Apple’s iPhone is widely regarded as the most successful electronic product in history. Since its launch in 2007, Apple has sold more than a billion smartphones worldwide. It is true that countless manufacturers worldwide now sell more smartphones with the Android operating system than iPhones. But when it comes to sales and even more profit, Apple regularly leads the way due to the higher average selling price of the iPhone.
The success story of the iPhone is inseparable from Apple’s App Store. There are currently nearly 1.8 million apps to choose from on the platform. In total, more than 370 billion apps have been downloaded there in the past 15 years. But now the successful model is under threat, at least in Europe, as current EU law will end the monopoly of the App Store on the iPhone.
Initially, web programs were considered
When the first iPhone premiered in 2007, Apple co-founder Steve Jobs did not yet have a coherent software strategy. There was no App Store back then. Jobs’ concept simply stipulated that app developers should offer their applications as web programs that run in the Safari browser. However, a healthy app ecosystem could not emerge on this technically shaky foundation.
However, Jobs quickly recognized the need for change: in October 2007, the then Apple boss announced that it would be possible to program real apps for the iPhone. And on July 10, 2008 – 15 years ago – Apple opened the App Store with more than 500 software applications, including games, education programs, shopping apps and business productivity tools. About a quarter of the apps were free, the paid apps often cost less than a dollar. The new store even overshadowed the presentation of the new iPhone 3G a day later, which, unlike the first iPhone, could support the more powerful UMTS (3G) mobile communications standard.
Jobs saw lucrative opportunities
Even then, Jobs was confident that the App Store could become a multibillion-dollar business. In an August 2008 interview with the Wall Street Journal, Jobs said he could envision half a billion in annual sales. “And at some point it could be a billion.” In fact, it was many billions. In fiscal 2022 alone, the App Store’s contribution to Apple’s balance sheet is likely to be around $70 billion.
At the beginning of 2008, however, these amounts were not yet in sight. But the competition was also introduced to the concept: in October 2008, Google followed suit with its platform and introduced the Android Market, now known as the Google Play Store. A year later, Apple then allowed developers to offer the apps for free in the store initially, but then charge money within the apps for additional features or hiding ads. In particular, these in-app purchases were the driving force behind the computer games business.
A third goes to Apple
Initially, app developers usually had to hand over 30 percent of their app store sales to Apple. After strong protests from major players such as game provider Epic Games (“Fortnite”) and music services such as Spotify, Apple reduced the revenue share for subscriptions and smaller providers to a maximum of 15 percent. Legal proceedings are still pending in the dispute over the alleged ‘Apple tax’.
Despite this controversy, sales within the app universe continued to increase. According to a study published in May 2023 by the market research firm Analysis Group, almost 98 billion euros will be generated directly from digital goods and services in the Apple App Store in 2022. In addition, there is 102 billion euros that comes from advertisements within the apps.
A trillion (!) Euro turnover
If you look at all transactions that also run indirectly via apps from the store, the threshold of a trillion euro turnover was even exceeded for the first time. The growth of online commerce in China is mainly responsible for the boom. There alone, the Analysis Group recorded the sale of goods and services via apps from the store for the equivalent of 490 billion euros. Europe amounts to almost 112 billion euros in all areas.
Apple’s enormous market power that comes with it has been criticized by competitors such as Microsoft. They complain that Apple has not yet allowed an alternative to its own App Store. But this quasi-monopoly is also viewed critically in politics. The Digital Markets Act (DMA) was adopted in the European Union at the beginning of July, which is intended to combat anti-competitive behavior by large internet companies. The DMA will take full effect this year and in 2024. After that, “gatekeepers” such as Apple may be forced to allow app stores from other companies as well.
New EU rules change a lot
This should also break Apple’s resistance to alternative app install options and billing options. According to US media reports, the group is preparing to allow alternative app stores for iPhone and iPad in the EU, as well as the direct purchase of apps without a store. It should start with iOS 17, which is expected next fall.
Apple customers then have more freedom of choice, at least in Europe. It is expected that multiple players such as Microsoft and Epic will open their app stores in the Apple environment without delay. And the direct installation of programs will also be possible – combined with the risk of catching one or the other malware.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
