Apple’s “monopsony” power, and the woman who named it (opens in new tab)

> 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.

Kinda miss the point of the article, which focused on monopsony -- sole buyer.

If your want to sell on the east coast (Apple), you need to put your product in wooden boxes no larger than X and documentation must be written in French, and you must have 10 employees that speak French.

If you want to sell to the West coast, you put your product in plastic bags, and everything is in Spanish, and your employees need to speak Spanish.

Yes, you have two competitors, but reach had a unique customer pool, and each had the sole power to let you access them. You must build your product and hope they purchase it (and keep it around), otherwise your business doesn't exist... You can't sell your product to anyone!

You have no negotiation power, if you're not promoted in store you can't leverage your power as a seller (they have all power, as long as they do not violate any actual law)

Agree on most if not all points but the article didn't argue against any of that. It did point out two things.

Companies don't have to literally be the only buyer in a marketplace to wield "monopsony power." If competition isn't perfect — like when there are only a few companies in a market and they aren't undercutting each other's prices — companies gain some ability to lower the price on the stuff they buy. Sellers don't have a lot of other options.

Apple might be profiting from its monopsony power in the app market. In this argument, the company is effectively the sole buyer of Apple-compatible apps and services, which allows them to set their fee as high as they want.

Both of this are new argument from "monopsony" perspective, which is different to all your listed point above are "monopoly" perspective.

Not saying I agree or disagree with his monopsony thing, since it is completely new word to me.

> 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?

Well, these aren't mutually exclusive. Apple can sell less variety, and still exert too much control over their platform--in fact, the first is caused by the second. I'd argue that "monopoly" doesn't really apply to the second situation, so that's sloppy use of the English language, but if you try to actually figure out what people are trying to communicate, rather than being pedantic, you'll have a more interesting conversation with those people.

Apple is not like Tesla; iPhones are often touted as a “luxury brand” but the truth is that they offer products of quality that are roughly in proportion to their pricing, and their high margins are due to better/more efficient operations than their competitors. A phone is such an essential tool in one’s life and priced low enough that it makes sense to invest in a product that is of good quality. Most people can afford iPhones and even poor people can afford used ones. Not many people can afford a Tesla.

Unlike a Tesla, you don’t lose a lifetime of app purchases, movies, songs and books when switching products; you don’t lose a major set of functionality between other Tesla owners which would hamper your ability to use your product. I think the “monopsony” is an excellent way to frame the problem. There should be regulation requiring companies like Apple to allow users to sell the apps and other digital content they’ve purchased to others, to allow people to set their own default apps on their own devices and to not hamper the efforts of others to provide interoperability with other devices. These should be common sense consumer rights issues, although at present the only consumer rights-focused entity strong enough to make any of this actually happen is the EU, and I hope they manage to do so.

"Nobody has to buy an iPhone to keep in touch with all their friends who have iPhones."

If an iPhone user has friends that all use Duo on Android, she can install Duo on her iPhone.

If an Android user has friends that all use iMessage or FaceTime, there is no way for her to participate in group chats or group calls.

> 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?

It's both, because they're two different contexts. There is no monopoly on phones; Android phones are direct competition. But what about app distribution? If you make apps and you want to buy app distribution to reach all customers, who is Apple's real competition for reaching customers on iOS? They haven't any; it's a monopoly. And it's not just like Walmart having a monopoly on shelf space at Walmart, because most Walmart customers will also shop at Target or Amazon, but most iOS customers don't also shop for apps at Google Play or Amazon. Apple is the only path to reach them.

Saying they could just buy an Android phone is like saying that a retailer with a regional monopoly in California doesn't really have a monopoly because all your customers could just move to New York. That's an unreasonable barrier to buy a $1 item, and on top of that it isn't even under the control of the app developer who wants to buy app distribution.

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

Apple recently rejected our app submission as we mention our Android version within our app settings. They don't demand you be iOS exclusive, but they damn well try to make it difficult.

That release was just a minor version with some fixes, the text had been in the app for years.

"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?)"

Antitrust enforcement isn't really about "fault". It's not there to punish, it is there to force markets to be more competitive.

Saying that people can develop for Android, so this isn't monopsony/monopoly is sort of like saying Standard Oil wasn't a monopoly because people still could use coal and steam power rather than Standard Oil's petroleum.

While many things about iPhone and Android phones are similar, there are also a huge amount of differences that put huge barriers to going from one to the other.

Network monopolies are complex things, and they aren't about people being able to charge "whatever they like." They are about significantly reduced competition and significant barriers to competitors. Not everything has to be so black and white.

"Apple is like Tesla."

Not really, particularly not in the respects that this article is about. For a consumer, going from a Tesla to another EV is not a big deal. Also, EV's are in their infancy, and antitrust enforcement tends to cut some slack when that is true. Tesla could (very reasonably) end up being forced to separate their car business from their charging network when they get big enough.

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

This isn't what the article is about. This is about the developer side of things, not the consumer side. Developers spend huge amounts of resources writing code that runs on only Apple devices. A very large number of users have iOS devices, not Android devices, and they only way to make apps for them is via the Apple store. Yes you can choose to develop for Android, but aside from the cost of switching, you are now selling to a completely different set of people.

For another analogy, imagine you're a clothing manufacturer, but if you want to sell clothing to women, you have to sell it through a single retail store chain. Saying "you can always make clothing for men" isn't particularly helpful.

On reflection, I will say one thing:

I consider Apple's restrictions on monetizing apps to be shenanigans. It feels normal to me for them to insist on a cut from app sales and in-app purchases.

It feels like shenanigans for them to try to block developers having revenue side-channels. I know this is very uneven, for example, I can download an Amazon Prime app and use it, even though I pay for Amazon prime elsewhere.

But in the Amazon app, there are certain things I can't buy in the app, nor is the app allowed to link me to a web page where I can buy it.

Apple is the smaller company in a duopoly market. There are not enough players in the market that dissatisfied customers can easily up and leave.

The real harm we see Apple doing is that they allow the dominant groups in society to suppress anyone else. This became especially clear during the Hong Kong protests, where they banned apps protestors used after a request from Chinese authorities. Because of the lack of choice in the market, consumers have little choice but to live with whatever is imposed on them.

I guess I'm not such a devotee of the free market. Ignoring legal theories for a moment and thinking about what ought to be, it seems clear to me that society at large is not well-served by having the defining artistic medium of our age in control of a single company, and censored to Disney-like levels.

Come up with whatever theory under existing laws or come up with some new laws, but it seems to me like this is a ridiculous situation that should have a legal remedy.

>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.

What about 3?

Apple's products are overpriced and underpowered, locked down devices sold as fashion statements or 'lifestyle' accessories that are more like toys for rich people than the miniature computers they're supposed to be.

As for their computers, similar argument, overpriced, underpowered, locked down hardware.

And then there's the whole culture of snobbery surrounding Apple and their products that has existed since at least the mid-late 90's about how superior Apple products are to everything else always that's just kind of grated on me...well since then.

You open with a false-dichotomoy. Apple is not a monopolist in the phone market (your first proposed argument). Apple is a monopolist of the app store (your second proposed argument).

Those 2 positions are not mutually-exclusive.

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

They do force us to build the package on their devices though. Which is a wholly arbitrary demand which is frustrating to map into a build process that is already automated on the cloud. Prior to services that rent out Apple devices its an awkward fit.

They're very aggressive with their posturing and they ruthlessly exploit the power they have. Just reading the dev EULA in full is evidence of that.

> 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.

The three positions suggested here (monopoly and monoposony being very different things) aren't actually incompatible. Android can sell more and Apple can be a monopoly (and even more easily, a monoposony) if there is a discernable market of buyers/sellers for whom price adverse changes in what apple is offering to sell or buy do not induce shifts to Android.

> They don’t have a stranglehold over vendors.

They flat out don't allow bloatware from the vendors on their devices. Android doesn't have that kind of pull, and Verizon won't push updates for my phone until they have tested all their bloatware crap that I can't uninstall.

Additionally, Apple has had many other 'requirements' from vendors to keep selling their phone, things like visual voicemail support, allowing them to use iMessage in place of texting (really goes with the part above), requiring ipv6 support, etc.

All Google/Android/?#_next_startup has to do is make a better phone than the iPhone, and people will flock to it. That's how Apple did it.

But currently the alternatives have many problems that cause people to choose iPhones. When those problems are overcome, the market will swing their way.

Apple is not infallible. It will screw up, or go out of fashion, or fall behind eventually. All companies do. People getting all worked up over this need to see the big picture.

There is a joke about similar topic. It goes something like this:

>If you sell too cheaply - antitrust laws break you

>If you sell at the same price as competitors - its a cartel or a deal between vendors

>If you sell at a price too high - its a monopoly

Apple was like Tesla in 2009.

Now the only way that Apple is like Tesla is if Tesla was also a utilities company that managed powerplants, which had a different pricing scheme for it's car customers.

Mostly Apple and Facebook and Google are too big and need to be split up. They are huge monoliths who stimy innovation and competition.

You can’t have a mobile presence without dealing with Apple.

Call it monopoly, monopsony, or neither of those.

At the end of the day it's about a company's abuse of power against users and smaller competitors, and that's what matters. If you get confused when this begins being called "monopoly" because you have a different idea of what a monopoly is, then stop calling it that.

It's about an abuse of power, pure and simple, and the bigger the company and its stranglehold on its users and developers, the more it can abuse that power. Government, the people's representatives (at least in theory), should have every right to deal with that.

I’d agree if iMessages was open platform. It’s beyond ridiculous that Android is limited to SMS (or their messaging app) but iPhone shuts out everyone for a basic utility function.

I wish the US Government and regulators were pushing for this as opposed to trying to break encryption or force backdoors.

If you want to provide services to 100 percent of the population, you need to bend the knee to Apple.

I don't, and it means 10 percent of the population can't use my free apps that save people time and money.

I suppose that's the cost of Apple being Evil and people buying from such a company.

It's both. The two aren't in contradiction.

Apple uses vendor lock-in for software used by one customer across devices, and for software used by multiple users (iMessage)

While this is certainly true, computers and especially mobile ones need to allow consumers to run whatever software they want period. While in the US, it becomes a small inconvenience for us that companies like Netflix and Spotify are having their business sidelined by apple, Apples lock on phones becomes a human rights issue in places like Hong Kong, Russia and Saudi Arabia when Apple complies with local regulation. While consumers with money have the choice to leave iPhone and go with Android, we as a society need to push back on the idea that you as a consumer don’t have the final say of what software can and cannot be run on a device you own.

Plus long term, the technology industry would be healthier to push back against Big Tech keeping an iron grip on these platforms. In the last year that Apple has turned every default app on its phone into a $10 a month optional premium service. This marginal increase in service revenue will starve the news industry, compete unfairly against Netflix and HBO, eviscerate the remaining paid mobile game industry, and scare any fintech start up / vc playing anywhere near apples potential roadmap. And Apple isn’t even doing that good of a job at these new services - they just have the luxury of making the iPhone which is so good that it makes up for them doing everything else mediocrely

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

The argument here is that if you want to produce an app for iOS you have to provide it through the App Store and thus succumb to the 30% fee. The same applies if you're using Apples payment processing, which you actually have to use if you want to offer any in-app purchases on iOS. In addition Apple is the sole authority on what is and is not allowed on their storefront. If they deem your app is not acceptable, you have no alternative ways to distribute it to users. They can also kick you out if they think it's necessary, again leaving you with no alternatives.

Google does the same thing with Play Store. If you sell an app in Play Store, Google takes 30%. If you use Goolges payment processing, Google takes 30%. They can kick you out, not permit you in the store, etc. The difference is that a developer isn't forced to use the play Store or Googles payment processing.

You can distribute your APK in any way you want to and users can install any APK from any location they want to. You can absolutely sell your Android games on your own website and just provide an APK to a paying user and now you don't have to pay 30% out of every purchase. If you want to provide in-app purchases the user can provide their CC information and you're free to process the payment in any way you want to, again, circumventing Goolges cut.

This is the primary reason you can't get Fortnite from the play store, instead you have to download an install an APK. Epic also uses their own payment processing systems, so they don't need to pay anything to Google for IAPs. They can't do that on their iOS apps, meaning they're losing on some hefty profits simply because no alternative exists.

So it's not that Apple is jacking up the profits, rather you could say that you need to pay a hefty tax to provide your app to iOS users.

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

Industry standard compared to what? Certainly not credit card processing, which typically runs 3% to 5%. If you're referring to Google Play, well they just copied Apple. And at least on Android you can side-load.

I think the 30% is a rough industry standard in most Retail sectors. Apple was basically pricing the App Store like an Online Retail store.

The issue is that Apple is not allowing cheaper app stores even in theory. Android does.

There is more going on besides price. The review process is also completely arbitrary. I don't like the whole thing that the only place to get apps is the app store. I will never buy any apple device as long as that is in place.

I don't see it mentioned (at all), but my hypothesis for 30% is that it is because of money laundering. Otherwise, you wouldn't be able to provide gift cards, would have to limit spending per app, cap all the prices, monitor whale spenders, etc. Easiest just to make it unprofitable.

And that would be a good thing. Why would anyone argue to have less control over the hardware they purchased?

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.

I think that is a different to business model. Game consoles are sold at break even or loss leader. That is why EPIC wasn't against the 30% cut from Games on Consoles.

Although it is likely Apple has started to "subsidise" some of its iPhone margin in 2019 with its Services Revenue. And likely continue to do so in 2020 and onwards.

While their consoles still support physical media they aren't monopsonies. A monopsony is a single buyer. As a game developer you have the choice to sell on the xbox store or get physical discs printed and sell them either through a retailer e.g. amazon, or directly from your own site if you wanted.

If/when they produce a generation of consoles that don't support physical media things will probably start to get a lot more questionable

Yup.

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)

Under traditional antitrust regulation, a monopoly is one that has "undue market control." The key terms here are "undue", "market", and "control", which will all be subject to tons of lawyers making a bunch of arguments.

Your point is about the "market": if the market is iOS devices, then there is no question Apple has "control". If "market" is smartphone apps, the argument gets shakier.

Antitrust violations are notoriously difficult to prove in court. Even if Apple were to lose in some iOS app antitrust case, the prospect that it leads to general B2B applications is quite negligible.

The market is too small? Let's try comparing it to a more "conventional" market, like cable TV.

Total iOS app store revenue is somewhere within the neighborhood of $50-100 billion per year. That puts it roughly on par with the US's cable television industry.

There are about 100 million people using iPhones in the US alone. That's about twice the number of cable TV households in the US.

So, it seems like the market for iOS apps is similar to the market for cable TV, and there's also less competition, as I may have other options for getting TV shows, but I don't have any other options for getting apps onto my iPhone.

> 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.

The size of the market is not relevant here. The real question is whether customers have viable alternatives or not. If not, then you're in a "monopwhatever" situation. We don't yet know if DoJ thinks iOS users have alternatives or not though.

Large by what measure? Size of the market in dollar amount? % of market?

> 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.

No. Monopsony and monopoly don't work like that.

See eg https://en.wikipedia.org/wiki/Monopoly_price

Basically, when a monopolists or monopsonists tries to abuse their position, they will shift less volume. There's a finite optimal cut that maximizes profits.

So: when Apple increases their cut, they'll get fewer apps developed. Marginal app developers will go work on Wall Street or flip burgers etc.

They could if they didn't strong arm developers into giving them a cut of subscriptions. This is a major point in the Spotify antritrust suit against Apple.

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

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?)

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).

Off topic: I like your nickname. In that vein, here are two variations of the same sequence of keypresses shifted up and down respectivelly: "erweriotuout" and "cvxcv,.bm.mb".

While something like "4694372" is motorically meaningful to a person typing it on the keypad, or to someone watching him do it, it translates to the screen space as gibberish. Another way to put it is that when typed it has an obvious structure, but when read on the screen, the structure is prohibitively difficult to discern. That's interesting, because it's all too easy to forget that the computer as we know it today can interface with only a very small portion of our faculties.

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.

It would be just enough to allow people to install third party apps without having to use app store.

The justification for the anti-trust actions against Microsoft was that it was abusing its power as a monopoly in operating systems to create a monopoly in web browsers. The same logic doesn't apply in this case because Apple doesn't have a monopoly in anything.

> 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.

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

That is just not true and an exaggeration like that has nothing to do on a board like this. In Europe the prices are even higher for Apple hardware, but because I'm in the market now for an upgrade I can tell you for sure that a 16" MBP is at around 500 Euros more expensive than a similar XPS15 (and I'm not even going into the actual components and the speed of the SSD or others). There is a market for everyone, just like some people like you prefer to pay less for a Dell, Asus or something similar, I would also not go back to a Windows machine or some sort of wobbly inferior built laptop (at least from my point of view).

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.

I disagree that application developers for iOS have the option of selling their products on their own. No matter how much money a developer invests in their own e-commerce operation they still have no legal method for getting their application on any iOS device.

The only way to sell iOS software is through the Apple App Store.

The price of buying a computer to compile and ship the code with is not going to kill many business models that would otherwise have worked (you can buy a used Mac Mini or make a Hackintosh if you're feeling adventurous vs the TOS). But forcing you to use their payment system which takes a 30% cut - that can and does prevent business models from even being possible. If Apple were not allowed to enforce their payment system's monopoly and reject apps for even linking to other options (I don't get how that can be legal), but had to compete with other solutions, that 30% cut would almost certainly be less.

There is a more to laptop than just raw numbers of RAM, SSD and CPU. Paying six-digits for the car that has same number of wheels as Tata — outrageous.

(Agrees, and ponders lack of macOS cloud offerings to address this use case.)