ANALYSIS

Could Apple’s App Store Row Hurt Its 5G Entry?

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Concern over tech giants’ dominance and their effect on the ability for smaller players to compete has been circulating for years and even led to some high-profile regulatory investigations, writes YANITSA BOYADZHIEVA.

Apple, one of the most valuable companies in the world, has been on the receiving end of much of this criticism in recent times.

Indeed, a major sector of its business is grabbing headlines as it appears to be a main target for close scrutiny and reproach. Pressure over the App Store policies, particularly in terms of maintaining a balanced level of competitiveness between app developers, has been in the spotlight for more than a year.

In the last four months alone Apple faced a number of challenges, including a probe by the European Commission (EC) focused on its App Store rules, a legal row with Epic Games following a ban of its gaming title Fortnite, and some of its biggest critics joining forces to press for changes across app marketplaces.

The main issues with Apple’s App Store’s policies relate to its practice to take a 30 per cent commission for in-app purchases for the first year, as well as complaints the company has created an environment that gives advantage to its own apps, eventually repressing competition.

The controversy has clearly come to a head in 2020, and with a 5G iPhone launch expected next week, it is only set to escalate.

The App Store and 5G iPhone

VP of analysis at Opensignal, Ian Fogg told Mobile World Live (MWL) that with Apple being a major player in many countries, none more so than in the US where approximately half of mobile users have iPhones, “the 5G iPhone will probably kick-start and accelerate the 5G market in the US.”

With cloud gaming deemed one of the most important 5G use cases for many users, it would be “a real pain point” if providers of those services are not able to offer them to iPhone users, noted Fogg.

“If those game streaming services are not able to work on the iPhone, then they can only probably work in some countries like the US or Japan for half of the users in the market,” Fogg noted.

“If you look at the game streaming services, the debate is around effectively whether there’s an app store inside the App Store,” he added.

Apple’s rules currently let gaming streaming services be on the App Store if each gaming title is listed as a separate item in the app marketplace – an approach heavily criticised by game developers.

“If you’re Microsoft or one of the companies operating, that means you’d have to do something different for Apple compared to other platforms. But why that’s important is that cloud gaming is one of the things that’s going to work well on 5G,” Fogg explained.

He cited recent Opensignal research which has found 5G smartphones in the US, including from Samsung, LG and OnePlus, have delivered speeds between 1.6-1.9 times faster on average compared to 4G.

“If we see the same kind of thing happening on iPhone, that’s a massive jump in that experience, which enables many of these new applications, like cloud gaming.”

Bypassing the App Store

There is however potential for cloud gaming offerings to be viable outside Apple’s App Store.

Developers might bypass app stores by pursuing progressive web applications (PWAs), similar to what Amazon did with its recently announced Luna cloud gaming service, digital media industry analyst at Frost & Sullivan Robert Cavin told MWL.

“Using a PWA allowed them to bypass app store rules and fees because everything runs in a browser. These browser-based apps are installable on Android/iOS home screens, even Windows, Mac, and Linux desktops, by creating shortcuts that essentially launch a webpage in an application-like window,” he explained.

In fact, the roll-out of 5G, which brings lower latency, could prove beneficial to PWAs as an alternative to native apps, as it “reduces the speed advantage native apps traditionally held before 5G,” Cavin noted.

In terms of the backlash against Apple, he pointed out that the iPhone maker will probably reconsider its fees if “developer fees become more of an issue that leads to declining app development and eventually lower unit shipments and/or service revenue.”

Apple’s commission goes down from 30 per cent to 15 per cent after one year of subscription, and “perhaps developers hoped a similar accommodation would be made for in-app purchases in long-standing apps,” Cavin stated.

Apple’s critics

Even if Apple halved its developer fees in the first year of publishing an app, it might still not be enough to keep critics at bay.

“It will have a much better chance of doing that if it allows developers to put in-app links to their own billing engines,” eventually resulting in both billing options to be displayed next to each other, principal analyst at Omdia, Guillermo Escofet, argued.

He suggested such a manoeuvre wouldn’t see Apple risk much loss of revenue, as “users with their payments details already registered with Apple will be far more likely to opt for the easy single-click option of paying via the App Store than follow a link outside it”.

If it were to make such a move, some of the company’s longest-standing critics would be reluctant to “accept this compromise without also demanding Apple to allow pricing differences to be displayed next to the billing options. Apple would no doubt balk at that,” Escofet said.

It is unknown as yet how Apple will keep its balance amid the challenges it faces and how much more it will grow its smartphone market share once it launches a 5G-powered iPhone.

Until then one thing is certain – the company will need to address concerns coming from regulators and developers to ensure it won’t lose key markets by restricting some of the most wanted user experiences.

  • Boyadzhieva is Mobile World Live Reporter based in London.
  • Editor’s Note: The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

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