Can Anyone Compete With the iTunes App Store?

Other app stores are no match for Steve Jobs. But what about the Justice Department and Federal Trade Commission?

Steve Jobs as Ninja


Antitrust enforcers in the U.S. have taken a new interest in Apple, provoked by the new terms Apple set this week for companies who want to sell content on the iPad and iPhone, according to the Wall Street Journal. It’s not that Steve Jobs is about to be dragged into court, but it’s part of what the Journal characterizes as “growing antitrust scrutiny” in the U.S. and abroad, directed at Apple.

Both the Justice Department and the Federal Trade Commission want to make sure Apple isn’t breaking U.S. antitrust laws with its iTunes store payment system, which takes a 30% cut of all sales and which has various draconian rules (companies would be required to sell through the iTunes App Store at the best available price, for instance, and would be forbidden from linking to stores beyond the App Store).

Apple is a giant in the sale of digital content. A recent report shows that it stands at the peak of the app-store market. It took $1.78 billion in worldwide App Store sales in 2010, more than doubling its $769 million take in 2009. It had 82.7% of the app store market last year.

That figure did decline from 92.8% in the prior year, raising the question: Can others compete? Android Market had a huge revenue growth last year, surging from just $11 million in 2009 to over $100 million in 2010–an 861.5% growth. Still, in 2010, it only had 4.7% of the market share in app stores; Nokia’s Ovi Store and BlackBerry App World out ranked it. There’s something of a new kid on the block, too, in the form of GetJar, an open app store that just got a fresh $25 million in funding this week. It bills itself as the second largest app store after Apple’s, having so far enabled 1.5 billion app downloads for multiple platforms.

Still, none of these seems within swiping distance of Steve Jobs’s walled garden. In the meantime, while regulators here and abroad sniff out Apple’s new terms, media companies are reacting in their own way. Rhapsody, for one, turned its back on the offer, calling the terms “untenable.” But Elle, Nylon, and Popular Science have happily climbed aboard, feeling the benefits of distributing their wares through Apple outweigh the downsides.

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About the author

David Zax is a contributing writer for Fast Company. His writing has appeared in many publications, including Smithsonian, Slate, Wired, and The Wall Street Journal.