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How can Apple’s App Store prices be monopolistic if the App Store has driven software prices so low that a lot of developers are having a hard time making money

by kbf 7y ago

How can Apple’s App Store prices be monopolistic if the App Store has driven software prices so low that a lot of developers are having a hard time making money? Before the App Store, software licenses for Mac software could be priced in the $40-$70 range for software that might have had feature parity with what you get in a $3-$10 app on iOS these days. That’s not even taking into account the fact that paying for a new version of a piece of software used to be the norm, but on iOS, you buy the app once and expect updates for free forever.

sethhochberg 7y ago
Nobody has ruled on whether the practices are actually monopolistic or not - this ruling just allows a suit against Apple to proceed, which will then make that determination about their business practices. The debate in this case was all about whether the end user was Apple's customer (thus able to sue Apple directly) or the developer's customer.
- criddell 7y ago
  There's nothing illegal about having a monopoly, is there? Don't you have to abuse that power before regulators step in?
  - analognoise 7y ago
    Notably Walmart has been examined for as a monopoly but because in every case that was examined they decreased prices to consumers, no action was taken. I hate that they use federal money to subsidize their workforce' paychecks (non-living wages, supplemented by food stamps), but...they're great for the consumer.
    - notfromhere 7y ago
      the consumer price standard is a pretty poor metric for monopoly. You can thank Bork of Watergate fame for that one.
    - gwright 7y ago
      How could it be any other way? To the extent that government benefits increase I would expect hourly wages to go down for those beneficiaries. This would be the nature result of a competitive market place.
      - michaelmrose 7y ago
        I doubt you comprehend how absurd this situation is. Benefits are inversely proportional to income meaning that a below survivable wage requires people on the verge of not being able to eat to actually step down in pay in order to take the natural progression of an increase in wages. In order to avoid this you just don't let people pay less than a minimum survivable hourly wage so they can't force the government to subsidize them.
        gwright 7y ago
        I understand what you are saying regarding the relationship between income and benefits. I think it is actually somewhat worse than you suggest due to the various step functions in the benefit calculations -- an increase in wage income can actually result in a larger decrease in benefits. In the absence of a minimum wage constraint, and all other things being equal, a change in government assistance is going to result in an opposite change in the market wage rate. This is just a statement of market mechanisms. When the labor pool has access to higher benefits, it is easier for an employer to find someone willing to work for a little less than before (and vice versa). The two situations are somewhat different though. In the first case you are talking about an individual moving themselves into a different market (unskilled/untrained labor to improved skills/experience, for example). Ensuring that this progression isn't penalized via overly aggressive reduction in benefits is a good thing irrespective of any minimum wage constraints. In the second case you are talking about a global change to the market constraints for all participants. So I was just responding to the parent to say that when the government changes its "formula" for benefits, it is entirely reasonable and expected for the market to find a new equilibrium. This isn't an example of Walmart or any other employer "using federal money to subsidize their workforce". This is just the market doing what it does. As for your minimum wage concerns, a minimum wage prices some people out of the labor market entirely. Someone with minimal skills or experience won't be able to bring enough value to an employer to cover the minimum wage. I think it would be much better to get rid of minimum wage rules and adjust benefits accordingly. It makes more sense for someone with minimal skills to have a job (and thus a path towards more skills) and some additional public assistance than to have no job at all and be 100% dependent on public assistance.
    - ashelmire 7y ago
      > they're great for the consumer They are only great at the point of purchase. They make it harder to run a competing business, they create a tax burden by paying low wages, they distort local markets and cause local economies to suffer, they benefit foreign suppliers of products produced at wages and in conditions below American legal minimums (at the expense of American companies that compete with them, which affects American workers at those companies).
  - mortenjorck 7y ago
    There’s nothing illegal about having a monopoly, but by the same token, you don’t have to have a monopoly to run afoul of antitrust regulation. This is an oversimplification, but the Sherman Act was about monopolies, while its later companion the Clayton Act was about anticompetitive practices.
- delinka 7y ago
  I think this debate is interesting, but I don't expect Apple to be happy about the final outcome. A developer publishing solely on Apple's App Store (and relying solely on Apple features to provide functionality) has no direct access to the customer* - Apple prevents that fairly well. In this case, I feel like, as a consumer, I'm Apple's customer. I think courts, and especially juries, would agree. That said, I don't see how the App Store is a monopoly. How would "monopoly" be defined to even formulate a case against Apple? * - notwithstanding that many apps want you to create an account on their systems - Apple does indeed allow this.
  - Majromax 7y ago
    > That said, I don't see how the App Store is a monopoly. How would "monopoly" be defined to even formulate a case against Apple? I think the argument would be fairly straightforward: the App Store is the exclusive avenue to distribute paid applications to iPhone users. In so doing, it acts as a single seller of applications to consumers and a single buyer of applications from developers, and its arbitrarily-set fees are incorporated into prices. The fine parsing comes in whether "iPhone users" are a sufficiently distinct market to effectively make the App Store a monopoly, and I think reasonable people could have different opinions here.
    - wayneftw 7y ago
      There was a story recently about how "83% of US teens have an iPhone, Android 9%" - https://news.ycombinator.com/item?id=19610357 https://news.ycombinator.com/item?id=19610357 So, they're certainly a monopoly in that market today and possibly in the general market in the near future. I have also read that you don't even need to have a higher than 50% market share to be considered a monopoly. You simply need to affect the entire market, which Apple certainly does with their 45% general market share in the US.
      - threeseed 7y ago
        It's ridiculous to think that Apple will be a monopoly in the future. The overwhelming trend is towards Apple losing share as Chinese phone manufacturers start to increasingly capture the middle market.
- deleted 7y ago
  [deleted]
belltaco 7y ago
>How can Apple’s App Store prices be monopolistic if the App Store has driven software prices so low that a lot of developers are having a hard time making money? But Apple is the one that's skimming all the revenue and making huge profits on their forced 30% cut. Apparently they made $12 billion just from the app store in Q3 2018. How is it surprising that a lot of developers are having a hard time making money?
- thechao 7y ago
  My understanding is that argument would have standing in the EU (competitive harm monopolistic practices), not the US (consumer harm monopolistic practices).
jdsully 7y ago
Standard oil used to dump product in competitive markets too. Low prices do not preclude a monopoly nor does the existence of some competition.
- briandear 7y ago
  So hundreds of thousands of app developers are conspiring to keep app prices low? That would involve coordination which is essentially impossible for the numbers of app developers. The developer of Tiny Wings isn’t calling Rockstar Games to agree on prices. Without such coordination, there isn’t any “dumping.” Standard Oil was a sole supplier, while the App Store has thousands of suppliers who all set their prices based on what the market supports. A dumping argument in this case makes no sense since Apple does not set app prices.
  - jdsully 7y ago
    It’s perfectly normal to dump product if it drives sales of your main product. In this case it’s the iPhone that benefits from cheap apps. The App Store has been instrumental in keeping prices down - a major way they do this is by not allowing demos. Who’s going to risk $50 without seeing it first? I’d refer you to this Joel Spolsky article which explains it: https://www.joelonsoftware.com/2002/06/12/strategy-letter-v/ https://www.joelonsoftware.com/2002/06/12/strategy-letter-v/ You see this strategy everywhere in tech. It’s not by accident.
AnthonyMouse 7y ago
> How can Apple’s App Store prices be monopolistic if the App Store has driven software prices so low that a lot of developers are having a hard time making money? Because the issue is the price of app distribution, i.e. the part of the price Apple gets, not the part of the price the developer gets. The fact that the developers are getting squeezed is what you expect to happen when some other part of the supply chain is monopolized, because more of the revenue goes to the monopoly and less to the developer. > Before the App Store, software licenses for Mac software could be priced in the $40-$70 range for software that might have had feature parity with what you get in a $3-$10 app on iOS these days. The desktop and mobile markets are very different. For one thing, the people paying for desktop apps are primarily businesses whereas iOS apps are sold primarily to individuals. The mobile market is also bigger, which means more customers to amortize costs over which should result in lower prices. Compare the price of iOS apps to Android apps. They're not lower and if anything are higher.

by kbf 7y ago

sethhochberg 7y ago

Nobody has ruled on whether the practices are actually monopolistic or not - this ruling just allows a suit against Apple to proceed, which will then make that determination about their business practices. The debate in this case was all about whether the end user was Apple's customer (thus able to sue Apple directly) or the developer's customer.

criddell 7y ago
There's nothing illegal about having a monopoly, is there? Don't you have to abuse that power before regulators step in?
- analognoise 7y ago
  Notably Walmart has been examined for as a monopoly but because in every case that was examined they decreased prices to consumers, no action was taken. I hate that they use federal money to subsidize their workforce' paychecks (non-living wages, supplemented by food stamps), but...they're great for the consumer.
  - notfromhere 7y ago
    the consumer price standard is a pretty poor metric for monopoly. You can thank Bork of Watergate fame for that one.
  - gwright 7y ago
    How could it be any other way? To the extent that government benefits increase I would expect hourly wages to go down for those beneficiaries. This would be the nature result of a competitive market place.
    - michaelmrose 7y ago
      I doubt you comprehend how absurd this situation is. Benefits are inversely proportional to income meaning that a below survivable wage requires people on the verge of not being able to eat to actually step down in pay in order to take the natural progression of an increase in wages. In order to avoid this you just don't let people pay less than a minimum survivable hourly wage so they can't force the government to subsidize them.
      - gwright 7y ago
        I understand what you are saying regarding the relationship between income and benefits. I think it is actually somewhat worse than you suggest due to the various step functions in the benefit calculations -- an increase in wage income can actually result in a larger decrease in benefits. In the absence of a minimum wage constraint, and all other things being equal, a change in government assistance is going to result in an opposite change in the market wage rate. This is just a statement of market mechanisms. When the labor pool has access to higher benefits, it is easier for an employer to find someone willing to work for a little less than before (and vice versa). The two situations are somewhat different though. In the first case you are talking about an individual moving themselves into a different market (unskilled/untrained labor to improved skills/experience, for example). Ensuring that this progression isn't penalized via overly aggressive reduction in benefits is a good thing irrespective of any minimum wage constraints. In the second case you are talking about a global change to the market constraints for all participants. So I was just responding to the parent to say that when the government changes its "formula" for benefits, it is entirely reasonable and expected for the market to find a new equilibrium. This isn't an example of Walmart or any other employer "using federal money to subsidize their workforce". This is just the market doing what it does. As for your minimum wage concerns, a minimum wage prices some people out of the labor market entirely. Someone with minimal skills or experience won't be able to bring enough value to an employer to cover the minimum wage. I think it would be much better to get rid of minimum wage rules and adjust benefits accordingly. It makes more sense for someone with minimal skills to have a job (and thus a path towards more skills) and some additional public assistance than to have no job at all and be 100% dependent on public assistance.
  - ashelmire 7y ago
    > they're great for the consumer They are only great at the point of purchase. They make it harder to run a competing business, they create a tax burden by paying low wages, they distort local markets and cause local economies to suffer, they benefit foreign suppliers of products produced at wages and in conditions below American legal minimums (at the expense of American companies that compete with them, which affects American workers at those companies).
- mortenjorck 7y ago
  There’s nothing illegal about having a monopoly, but by the same token, you don’t have to have a monopoly to run afoul of antitrust regulation. This is an oversimplification, but the Sherman Act was about monopolies, while its later companion the Clayton Act was about anticompetitive practices.
delinka 7y ago
I think this debate is interesting, but I don't expect Apple to be happy about the final outcome. A developer publishing solely on Apple's App Store (and relying solely on Apple features to provide functionality) has no direct access to the customer* - Apple prevents that fairly well. In this case, I feel like, as a consumer, I'm Apple's customer. I think courts, and especially juries, would agree. That said, I don't see how the App Store is a monopoly. How would "monopoly" be defined to even formulate a case against Apple? * - notwithstanding that many apps want you to create an account on their systems - Apple does indeed allow this.
- Majromax 7y ago
  > That said, I don't see how the App Store is a monopoly. How would "monopoly" be defined to even formulate a case against Apple? I think the argument would be fairly straightforward: the App Store is the exclusive avenue to distribute paid applications to iPhone users. In so doing, it acts as a single seller of applications to consumers and a single buyer of applications from developers, and its arbitrarily-set fees are incorporated into prices. The fine parsing comes in whether "iPhone users" are a sufficiently distinct market to effectively make the App Store a monopoly, and I think reasonable people could have different opinions here.
  - wayneftw 7y ago
    There was a story recently about how "83% of US teens have an iPhone, Android 9%" - https://news.ycombinator.com/item?id=19610357 https://news.ycombinator.com/item?id=19610357 So, they're certainly a monopoly in that market today and possibly in the general market in the near future. I have also read that you don't even need to have a higher than 50% market share to be considered a monopoly. You simply need to affect the entire market, which Apple certainly does with their 45% general market share in the US.
    - threeseed 7y ago
      It's ridiculous to think that Apple will be a monopoly in the future. The overwhelming trend is towards Apple losing share as Chinese phone manufacturers start to increasingly capture the middle market.
deleted 7y ago
[deleted]

belltaco 7y ago

>How can Apple’s App Store prices be monopolistic if the App Store has driven software prices so low that a lot of developers are having a hard time making money? But Apple is the one that's skimming all the revenue and making huge profits on their forced 30% cut. Apparently they made $12 billion just from the app store in Q3 2018. How is it surprising that a lot of developers are having a hard time making money?

thechao 7y ago
My understanding is that argument would have standing in the EU (competitive harm monopolistic practices), not the US (consumer harm monopolistic practices).

jdsully 7y ago

Standard oil used to dump product in competitive markets too. Low prices do not preclude a monopoly nor does the existence of some competition.

briandear 7y ago
So hundreds of thousands of app developers are conspiring to keep app prices low? That would involve coordination which is essentially impossible for the numbers of app developers. The developer of Tiny Wings isn’t calling Rockstar Games to agree on prices. Without such coordination, there isn’t any “dumping.” Standard Oil was a sole supplier, while the App Store has thousands of suppliers who all set their prices based on what the market supports. A dumping argument in this case makes no sense since Apple does not set app prices.
- jdsully 7y ago
  It’s perfectly normal to dump product if it drives sales of your main product. In this case it’s the iPhone that benefits from cheap apps. The App Store has been instrumental in keeping prices down - a major way they do this is by not allowing demos. Who’s going to risk $50 without seeing it first? I’d refer you to this Joel Spolsky article which explains it: https://www.joelonsoftware.com/2002/06/12/strategy-letter-v/ https://www.joelonsoftware.com/2002/06/12/strategy-letter-v/ You see this strategy everywhere in tech. It’s not by accident.

AnthonyMouse 7y ago

> How can Apple’s App Store prices be monopolistic if the App Store has driven software prices so low that a lot of developers are having a hard time making money? Because the issue is the price of app distribution, i.e. the part of the price Apple gets, not the part of the price the developer gets. The fact that the developers are getting squeezed is what you expect to happen when some other part of the supply chain is monopolized, because more of the revenue goes to the monopoly and less to the developer. > Before the App Store, software licenses for Mac software could be priced in the $40-$70 range for software that might have had feature parity with what you get in a $3-$10 app on iOS these days. The desktop and mobile markets are very different. For one thing, the people paying for desktop apps are primarily businesses whereas iOS apps are sold primarily to individuals. The mobile market is also bigger, which means more customers to amortize costs over which should result in lower prices. Compare the price of iOS apps to Android apps. They're not lower and if anything are higher.