The EconomistJune 27th 2020 Business 531I
f apple’s properation has a centrepiece,
it is the Worldwide Developers Confer-
ence (wwdc). The covid-19 pandemic
forced this year’s jamboree, which began
on June 22nd, online. Instead of the usual
cheers and whistles at the keynote speech,
viewers were treated to a slick pre-recorded
video of Tim Cook, Apple’s boss, listing the
usual slew of announcements: a new ver-
sion of the iPhone’s operating system, new
chips for Apple’s desktops and laptops,
plans to let iPhones unlock some bmwcars.
Perhaps that is just as well—for this year
Mr Cook may have heard a few boos. A week
before the wwdcthe European Union had
announced antitrust probes into Apple’s
App Store. That, in turn, came amid an out-
break of restiveness among the developers
who provide software to Apple users, and
at whom the wwdcis ostensibly aimed.
The eu’s investigation follows com-
plaints from Spotify, a Swedish music-
streaming firm, Tile, which makes tracking
devices, and Kobo, a maker of e-book read-
ers. They are unhappy about rules that
force app-makers that sell digital services
on Apple devices to use Apple’s own system
for handling purchases made in their apps.
Apple takes a cut of up to 30% from each
such transaction. At the same time the
rules limit firms’ ability to guide users to
other payment options (via their websites,
for instance). Since the App Store is the
only way to sell software to iPhone users,
the firms allege that Apple’s rules amount
to an abuse of its control over the platform.
The grumpiness extends beyond firms
that have formally complained. Just before
the wwdc, Basecamp, which makes an
email app called Hey, publicly fell out with
Apple for the same reason. Match.com, an
online-dating firm, says it is unfair that
purveyors of digital services must fork over
30% to Apple, while other businesses, such
as ride-hailing apps like Uber, do not have
to. Other developers grouse in private, fear-
ing reprisals if they speak up. Apple, for its
part, has dismissed the complaints as mere
moaning from companies keen to get a
“free ride”, though it did quietly make a few
small concessions, such as promising to
loosen restrictions on non-Apple web
browsers, music-streaming apps and other
software, and letting developers appeal
when their products are said to violate App
Store rules.
Apple’s legal troubles extend beyond its
payments systems, and beyond the eu. Be-sides charging for in-app transactions, the
firm also takes a 30% cut from every sale of
any app in the App Store. A court case in
America alleging that the App Store’s mo-
nopoly has driven up prices for consumers
was given the green light to proceed by the
Supreme Court last year. Attitudes towards
the tech industry in general are hardening
on both sides of the Atlantic. Google, Face-
book and Amazon all face their own scruti-
ny from trustbusters. On June 18th Brad
Smith, the president of Microsoft—which
lost a landmark antitrust case in 2001—
gave the pot a vigorous stir when he opined
that Apple and Google exert far tighter con-
trol over smartphones than Microsoft ever
had over desktop pcs.
Mr Cook and Sundar Pichai, who runs
Google’s corporate parent, Alphabet, may
beg to differ—not least because each can
claim to have to compete with the other. Ei-
ther way, Apple may be tempted to carry on
squeezing its developers even as regulatory
storm clouds gather. Smartphones, which
have powered the firm’s transformation
from also-ran to colossus over the past de-
cade, have become a mature market. Sales
of iPhones are stagnant. Those who already
own a device replace it less frequently. And
the number of people buying an iPhone for
the first time has fallen by 63% from its
peak in 2016, calculates Neil Cybart of
Above Avalon, a tech-analysis firm.
Apple plans to replace revenue from
selling phones with that from services.
This includes proceeds from, among oth-
ers, warranties and video-streaming, as
well as App Store fees and commissions. A
new study, financed by Apple, estimates
the size of the global market for everything
that the App Store has created, from food-
delivery to online shopping, at $519bn a
year (see chart). One way to read this is as
an advertisement for Apple’s benevolence.
Advertising and digital goods, from which
the firm takes a cut, make up just a fifth of
the total. On the other hand, the study also
highlights just how much more digital ter-
rain remains to be harvested. 7App developers are cross with the
iPhone-makerAppleSqueezing the pips
Orchard pickings
Apple, transactions enabled by the App Store*
2019 estimate,$bnSource: Analysis Group*Value of products and services purchased and/or consumed
via mobile apps installed from the App Store †Excludes RussiaRest of worldEurope†United StatesChina250200150100500In-appadvertising DigitalpaymentsE-commerce Digital goods & servicesO
il analystsdebate the future of tran-
sport fuels. That of petrochemicals—
used to make everything from plastic pack-
aging to paint—has seemed unequivocally
bright. The International Energy Agency
(iea), an industry forecaster, expects them
to account for half the growth in oil de-
mand from 2019 to 2025. Better yet, Ameri-
ca’s shale boom has furnished cheap feed-
stock in the form of natural gas. Exxon-
Mobil is spending $20bn on chemical and
refining facilities along America’s Gulf
Coast, near Texas’s Permian basin. Royal
Dutch Shell is building a huge complex in
Pennsylvania, atop the Marcellus shale for-
mation—President Donald Trump has
called it “one of the single biggest construc-
tion projects in the nation”. Saudi Aramco,
the largest oil firm of all, this month com-
pleted its $69bn acquisition of a 70% stake
in sabic, Saudi Arabia’s chemicals giant.
Covid-19 would seem to validate such
moves. Use of petrol, diesel and jet fuel has
plunged amid lockdowns but plastic pack-
aging and medical supplies are in high de-
mand. However, diversification that makes
sense for any individual firm may prove
risky for the industry as a whole.
On paper, the allure of petrochemicals
remains strong. If the internal-combus-
tion engine falls out of favour, the thinking
goes, even sanctimonious environmental-
ists will still purchase polyester camping
tents and synthetic sandals. The market in-
creasingly punishes companies that invest
in new drilling, so it seems only sensible to
build “crackers”, sprawling networks of
pipes and furnaces that break the molecu-
lar bonds in ethane, a substance extractedNEW YORK
Oil companies’ favourite way to
diversify isn’t going to planPetrochemicalsThe hole in the
hedge
Dawn cracking in Texas