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Epic Apple Ruling Lets Billion-Dollar Companies Keep More Cash From Trillion-Dollar Companies

Apple App Store
(Image credit: Apple)

So little guys everywhere in tech world celebrated Friday after a judge decided that maybe Epic had a case against Apple over the ways it runs, at great profit, its vast App Store. 

The actual decision by U.S. District Judge Yvonne Gonzalez Rogers, whose jurisdiction includes Silicon Valley and San Francisco, was initially perceived as a blow to Apple, but further investigation suggests something less damning, but definitely still a deal. 

The decision’s new strictures on the App Store edifice (and by extension, other company’s app stores) indeed are likely to be useful to the big streaming video services, dating apps, game publishers and the like whose well-known apps sit at the top of the charts. 

They’re the ones with the resources and motivation to take advantage of what Judge Yvonne Gonzalez Rogers said is now possible on Apple’s store: 

“Apple Inc. and its officers, agents, servants, employees, and any person in active concert or participation with them (“Apple”), are hereby permanently restrained and enjoined from prohibiting developers from (i) including in their apps and their metadata buttons, external links, or other calls to action that direct customers to purchasing mechanisms, in addition to In-App Purchasing and (ii) communicating with customers through points of contact obtained voluntarily from customers through account registration within the app.”

So, to translate, if you have a separate way for people to pay you directly, outside of your app, go for it. Now you can link to that payment function in your app, and also market it separately to customers if they give you permission. It’s easy to envision, say, Disney taking quick advantage so it can further market the living heck-ness out of its SVOD bundle beyond the gazillions it already spends on TV advertising for Disney Plus et al.

Indeed, Match Group finance chief Gary Swidler said his company is already trying to figure how the decision will let it keep some portion of the $500 million its big dating services send to Apple each year. 

But Swidler disputed one analyst’s estimate that the decision might save Match $80 million a year. There’s still too many unknowns to make that kind of projection with any authority, he said. 

For instance, how many subscribers will actually click through to an app’s home site or payment system, go through the laborious process of entering credit card information, overcome any festering concerns about the security and trustworthiness of a company they may not know well, and then hit “pay?” It’s one of the great challenges of e-commerce generally, and something that the App Store solves seamlessly and safely in exchange for its huge vig. 

For big apps like Netflix, that’s probably a lot of customers, who already have to go outside the streaming giant’s iOS app to pay because the company long ago decided it didn’t like sharing at least this part of its revenue stream (don’t get me started on password sharing). 

But the calculus is likely to be far different for that interesting little game or productivity app that just launched on iOS. For them, the judge’s decision will provide little succor any time soon. Those apps must weigh the time and expense of building a separate payment system, or more likely, contracting it out, or keeping it simple and allowing Apple to the job quickly and painlessly and expensively. Pick your poison. 

The decision is unlikely to make a huge impact on the bottom line of the world’s most valuable company. Yes, shares dropped Friday after the decision by more than $5, to about $149 apiece after a long and profitable run-up since mid-March had sent shares soaring nearly a third. 

As it is, investors still own a company valued at $2.46 trillion, just hours before it holds its annual iPhone-a-palooza to detail what’s cool enough in this fall’s smartphones to generate another $135 billion or so in sales. That money train appears likely to keep chugging along, regardless of the Epic case’s final outcome. 

And Epic thought so little of the decision that it immediately announced it would appeal, while Apple proclaimed victory, and the preservation of the safety and sanctity of the app store.

In response, Epic CEO Tim Sweeney tweeted, “Today’s ruling isn’t a win for developers or for consumers. Epic is fighting for fair competition among in-app payment methods and app stores for a billion consumers.”

More likely to make an impact long term are what happens within Apple itself, probably prodded along at the point of a regulator’s or legislator’s pen. 

For instance, Japan and South Korea regulators had already knocked a few bricks out of Apple’s walled garden, bricks that Apple said it would also remove elsewhere. And we can expect regulatory and legislative reforms soon enough in the United States, or more likely, the European Union, India or China. Those changes in one big market may in turn trickle down to everyone else.

Chances are, this decision will be something less than revolutionary, but more than meaningless, hovering in that ‘meh’ middle that columnists hate. But what does matter is that it marks a significant change in the operations of one of the greatest engines of commerce in the history of capitalism. For that, it should remembered. 

David Bloom

David Bloom of Words & Deeds Media is a Santa Monica, Calif.-based writer, podcaster, and consultant focused on the transformative collision of technology, media and entertainment. Bloom is a senior contributor to numerous publications, and producer/host of the Bloom in Tech podcast. He has taught digital media at USC School of Cinematic Arts, and guest lectures regularly at numerous other universities. Bloom formerly worked for Variety, Deadline, Red Herring, and the Los Angeles Daily News, among other publications; was VP of corporate communications at MGM; and was associate dean and chief communications officer at the USC Marshall School of Business. Bloom graduated with honors from the University of Missouri School of Journalism.