Apple’s Secret Monopoly
Its App Store has a choke hold on your devices. That may not last much longer.
You’ve just dropped $500 on a new iPad Air. You can’t wait to sign up for Netflix and watch Black Mirror on its dazzling Retina display. So you download the app from the iOS App Store, open it up, and… you’re greeted with what looks like an error message.
“Trying to join Netflix?” it reads. “You can’t sign up for Netflix in the app. We know it’s a hassle. After you’re a member, you can start watching in the app.” Bizarrely, it gives no further instructions on how or where to go if you want to sign up for Netflix: no URL, no QR code, not even a hint of how to join. If you aren’t already a member, it’s a complete dead end.
That’s not a bug. It’s a function of Apple policy. With some exceptions, the company doesn’t let users pay app makers directly for their apps or digital services. They can only pay Apple, which takes a 30% cut of all revenue and then passes 70% to the developer. (For subscription services, which account for the majority of App Store revenues, that 30% cut drops to 15% after the first year.) To tighten its grip, Apple prohibits the affected apps from even telling users how they can pay their creators directly.
In 2018, unwilling to continue paying the “Apple tax,” Netflix followed Spotify and Amazon’s Kindle books app in pulling in-app purchases from its iOS app. Users must now sign up elsewhere, such as on the company’s website, in order for the app to become usable. Of course, these brands are big enough to expect that many users will seek them out anyway.
Smaller app developers, meanwhile, have little choice but to play by Apple’s rules. That’s true even when they’re competing with Apple’s own apps, which pay no such fees and often enjoy deeper access to users’ devices and information.
Now, a handful of developers are speaking out about it — and government regulators are beginning to listen. David Heinemeier Hansson, the co-founder of the project management software company Basecamp, told members of the U.S. House antitrust subcommittee in…