Cantillon: iWinning and iLosing at Apple

It has been a week of mixed fortunes for tech giant Apple. Yesterday , the maker of iPhones, iPads and Macbooks marked the fifth anniversary of its app store, the digital marketplace for programmes to run on your smartphones and tablets. Coinciding with the celebrations, it has been found guilty of conspiring with several publishers to fix the price of ebooks.

The ruling marks a victory for the department of justice in the US and, indirectly, online retailer Amazon. The case against Apple was that it conspired with five big book publishing houses to develop a new ebook pricing formula – in the eyes of the department of justice – that gave the publishers the final say in the prices the ebooks sold to the public.

It was argued that this led to much higher prices charged on Apple’s ibook store for ebooks than were being charged for similar sorts of books through Amazon’s Kindle operation. The publishers had already agreed to settle out of court. Apple continues to deny its guilt in the matter, saying it will appeal the “false accusations”.

Regardless of the final outcome of the case, it highlights the potential risk to consumers of having a handful of players so dominant in something that plays such a major role in our everyday lives.

The app store has been an unqualified success for Apple and for many tech start-ups in the process.

It’s hard to believe that was five years ago. Nowadays smartphone users turn to apps for nearly everything, from train timetables to news.

Recently the store clocked up its 50 billionth download. For those of us attached to an iPhone for most of our waking hours, it’s hard to recall life before apps.

When it started out there were just 500 apps available: now there are 900,000 across a range of devices, with 375,000 designed specifically for the iPad. Of course not every app has become a hit: reports suggest two-thirds of the apps in the store are rarely if ever downloaded.

The store has also created a steady flow of new millionaires from the software development community, some of whom created their businesses on the kitchen table with a laptop. Apple has paid out €5.2 billion to app developers in the last five years. Worldwide there are more than half a billion accounts registered with the App Store and there are in excess of 800 apps downloaded every second. A measure of how quickly the market has expanded is that it took almost four years to hit 25 billion, but just another 14 months to double that.

Many apps have made life easier but yesterday’s ruling tempers some of the eulogising over Apple’s role in society. It also highlights why we need to be wary of becoming too over-reliant on one supplier managing our tech lives.