App store has risk to become a burden for Apple

The expectations are that by March this year the App Store will surpass the iTunes store in number of downloads. I am confident that the associated revenue will surpass music sales pretty soon too. What this says about the music business is not where I wanted to talk about in this post.

I want to talk about that as the apps economy is growing to enormous proportions it brings a significant risks for Apple. The applications bring new functionalities and services to their platform. With that I ask myself two questions:

1. What happens if Apple incorporates new functionalities into iOS and makes a particular group of applications redundant?

2. What happens if Apple wants to introduce a new service for which different competing services are available?

Incorporating functionalities inside iOS

There is a serious risk that any enhancement to iOS will make a certain set of applications redundant. What happens then? Especially developers who make their living from selling their applications on the App Store will not be amused by such a move.
If Apple uses the App Store as inspiration to set the development roadmap of iOS then it can lead to serious consequences. For most it can lead to developers moving away from the platform and thereby reducing the ecosystem of the platform.
The success of the platform and a healthy application economy supporting it becomes more important to Apple from a revenue perspective. For this reason it will restrict the options Apple has on extending the iOS platform at some point.
Another risk is since Apple controls the complete platform from top to bottom it can be seen as monopolistic behavior. This is a route Apple definitely does not want to go into.

At some point the whole App Store ecosystem can be more of a burden to Apple than the success of today predicts.

Introducing new services by Apple

Apple has developed a healthy set of services around the platform. Music, movies, TV series and applications can be bought, rented and downloaded to their iphones, ipods, macbooks etc. But there are competitors on the market who wants access to the platform. The platform represents a huge market opportunity and Apple likes to be their own services to be successful to bring in the most revenue.

At this moment Apple allows competitors access to their platform. I wonder if all competitors are welcome. It is not completely clear since this part of the market is not really transparent. The negotiations between companies of this size are behind doors. For instance Apple holds back on allowing Flash to be ported to the iOS platform or stopped competing browsers to enter the App Store.
At the same time Amazon delivers books through their Kindle application while Apple sells books through their own store.

It is logical from Apple’s perspective to protect the revenue stream for their own services but it could be seen as monopolistic behavior. The iOS platform holds a significant amount of the market and closing access to competing services can be a serious problem for competitors and consumers.

Conclusions

The Apple controlled ecosystem of the iOS platform brings serious risks for Apple in the future. At this moment they will feel euphoric about the success but there is a significant change it becomes a burden for the creation of new products and services.

If Apple makes the wrong decisions it can be seen as monopolistic behavior and this can have serious consequences. I am sure Apple’s ecosystem is and will be on close watch with the market regulation organizations in different countries.

The only option for Apple is to tip toe through any changes and new introductions. And I wonder if that will slow down Apple in bringing new products and services to the market.