Thursday, February 10, 2022

New public statement positions Microsoft as the Gorbachev of app store governance, contrasting starkly with Apple's hermit kingdom and Google's fauxpenness

What no one--or only a few people--may ever have considered in the app store antitrust context is that we've all been taking something for granted: that Microsoft would not wall its Windows garden in an Apple-style way.

Even if Microsoft had not gone to that extreme but had "merely" turned Windows from an open app platform into a pseudo-open ("fauxpen") one like Android, the consequences would have been dramatic. It's not that they couldn't have tried. It wouldn't have been quick or easy, but a gradual transition, closing door after door, Windows update by Windows update, would have been technically and commercially feasible. And legally? Only because Microsoft faced antitrust issues in different contexts two decades ago over laughably negligible issues compared to what Apple and Google are doing now doesn't mean anyone could apply a stricter standard to them in today's environment than to Apple and Google.

In 2020, Microsoft declared itself in agreement with app store principles laid out by the Coalition for App Fairness (without joining the organization), yet left open the question of whether and when those principles should apply not only to mobile devices and Windows, but also to gaming consoles like the Xbox. Apple pointed, and will keep pointing, to gaming consoles in its defense against Epic Games. On the one hand, it's understandable that Judge Yvonne Gonzalez Rogers was wondering--especially in light of some Epic-internal emails along the lines of "why go after Apple, not Sony?"--why Epic was suing Apple rather than the makers of platforms on which it makes a lot more money and, therefore, pays far greater commissions to platform owners. And she worried about spill-over effects of whatever she would decide (though a case like that doesn't really matter much until the appeals court has spoken). On the other hand, smartphones and consoles are not even an apples-to-oranges comparison: even the minority of consumers who own a gaming console at all have a smartphone in reach 24 hours a day, and access to a console for only a fraction of that time. Therefore, during large parts of the day, and in countless everyday situations, a smartphone is our only computing device at hand, while we always have alternatives to a gaming console (I only ever owned one: the Atari 2600, and my famous game maker at the time was Activision).

On Wednesday, Microsoft made it publicly known that opening up is the way to go, and that the Xbox is slowly but surely transitioning to an open app platform as well. With the industry standing at a crossroads, Microsoft has decided to forgo short-term monopoly rents in favor of betting on a future in which all app developers compete on the merits. No walled gardens, no self-preferencing, no private taxation.

When I saw the headline (Adapting ahead of regulation: a principled approach to app stores), what came to my mind immediately was the ongoing debate over Apple's and Google's bad-faith compliance or possibly even non-compliance with the Dutch dating app ruling and the South Korean in-app payment law. But after reading the long statement in its entirety, it was clear that this was about Activision Blizzard more so than about Apple and Google.

There's no disclaimer of the kind we've often seen at the end of movies: "Any similarity to actual persons, living or dead, or actual events, is purely coincidental." Of course, one just cannot talk about app stores without also addressing, even if only indirectly, mobile app stores. And Microsoft itself is a victim of the App Store Tyranny, not only because its mobile revenues are taxed to the tune of 30% but also because it can't offer products it would like to make available to consumers, such as streaming games on iOS (xCloud). But the overall message and tone of Microsoft's statement is like they're already looking past the dark era of app story tyranny. They're making it sound like Apple's total app store control is already a strategically lost position in the face of litigation, regulation, and legislation all over the world. Apple is still fighting a war it has already lost. The greatest injustice and most massive abuse in the history of the information technology industry is simply not sustainable.

Apple has made itself "the Enemy of the States" (1, 2). The only ally it has left is Google, and even Google is urging Apple to support an open messaging standard rather than cash in on classism and bullying.

In the late 1980s, another walled garden was about to collapse: the East Bloc behind its Iron Curtain. Though counterintuitive it may seem, a market failure in capitalism actually creates a situation that has a lot in common with a communist dictatorship. That's why late-19th-century Republicans realized that antitrust laws had to be created in order to cure market failures and restore competition. So, in the late 1980s, Gorbachev told the leaders of other Eastern European communist tyrannies: "Life punishes those who come too late." He urged the likes of Erich Honecker (then the leader of the German "Democratic" Republic) to embrace--not resist--change. In Honecker's case, those calls fell on deaf ears, which is why Comrade Erich had to flee to Moscow before being jailed in Berlin and dying in his Chilean exile.

Microsoft aims to be the Gorbachev of app store governance. It considers the opening up of these platforms as inevitable--a question of when, not if.

There won't be a third-party app store (of which there are various on Windows, and they can even be found in the official Windows Store) on the Xbox tomorrow. They're going to get there one step at a time. And some of Microsoft's principles are so general that Apple--albeit untruthfully--would claim to adhere to them as well, such as #1 ("We will enable all developers to access our app store as long as they meet reasonable and transparent standards for quality and safety") and #4 ("We will hold our own apps to the same standards we hold competing apps"). But there is enough in that statement--such as the right to use alternative payment systems--to give developers comfort that there is a true commitment to open access.

Finally, the Activision Blizzard connection. Microsoft acknowledges in its statement that regulators will ask questions about that $70B deal. In the mid-1990s, I was the first person outside the U.S. to work for Blizzard as a consultant and representative. Warcraft II was Blizzard's first #1 hit, and it became #1 in German sell-through rankings in early 1996 a few months before it did in the United States. I still have one of about 50 T-shirts that were made for the Warcraft II development team, an honor I will never forget.

Interestingly, Microsoft's proposed acquisition of Activision Blizzard now represents an opportunity to accelerate the opening up of mobile app stores. Legislation, regulation, and court rulings can open the doors, but in order to really bring down the walls around those walled gardens, there must be viable alternatives. In order to be commercially successful, they must appeal to consumers. Some reasonable degree of consolidation on the content side, with Microsoft uniting some terrific game franchises under its umbrella, will enable certain players to really break the app store monopolies of our times. It's one thing to force Apple to allow sideloading or alternative app stores; it's another to actually make it work against "the Power of Default."

Apart from the fact that Microsoft has committed to the continued availability of its key game titles on other platforms, it would be as myopic as it would be misguided to focus on the games and console markets when there's a massive market failure to correct in connection with mobile app stores. I'm all for Microsoft's acquisition of Activision Blizzard, and that's not because I was a consultant to Blizzard in the mid to late 1990s and announced a consulting project for Microsoft in 2011. It's because I've seen and experienced the unsustainability of the mobile app store tyranny, of the Apple-Google duopoly. Small app developers like my company can't change this. Even Epic has so far made more noise than impact, though its appeal is getting interesting.

We need a Balance of Power. We need the Microsofts, Facebooks (sorry, I mean Metas), and Amazons (and possibly even Teslas, given Elon Musk's clear pro-Epic anti-Apple stance) of the world to create a level playing field for us. I'm not saying Microsoft should buy up all games companies, but enabling them to break Apple and Google's mobile app distribution duopoly would make the world a better place. Yesterday's statement makes me optimistic about the net effects of that deal, and I'm saying so even though I have actively opposed other acquisitions (like Oracle-Sun, because of MySQL, and Google-Motorola, because of standard-essential patent abuse).

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