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Communications of the ACM

Technology strategy and management

Epic Versus Apple and the Future of App Stores

V-Bucks surround Apple logo and hot-air balloon with Epic Games logo

Credit: Alicia Kubista / Andrij Borys Associates; Epic Games Inc.

In the early days of smartphones, many people found it difficult to find and install software. Online app stores solved that problem and fundamentally transformed the software business. App stores serve as marketplaces to help users find software from various companies that can work alongside the operating systems and applications that come bundled with their smartphones as well as personal computers. They work by establishing a set of rules that govern platform access, user interfaces, compatibility, prices, payment procedures, quality, security, and intellectual property rights. As of 2021, the Google Play Store for phones and tablets using the Android operating system had approximately 3.5 million apps, while Apple's App Store for the iPhone and iPad had some 2.2 million apps.a PC software companies followed the lead of smartphone OS producers, which remain the largest owners of app stores.

These developments suggest how future legal decisions and government legislation could make operations more difficult for the app store owners.

App stores have also become a two-sided platform business in their own right. Apple alone earned some $20 billion from its App Store in 2020 (even though the majority of apps were free), with mobile games accounting for approximately 70% of iPhone app sales.11 One estimate is that Apple's App Store profit margins are as high as 78%.8 Producers have been paying a 30% tariff when they sell software licenses, upgrades, subscriptions, or virtual goods for video games through the Apple App Store, launched in 2008. Some developers have complained about these charges and Apple's terms of use.1 Yet the convenience and distribution power of the app stores have kept them as the primary way smartphone users access software and developers access users. Nonetheless, Apple's App Store has recently come under criticism and a legal challenge from Epic Games, a privately held software company valued at approximately $29 billion that makes Fortnite and other games.4


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