Do Claims of App Store Monopoly Power Have Merit?

Executive Summary

A bill intended to regulate the two biggest app stores, Google Play and the Apple App Store, is currently waiting on the Senate Calendar. The Open App Markets Act was introduced in the Senate earlier this year. The bill has bipartisan support in the Senate with seven Republicans and seven Democrats sponsoring it. An identical bill has also been introduced in the House. 

The bill is based on the assumption that Apple and Google are unfairly advantaged in negotiating fee rates and other conditions because app developers don’t have sufficient substitutes aside from these two app stores. In other words, in an optimal competitive market, terms would be better for developers because the app stores would fear losing to other app stores with more appealing fees and conditions than those currently in place.

In this research in focus piece, digital technology expert Jessica Melugin explains why this bill is unnecessary. The bill ignores modern economic analysis that separates a hardware device (like a phone or tablet) from the app marketplace. She explains that policymakers should focus on a wider market in determining whether to accuse Google and Apple of monopoly activity.

According to Melugin, policymakers have defined the app market too narrowly, assuming that all apps are exclusively developed for handheld mobile devices. This limited focus ignores more than 300 app stores available worldwide servicing an average of 22 devices per American home. She also points out that the fees Apple and Google charge are not significantly higher than the fees other app marketplaces charge and that the App Store benefits developers by allowing them to piggyback on Apple’s valuable reputation for security.

Melugin encourages policymakers to use a wider policy lens that recognizes users’ multiple hardware devices and the many app distribution channels available to developers. Legislation based on a too-narrow conception of the full landscape of app stores may lead to unintended consequences that stifle innovation and limit choices. 

Melugin recommends abandoning this narrow approach to legislation to ensure competition and innovation can fully benefit consumers.

The Open App Markets Act,1Open App Markets Act, S. 2710, 117th Cong. (2022), https://www.congress.gov/bill/117th-congress/senate-bill/2710. sponsored by Senators Blumenthal (D-CT), Klobuchar (D-MN), and Blackburn (R-TN), was one of many antitrust tech bills to garner bipartisan support in the 117th Congress. The proposed law seeks to set new rules for the operation of app stores, including requiring app stores to allow more payment options inside apps and requiring Apple devices to afford users more permissive downloading options. Promoting the legislation, Sen. Blumenthal’s website declared, “Two companies, Google and Apple, have gatekeeper control of the two dominant mobile operating systems and their app stores that allow them to exclusively dictate the terms of the app market, inhibiting competition and restricting consumer choice.”2Office of US Senator Richard Blumenthal, “Blumenthal, Blackburn & Klobuchar Introduce Bipartisan Antitrust Legislation to Promote App Store Competition,” press release, August 11, 2021, https://www.blumenthal.senate.gov/newsroom/press/release/blumenthal-blackburn-and-klobuchar-introduce-bipartisan-antitrust-legislation-to-promote-app-store-competition.

In some sense, it stands to reason that the owners of these app stores have gatekeeper control over them—much as McDonald’s has gatekeeper power over Big Macs and Disney over the Matterhorn ride. But misguided charges of harmful antitrust market power are largely a result of defining the app store market too narrowly by looking only at mobile devices while ignoring the multiple hardware devices consumers often use, and thus arriving at the mistaken conclusion that there are only two app stores of consequence.

The implied accusation of market interventionists is that the two biggest app stores, Apple’s App Store and the Google Play Store, possess monopoly power. As monopolies, they are supposedly able to charge inflated fees and make unreasonable demands of app developers that use their platforms. Proponents of government intervention claim that Apple and Google are unfairly advantaged in negotiating fee rates and other conditions because there are insufficient substitutes available to app developers. In other words, in an optimal competitive market, terms would be better for developers because the app stores would fear losing too many developer products to other app stores with more appealing fees and conditions. 

This theory employs an inappropriately narrow definition of the market—one that focuses on mobile devices and market shares only while ignoring modern economic analysis.3Office of US Senator Richard Blumenthal, “Blumenthal, Blackburn & Klobuchar Introduce Bipartisan Antitrust Legislation to Promote App Store Competition,” press release, August 11, 2021, https://www.blumenthal.senate.gov/newsroom/press/release/blumenthal-blackburn-and-klobuchar-introduce-bipartisan-antitrust-legislation-to-promote-app-store-competition. Instead, what is needed is a much wider policy lens that recognizes users’ multiple hardware devices and these devices’ corresponding app stores and developers’ ability to offer products through these alternative distribution channels. A wide lens provides the full picture of what can (and could yet) be used as a substitute for an iPhone or a phone running the Android operating system. The full picture gives lie to the assertion that the Apple App Store or the Google Play Store have monopoly power that is pushing fees higher than they would otherwise be. 

As of 2022, American homes have an average of 22 connected devices.4Deloitte, “Consumers Benefit from Virtual Experiences, but Need Help Managing Screen Time, Security and Tech Overload,” press release, August 3, 2022, https://www2.deloitte.com/us/en/pages/about-deloitte/articles/press-releases/connectivity-and-mobile-trends.html. These include desktop computers, laptops, tablets, smartphones, gaming consoles, smart displays, smart speakers, digital media players, vehicles, smart TVs, smart watches, appliances, and home voice assistants, among other devices. These devices come with their own app stores that stretch far beyond the Apple App Store and the Google Play Store, but proposed legislation focuses on those two biggest app stores and the agreements they have in place with app developers.5See the appendix for a partial list. Considering that the majority of app revenue comes from gaming and subscription-based video and music streaming services,6Sensor Tower, Q2 2022: Store Intelligence Data Digest, July 2022, https://go.sensortower.com/rs/351-RWH-315/images/Sensor-Tower-Q2-2022-Data-Digest.pdf. it would be a mistake to disregard these competing devices and platforms when evaluating the current app market.


Comparing the Big Two App Stores to Other App Stores

Apple’s App Store provides apps compatible with devices running on Apple’s iOS. These include iPhone, iPad, Mac, Apple TV, and Apple Watch. Apple currently has a 30 percent baseline fee, but exceptions are plentiful, and in many cases the fee falls to 15 percent.7L. Ceci, “Commission Rates for Leading App Stores Worldwide as of July 2022,” Statista, September 13, 2022, https://www.statista.com/statistics/975776/revenue-split-leading-digital-content-store-worldwide/. For example, a commission for subscription-based purchases that automatically renew declines to 15 percent after one year. Similarly, Apple’s Small Business Program, announced in November 2020, reduces Apple’s commission to 15 percent if the developer earned less than $1 million during the previous calendar year.8“For Developers who have qualified and been approved by Apple for the App Store Small Business Program, Apple shall be entitled to a reduced commission of 15%. . . . You and Your Associated Developer Accounts must have earned no more than $1,000,000 in total proceeds . . . during the twelve (12) fiscal months occurring in the prior calendar year.” “Paid Applications Agreement (Schedules 2 and 3 of the Apple Developer Program License Agreement),” Developer, Apple, February 25, 2022, https://developer.apple.com/support/downloads/terms/schedules/Schedule-2-and-3-20220225-English.pdf. And Apple’s News Partner Program, announced on August 26, 2021,9Apple, “Apple Introduces the News Partner Program,” press release, August 26, 2021, https://www.apple.com/newsroom/2021/08/apple-introduces-the-news-partner-program/. allows developers that create content for Apple News to qualify for a 15 percent commission rate.10“Introducing the News Partner Program,” Developer, Apple, accessed September 19, 2022, https://developer.apple.com/apple-news/program/.

Apple devices do not allow users to download apps from other app stores, from websites, or from other devices.11An exception is offered by the popular messaging app WeChat, where third-party developers build lightweight HTML apps, or “mini-apps,” for everything from ordering food delivery to playing games. These apps are available via link with the WeChat interface and from outside QR codes. Kif Leswing, “Three Ways to Get iPhone Software without Using Apple’s App Store,” CNBC, September 1, 2020, https://www.cnbc.com/2020/09/01/how-to-get-iphone-software-without-using-apples-app-store.html. However, consumers still manage to “sideload” using third-party app stores developed to bypass Apple’s “walled garden.” Apple’s closed-system approach may limit total choices for users, but it likely has the benefit of keeping its devices more secure and less vulnerable to malware.12Dan Rafter, “Android vs. iOS: Which Is Better for Security?,” Security Center, Norton, March 22, 2022, https://us.norton.com/internetsecurity-mobile-android-vs-ios-which-is-more-secure.html. Apple now claims more than half of the smartphone market in the US, but it claims only 25 percent of the global phone market.13David Lumb, “More Americans Have iPhones Than Android Phones for First Time since 2010, Research Says,” CNET, September 2, 2022, https://www.cnet.com/tech/mobile/more-americans-have-iphones-than-android-phones-for-the-first-time-since-2010/.

If some consumers don’t like the walled-garden trade-off of more security for less openness, they can opt for hardware running Google’s open-source Android operating system. This ecosystem allows users to sideload apps and download them from websites. As a consequence, Android devices are arguably less protected from malware and other security threats than Apple devices are. But some consumers clearly prefer the freedom to tinker with the operating system and value the greater number of available apps. Globally, Android phones account for just over 70 percent of the mobile operating system market.14Federica Laricchia, “Mobile Operating Systems’ Market Share Worldwide from January 2012 to August 2022,” Statista, August 30, 2022, https://www.statista.com/statistics/272698/global-market-share-held-by-mobile-operating-systems-since-2009/.

Google Play’s standard “service fee” for developers is 30 percent. For automatically renewing subscriptions, the service fee is 15 percent.15“Service Fees,” Play Console Help, Google, accessed September 6, 2022, https://support.google.com/googleplay/android-developer/answer/112622?hl=en. Unlike Apple’s App Store, this 15 percent rate for subscriptions does not appear to be predicated on a subscription during the previous calendar year. Google announced a “15% service fee tier” in March 2021.16“Changes to Google Play’s Service Fee in 2021,” Policy Console Help, Google, accessed September 6, 2022, https://support.google.com/googleplay/android-developer/answer/10632485. Enrolled developers incur a 15 percent service fee for their first $1 million of earnings during each year. All earnings over $1 million incur the standard 30 percent service fee.

Both Samsung and Amazon operate app stores that distribute applications for Android devices and their own respective app-enabled devices. The Samsung Galaxy Store has a standard commission rate of 30 percent. The Galaxy Store’s terms and conditions stipulate that “an alternative revenue share rate may be established upon mutual written agreement during the certification process for an Application.”17“Terms and Conditions,” Galaxy Store Seller Portal, Samsung, accessed September 6, 2022, https://seller.samsungapps.com/help/termsAndConditions.as.

Amazon charges 30 percent as a standard commission for purchases made in its app store, but the company provides a lower commission rate of 20 percent for small businesses through its Small Business Accelerator Program.18“Amazon Developer Services Agreement,” Terms and Agreements, Amazon, last modified July 20, 2022, https://developer.amazon.com/support/legal/da. Certain small developers making under $1 million a year can also utilize Amazon Web Services credits amounting to 10 percent of revenue, which brings total revenue paid to developers to 90 percent.19Palanidaran Chidambaram, “Coming Soon: Amazon Appstore Small Business Accelerator Program,” Developer Console, Amazon, June 15, 2021, https://developer.amazon.com/apps-and-games/blogs/2021/06/small-business-accelerator-program. In-app subscription payments for movies and TV subscriptions incur a 20 percent commission.20“Amazon Developer Services Agreement,” Terms and Agreements, Amazon.

The Microsoft Store assesses a 30 percent store fee for Xbox console apps purchased on a nonsubscription basis. The fee applies to Xbox console games, in-app purchases on Xbox consoles, and apps and in-app purchases on Windows 8 devices, including phones.21“App Developer Agreement,” Microsoft Store, July 16, 2022, https://query.prod.cms.rt.microsoft.com/cms/api/am/binary/RE4YJB0. A 15 percent store fee is applied to apps and in-app purchases from the Microsoft Store that are not included in the above criteria. A 12 percent store fee is applied to any game purchases or in-game purchases, after August 1, 2021, that are not included in the aforementioned criteria.22“App Developer Agreement,” Microsoft Store. This has been understood to include PC games.23Nick Statt, “Microsoft Matched Epic by Slashing Its Commission on PC Games,” Protocol, April 29, 2021, https://www.protocol.com/bulletins/microsoft-store-commission-cut.

Additionally, while Sony will not publicly confirm the number, it is widely believed to take a 30 percent commission. YouTube allows creators to get paid directly by viewers, but creators make most of their money through ad revenue, and the platform takes 45 percent of that.24Ian Carlos Campbell and Julia Alexander, “A Guide to Platform Fees,” The Verge, August 24, 2021, https://www.theverge.com/21445923/platform-fees-apps-games-business-marketplace-apple-google. Valve’s platform, Steam, which provides streaming services for its gaming storefront, also charges a 30 percent commission.25Nick Statt, “Valve Says Steam’s 30% Cut Is Still as Competitive as It Was in 2004,” Protocol, July 30, 2021, https://www.protocol.com/bulletins/valve-defends-30-percent-commission.

In short, the app store commissions charged by Apple and Google are substantially in line with commissions charged by other app stores.


Policymakers Exhibit a Fundamental Misunderstanding of the App Market

To legislate with the notion that there are just two app stores—as if handheld mobile devices composed the market for all digital applications— is to ignore the more than 300 app stores worldwide26Artyom Dogtiev, “App Stores List,” Business of Apps, May 4, 2022, https://www.businessofapps.com/guide/app-stores-list/. that go along with the average of 22 connected devices in Americans’ homes. Using a wider and more accurate market lens shows the inaccuracy of the notion that Apple or Google can or do “exclusively dictate the terms of the app market.”

The fees Apple and Google charge are not significantly higher than fees in other areas of the app ecosystem.27Jennifer Huddleston and Juan Londoño, “Do App Stores Need Antitrust Intervention?,” American Action Forum, April 21, 2021, https://www.americanactionforum.org/insight/do-app-stores-need-antitrust-intervention/. This rough consistency across the industry at least suggests a lack of monopoly power and profits by Apple’s and Google’s app stores.

Indeed, far from being exploited by the scope and size of the two largest app stores, developers derive significant advantages from the economies of scale inherent in the massive distribution systems of the Apple App Store and Google Play.

As of January 2022, Apple has paid out $260 billion to iOS developers. In 2021 the company paid developers $60 billion, up from the $45 billion that it paid in 2020.28L. Ceci, “Cumulative Apple App Store Earnings of Mobile App Developers as of January 2022,” Statista, January 11, 2022, https://www.statista.com/statistics/235418/total-apple-app-store-ios-developer-payout/. As of July 2021, Google has paid out $120 billion to Android app developers.29“Alphabet Q2 2021 Earnings Call,” Alphabet, July 27, 2021, https://abc.xyz/investor/static/pdf/2021_Q2_Earnings_Transcript.pdf?cache=1b65cc3. The size and scope of Google’s and Apple’s app stores enable developers to achieve distribution and profitability that would otherwise be unlikely or perhaps even impossible. These two roads to success at scale exist alongside all the other options for developer success in the marketplace.

The Apple App Store provides an additional benefit to developers by enabling them to piggyback on Apple’s valuable reputation for security. Developers whose apps meet Apple’s high standards for inclusion in its app store can skip starting from scratch to earn that trust with consumers. This increases their efficiency in catering to consumers who place a premium on heightened security and quality in apps. Again, this path sits alongside Google’s more open and permissive model and all the other options for app developers to distribute their products.

Economic analysis may be helpful in evaluating whether government antitrust intervention is justifiable (see, for example, the federal antitrust enforcers’ “horizontal merger guidelines”),30US Department of Justice and Federal Trade Commission, “Horizontal Merger Guidelines,” August 19, 2010, https://www.justice.gov/atr/horizontal-merger-guidelines-08192010. but regulators and legislators cannot know with certainty what the “correct” number of firms in any given market is or what market shares are “inappropriately high.” In an economic sector as varied, fast-changing, and fluid as that of digital apps, it is almost certain that regulatory interventions will have harmful unintended consequences.

Legislation like the Open App Markets Act, with its focus on just two app stores out of approximately 300, fails to accurately define the market. To proceed to regulate with poor initial analysis increases the risk of unintended and harmful consequences. These types of regulatory schemes should be abandoned in order to preserve innovation in the marketplace and benefits to consumers.


CGO scholars and fellows frequently comment on a variety of topics for the popular press. The views expressed therein are those of the authors and do not necessarily reflect the views of the Center for Growth and Opportunity or the views of Utah State University.

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