App Store — and, crucially, the way developers like Epic had to use Apple's App Store to sell "in-app" items like power-ups and other digital goods — was a monopoly. So Epic deliberately flouted Apple's rules, and dared the company to ban Fortnite.

Apple responded by essentially banning Fortnite, and the two companies have been in court ever since.

This week, the Supreme Court sided with Apple on almost every point except one: It said Apple needed to let developers tell users that they could buy those digital goods outside of Apple's App Store. At first glance, this seems like a big deal.

But if you look at Apple's plans for implementing that directive, you'll see that Apple is going to comply with the rules while also making them irrelevant.

In short, Apple is making sure that the experience of actually leaving an Apple app to buy something on a developer's website is a pain for both developers and customers. And Apple is making sure that selling that stuff will cost developers just as much — perhaps even more — than selling it inside the Apple app.

So there will be no reason for anyone to do this. Which is exactly what Apple wants.

(Asked for comment, an Apple spokesperson pointed to two court documents spelling out Apple's plans. On Twitter/X, Epic Games CEO Tim Sweeney said his company will fight Apple's "bad-faith compliance plan" in court.)

The big picture: For years, developers and some regulators have complained about the way Apple tightly controls its App Store and the fee of up to 30% that Apple charges for transactions made inside its apps. And for years, Apple has told them to pound sand. It only makes concessions when a court or country mandates them, and then it does it in the most grudging way possible.

So even in a world where regulators are increasingly aiming at Big Tech — ask Meta and Google, who are facing multiple antitrust lawsuits in the US; or ask Apple, which had to change the chargers on its new iPhones because of the European Union — Apple has fought tooth and nail to control its store.

Apple's App Store prints money. Lots of it.

On the one hand, thumbing your nose at antitrust regulators seems like a fraught, high-risk strategy.

On the other hand, it's a strategy that has paid off handsomely for Apple for years.

Revenues from the App Store are the main driver for Apple's "services" revenue, which is increasingly important to Apple as iPhone sales growth slows (because everyone who wants an iPhone has an iPhone, and because iPhones are so good, there's less incentive to replace them often). Last year, Apple generated more than $85 billion in services revenue — that's 22% of Apple's total sales.

And revenue from games — including, in the old days, Fortnite — is the biggest driver, by far, of App Store sales. In 2021, a US judge announced that games represent 70% of Apple's App Store topline.

Will the EU — or anyone else — force Apple to change?

Apple says it keeps its App Store policies in place because they protect its users, and because it deserves to run its store any way it wants. Left unsaid: Those App Store policies let Apple generate many billions of dollars of high-margin sales. And Apple doesn't want to give up a dime of that unless it absolutely, positively needs to.

Which might actually happen, one day. The European Union has already said it thinks Apple's App Store policies treat music services like Spotify unfairly, and the EU is planning on unveiling new rules to fix that. And it's possible that the EU's rules will fundamentally change the way Apple's policies work, for real.

But Apple's stance on this stuff is crystal clear: It will fight any of those changes for as long as it can, in any way that it can. It has billions of reasons to do so.

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