Apple’s regulatory issues could affect the iPhone
Apple’s quarterly profit rose 11% to a record $123.9 billion, with revenue from iPhone sales at $71.63 billion, up 9% year-on-year the other. The services, which include App Store fees, continued to grow, growing 25% annually to $19.52 billion.
Yet while consumers can still buy Apple devices and developers will continue to use the App Store to distribute their apps, regulatory pressure on Apple is mounting and the latest report from an antitrust authority could point to a new threat. which could affect Apple’s crown jewel, the iPhone.
The UK Competition and Markets Authority (CMA) recently published an interim report on mobile ecosystems. In addition to the usual concerns about how Big Tech companies leverage their position in markets where they are dominant (App Stores, search, online advertising) to gain advantage in adjacent markets, the regulator has identified a new restriction potential in cloud gaming.
The report concludes that “Apple has blocked the emergence of cloud gaming on iOS”. Cloud gaming uses cloud functionality to deliver games in a “platform independent” way. For example, users can access a catalog of games for a monthly subscription (like Microsoft’s Game Pass) and play on their consoles, phones, or any other device.
The advantage of cloud gaming for users who play on mobile devices is that cloud gaming goes beyond the technological capabilities of any phone because the storage and processing happens in the cloud. Thus, cloud gaming removes the limitations of storage and processing capacity of the phone and allows users to enjoy their games without relying on the latest smartphone model. While cloud gaming is still at a nascent stage of technology, if users prefer using the cloud rather than downloading games to their phones, it could impact the number of iPhones sold, especially among the population. younger.
The AMC identified this concern in its interim report and also reviewed Apple’s App Store review guidelines where, according to the regulator, Apple includes various policies that can restrict how cloud gaming apps can run as native App Store apps. Apple doesn’t allow apps that offer access to a catalog of games and instead requires each game to be submitted individually. This means that users must individually download each game to their devices, which also gives Apple a significant source of revenue as each game must be paid for using Apple’s in-app purchase system, for which it charges around 30% of value.
The interesting part of the report is how the CMA considered the potential harm to competition. Rather than focusing on cloud gaming, where Apple doesn’t have a strong presence, the CMA looked at Apple’s incentives to protect its own hardware and application distribution. If Apple can hinder the development of cloud gaming by blocking certain apps from the App Store, users would still need high-end phones to play the latest games. Apple might also have an interest in not allowing the next Spotify or Netflix for cloud gaming, as it could pose a threat to a growing revenue stream.
These tentative findings may change in the final report, and even if confirmed, that doesn’t mean Apple should change its policies. The regulator may or may not open a separate investigation, and Apple may also be able to justify this restriction. But whatever the outcome, it’s just one more stone in a long road of regulatory challenges facing the company.
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