On Wednesday, the Arizona House of Representatives passed a bill that would require Google and Apple to allow Arizona-based app developers to choose their own alternate payment systems — and thus avoid the 15 to 30% commissions the app stores typically charge. This legislation follows on the heels of antitrust lawsuits by Epic Games, the developer of hit game Fortnite, against Google and Apple for monopolizing app stores. Many other states are considering similar bills. Some are also considering more extreme rules requiring the tech giants to allow sideloading, or the ability to download software programs outside of the default app stores. Google’s Android currently allows sideloading while Apple’s iOS does not.
What these proposed laws share in common is a highly prescriptive view of what technology platforms should allow and how their business models should work. The market has been running a decades-long test on consumer preferences for open vs. closed platforms: On desktop, consumers can choose Windows if they want a more open experience and macOS if they want a more closed experience. Similarly, on mobile devices, consumers can choose Android if they want to be able to sideload app stores and iOS if they want a more controlled experience. This diversity of approaches in tech seems to be working out for consumers, developers, and platforms, given the proliferation of these devices in recent years. According to estimates from PPI’s Michael Mandel, as of August 2020 the United States had 2.52 million App Economy jobs.
Apple pursues a highly integrated approach — they build the hardware, they build the operating system, they build the app store, they build the payments system, and they build many of the basic apps users need to get value out of their phones. Google — and many others — pursue a highly modular approach. Google developed Android, an open source operating system, but it doesn’t sell many phones (in 2019, Google sold 7.2 million Pixel phones; there were 1.5 billion smartphones sold worldwide). There are tradeoffs between the modular approach and the integrated approach. The modular approach can often deliver lower costs because vendors can mix and match different commodified components into a final product.
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