Top news and what to watch in the markets on Thursday, August 13, 2020.
(Bloomberg) -- Apple Inc. Chief Executive Officer Tim Cook sidestepped most of the criticism two weeks ago when he appeared before Congress at an antitrust hearing with his peers at Alphabet Inc., Facebook Inc. and Amazon.com Inc. taking the heat.Over the past several days, however, video-game developers ranging from Epic Games Inc., Microsoft Corp. and Facebook, have ensured that Apple doesn’t dodge scrutiny over its App Store practices and policies.Last week, Microsoft criticized Apple for barring its Xbox Game Pass service from the iPhone and iPad. “Apple stands alone as the only general purpose platform to deny consumers from cloud gaming and game subscription services like Xbox Game Pass,” the Redmond, Washington-based software maker said in a statement. “And it consistently treats gaming apps differently, applying more lenient rules to non-gaming apps even when they include interactive content.”Apple has said it doesn’t let cloud-based gaming services on the App Store because it needs to review all games individually before they can run on the platform.Facebook Chief Operating Officer Sheryl Sandberg echoed Microsoft’s complaint after Facebook was forced to launch its new gaming service on iPhones without any games. Users can watch live streams of people playing games and be part of a social network of gamers, but can’t play themselves.“We had to remove game-play functionality entirely in order to get Apple’s approval on the standalone Facebook Gaming app -- meaning iOS users have an inferior experience to those using Android,” Sandberg said.Gaming is a key area for Apple as its seeks to generate new revenue sources. Last year, it launched Apple Arcade, a $4.99 monthly subscription that gives access to a library of premium games across its devices. Purchases inside games as a broad category -- of which Apple typically takes a 30% cut -- are one of the biggest sources of App Store revenue, bringing in $22.2 billion for developers in the first half of 2020, according to Sensor Tower.Epic Games, whose CEO Tim Sweeney has been a vocal critic of Apple’s App Store practices, raised the pressure on Thursday. The gamemaker added an option in its popular game Fortnite on Apple devices to pay Epic Games directly, circumventing Apple’s rules and working around the iPhone maker’s fee. Hours later, Apple removed the game, citing the rule violation. Google also removed Fortnite from the Android Play Store later in the day. Minutes after Apple’s removal, Epic Games sued Apple, saying its App Store violated antitrust law.Game installations on iOS were up nearly 20% year over year in the second quarter, driven in part by the global pandemic keeping people home and topping 2.5 billion downloads. Fortnite was one of the most downloaded games in the period, topping 9 million installations, Sensor Tower said. Apple would lose tens of millions of dollars if Epic bypassed Apple’s payment system for Fortnite.“Apple has become what it once railed against: the behemoth seeking to control markets, block competition and stifle innovation,” Epic Games said in its lawsuit. “Apple is bigger, more powerful, more entrenched and more pernicious than the monopolists of yesteryear.”The gaming industry, perhaps, has the loudest voice in the antitrust argument against Apple because App Store rules are often the most strict on games.In addition to barring cloud-based gaming services, which have been popularized by Google, Nvidia Corp. and Microsoft, Apple doesn’t let gamers subscribe outside the App Store and then use the subscription on an iPhone and iPad. Such an exemption is made for music, video, news, cloud and business apps.That exemption has led other App Store critics, including Spotify Technology SA, to push users to subscribe on their websites, then log in on the iPhone. That lets customers use the app on the iPhone, without providing a revenue share to Apple. While Spotify has long publicly complained about Apple’s practices, it has never pulled its app or violated Apple’s rules to cause the iPhone maker to remove it -- marking the Epic Games confrontation as an escalation of tensions between Apple and service providers on its platform.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- It looks as if the long-awaited Apple Inc. subscription bundles are finally going to happen. But while it is a solid step in the right direction, the smartphone giant needs to do far more to change the game.Bloomberg News reported Thursday that Apple is preparing to launch several bundles, internally named “Apple One,” as soon as October. There will be multiple tiers — including a low-end package with Apple Music and Apple TV+, along with higher-end offerings that incorporate its Apple Arcade gaming service, Apple News+ and more iCloud storage. Further, the company is developing a new virtual fitness-class subscription that will compete with offerings from Peloton Interactive Inc. and Nike Inc.Wall Street has been clamoring for years for Apple to do more on subscription bundles, citing the success of Amazon.com Inc.’s Prime service. Although these bundles seem like a decent start at first blush, they are too incremental and tentative. The problem is, with the exception of Apple Music, none of these other subscriptions have gained much traction with the general public. So the bundles are essentially just a price reduction for Apple’s current array of mixed and generally underperforming products. Bloomberg’s Mark Gurman reported that they will work with Apple’s Family Sharing system and could save customers $2 to $5 a month in the aggregate compared with current pricing.So, what should Apple do instead? The company needs to be much bolder. At a bare minimum, Apple should combine its hardware and software products into a larger monthly subscription. Already, Apple has its iPhone Upgrade Program, which enables annual smartphone upgrades and includes the AppleCare+ service. Combining this offering with the new subscription bundles is a no-brainer.In addition, Apple needs to follow the lead of its two other giant tech competitors. For example, Amazon’s Prime offers dozens of disparate features and consumer benefits from fast shipping, music, books and video to exclusive deals and discounts. And Microsoft Inc. has added similar deals in its latest 365 subscription plans, which now include additional free promotions worth hundreds of dollars from outside software and app makers like Adobe Inc. There is no reason Apple can’t do similar things.Frankly, it’s befuddling that Apple hasn’t taken advantage of its biggest asset — an avid, passionate base of more than a billion active customers. The tech giant should expand aggressively into financial services, commerce and retail, either by creating its own services or partnering with other companies. With the power of its huge scale, it shouldn’t be difficult to add a larger array of discounts and promotions, too.And nothing would engender more loyalty than creating a truly “must-have” comprehensive subscription for hardware, software and everyday lifestyle services. An offering that provides amazing value would be great for Apple’s customers and the company’s business.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron's, following an earlier career as an equity analyst.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.