A handful of billion-pound mobile app companies, from gaming to online dating to streaming music, want to change the conditions that made them successful in the first place, pulling up the ladder behind them.
The Competition and Markets Authority (CMA) is right to look at broadening the ways that developers can create new products and serve their customers. Regulators, however, must resist the call to completely reshape the structure of the widely successful mobile ecosystem.
Greater flexibility for developers to serve their customers with new products, services and purchasing options could benefit small businesses. However, those benefits will only be realised if the security, privacy and consumer trust that underpin the current marketplaces are maintained. Consumers willingly download, pay for and subscribe to apps developed by companies they have never heard of because of the trust they have in the mobile ecosystem.
Photographer: Dino Soldin
For developers, access to app stores is a major competitive advantage. With almost no investment or overhead, a founder can create an account, upload their app and start earning customers. It’s such a positive arrangement that in the UK, the app economy generates more than £76.9 billion annually and sustains more than 400,000 jobs. In fact, almost all of the apps on the biggest app stores are developed by small and medium-sized enterprises (SMEs).
What does it cost for an individual to be able to publish an app to an app store? For Google Play, it’s a one-time fee of $25, and for Apple’s App Store, it is an annual fee of $99. And what do they get for that?
- Offloading overhead costs like maintaining secure payment processing.
- Instant access to a global marketplace.
- Built-in consumer trust, which allows small businesses to compete with global brands.
This system has worked well for the vast majority of businesses that operate on the app stores. In fact, it worked well for the now billion-pound brands that want to use regulation to break it apart because they don’t want to pay their share.
Let’s take a look at just one of the app stores, Apple’s App Store. First off, 95.8 percent of all apps are free and pay no commission at all. Ninety-eight per cent of all registered developers are small or independent and qualify for the reduced 15 percent commission on the first $1,000,000/year. Who then, you ask, pays the 30 percent the billion-pound brands are complaining about? The very same billion-pound brands that are lobbying to pull the ladder up on the ecosystem that they used to get big.
In the UK, the app economy generates more than £76.9 billion annually and sustains more than 400,000 jobs.
And what are commissions charged on? In both Apple’s App Store and Google Play, paid app downloads (such as games), in-app purchases of digital goods (such as access to premium features) and purchases of digital services (such as podcast and streaming services) are subject to a commission.