Clash between Titans: A Breach in Apple’s Unbreachable Platform Flow

24

September

2025

5/5 (1)

As defined by MIT’s Center for Information Systems Research (CISR), a “mono-home” is a digital platform strategy that aims to keep users within its ecosystem (Woerner & Weill, 2025). The most famous company to have built and relied on that method has been Apple. This blog post aims to exhibit the unique case where Epic Games broke Apple’s tightly regulated platform flow breaching outside its ecosystem. Thereby, I will be focusing specifically on Apple’s value loss, the company’s response strategy and which steps it could have taken to prevent the status quo.

Apple’s Unmatched Mono-Home Ecosystem
Through a dense ecosystem and a close product tie, Apple has been able to achieve unmatched customer loyalty and an extraordinary value stream. New research now shows how this effect has been amplified with each additional Apple purchase by the consumer. With a growing product tie come increased transition costs in case users wish to exit Apple’s platforms and increased sunk costs, as previous Apple purchases lose their value (Chang, 2025).

One of Apple’s largest platform-integrated services has always been its app store. To leverage network effects and stay competitive to platforms such as Google’s play store or the Microsoft Store, Apple allows external app developers to publicly provide their applications (Lindenmayr & Foerderer, 2022). Nevertheless, the tech giant has established guidelines and arguably anti-competitive practices to keep not only users, but also developers from operating on competing platforms.

Keeping this so-called “walled garden” – meaning the practice of tightly controlling a closed platform ecosystem – ensures that Apple has control over everything which could constitute a leak in its platform flow. Such practices have included limiting developers to their Swift coding language or a limited pool of pre-approved third-party coding frameworks, and prohibiting the sideloading of apps (the process of installing apps from outside of Apple’s official app store) (Yun, 2021).

Epic Games’ Breach on Platform Flow & Apple’s Counter Strategy
In 2022, Epic Games first used a process called “steering” by leading users outside of the app store and allow them to make purchases, which excluded Apple’s 30% commission and thereby effectively circumvented Apple’s In-App Purchasing (IAP) system. The impact was significant. Other apps like Spotify followed suit shortly after and Bloomberg has estimated that the loss over the platform flow could result in Apple losing around $4,1 billion in revenue to app developers (D’Anastasio, 2025).

Apple, realizing the thread to one of their core income cash flows, went ahead and removed Epic’s most popular app Fortnite from their app store. Epic Games then subsequently suit Apple over anti-competitive practices. According to Epic, Apple ended up spending a total of $100 million on the lawsuit proceedings (Owen, 2025) to set the tone for other (smaller) developer through a landmark legal case.

This strategy follows the playbook for digital leaders as outlined in “How platform leaders win”. Through the lawsuit, Apple aims to act as an enforcing orchestrator that set the “rules of the game” (Hidding et al., 2011), not only for Epic Games, but for similar developers thereafter.

In addition, Apple adjusted to the threat by changing the way transactions outside of the app store work. After the settlement concluded that Apple had to allow apps to offer payment outside the store’s ecosystem, they implemented a mandatory 27% commission on all of such purchases on the web and banned any kind of marketing within apps to encourage users to exit the app before paying. Notwithstanding the new disclosure screen that must be shown before leaving the app, warning the user about potentially unsafe websites.

All in all, Apple succeeded in mitigating the threat by leaving developers the freedom to “steer”, whilst enforcing its legacy monetarization system practically rendering the method useless. However, its practices left a mark on all app store providers in the industry and have gotten the beloved brand under unprecedented scrutiny.

Conclusion and Revision of Apple’s Strategy
In hindsight of this and the respective lawsuits fought against Apple’s competitor platforms; it can be said that Apple risked nearly being labelled a “monopoly” in the US case and decreased overall value in the market as developers have been uniquely exposed to the predatory practices that have been quietly utilized by platforms for a long time. This outrage therefore directly pressured Apple into the creation of the small business program for instance, where apps with revenue under $1 million must only pay 15% commission (Apple Inc, n.d.).

Thus, Apple would have been wise to value feedback and transparency early on and negotiate a lowered commission rate with Epic Games instead of going so far as to ban its apps outright. This would have avoided a public lawsuit and the risk of hurting its overall customer loyalty. Lastly, the platform could have implemented security measures such as the disclosure screen and out-of-app commissions on its own terms, ensuring to future-proof its “walled garden”.

References

Apple Inc. (n.d.). App Store Small Business Program. Apple Developer. Retrieved September 24, 2025, from https://developer.apple.com/app-store/small-business-program/

Chang, J.-H. (2025). Secret power of the product ecosystem: A network perspective from the case of Apple. Journal of Business Research, 200, 115641. https://doi.org/10.1016/j.jbusres.2025.115641

D’Anastasio, C. (2025, May 29). Mobile-Game Makers Poised for Windfall Following Win Over Apple. Bloomberg.Com. https://www.bloomberg.com/news/articles/2025-05-29/mobile-game-makers-poised-for-windfall-following-win-over-apple

Hidding, G. J., Williams, J., & Sviokla, J. J. (2011). How platform leaders win. Journal of Business Strategy, 32(2), 29–37. https://doi.org/10.1108/02756661111109752

Lindenmayr, M., & Foerderer, J. (2022). Qualitätssicherung in Digitalen Plattform-Ökosystemen: Implementierung von Kontrollsystemen am Beispiel von Apple iOS. HMD Praxis der Wirtschaftsinformatik, 59(5), 1312–1322. https://doi.org/10.1365/s40702-022-00904-6

Owen, M. (2025, July 5). Billion dollar battle: Picking an App Store fight with Apple cost Epic Games greatly. AppleInsider. https://appleinsider.com/articles/25/05/07/billion-dollar-battle-picking-an-app-store-fight-with-apple-cost-epic-games-greatly

Woerner, S., & Weill, P. (2025, May 12). Top-Performing Companies Reuse Four Digital Platform Designs | MIT CISR. https://cisr.mit.edu/publication/2025_0501_DigitalPlatformDesigns_WoernerWeill Yun, J. M. (2021). App Stores, Aftermarkets, & Antitrust. Arizona State Law Journal, 53(4), 1283–1328.

Seamlessness between Digital Ecosystems comes at a Heavy Price

19

September

2024

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We are living in a generation that yearns for convenience. The same can be said about the digital ecosystems provided by notable tech giants—Google, Amazon, Meta, Apple, and Microsoft (GAMAM)—which have become indispensable parts of our day-to-day lives. For instance, Apple’s ability to facilitate cross-connectivity among all its products and Microsoft’s 365 suite providing strong SaaS-based tools for productivity are prime examples of how simple it has become to interact with technology.

However, the ease between platforms and software costs digital giants a fortune, leading to speculation from regulatory bodies over potential violations of antitrust laws. Firms like GAMAM often produce incremental advances within their established systems but refrain from investing in new, digitally disruptive innovations to protect their revenue streams and existing user base. This strategy of focusing on refinement rather than disruption allows them to maintain control over vast ecosystems, raising concerns about reduced competition. Maintaining market position is their main focus, which has eventually led to domination and possible violations of antitrust laws.

The Monopoly Moment: Redefinition of Tech Regulation

Monopolistic practices first came under major scrutiny in the 1990s when Microsoft faced antitrust accusations for bundling its Internet Explorer browser with the Windows operating system, effectively pushing out competitors like Netscape Navigator. This practice not only harmed rivals but also limited consumer choice. Although the court initially ruled to break up the company, the decision was overturned, resulting in a settlement that required Microsoft to share its software interfaces with third-party developers.

The verdict of this case revolutionized the public’s perception of the tech industry, prompting governments to take a closer look at antitrust investigations involving companies like Google and Apple. Dozens of cases have been filed against these giants over the past few years.

Living Under the Microscope

Monopolistic practices leading to scrutiny include Google’s default search engine deals, Amazon’s use of non-public seller data for competitive advantage, and Microsoft bundling Teams with Office. While these practices create a frictionless and predictable user experience, they also make it difficult for smaller players to compete and lead to a digital lock-in for consumers. This reduces the incentive for these firms to innovate and encourages them to acquire or push out smaller firms that pose a threat.

There is a fundamental tension between innovation, consumer convenience, and market control. This seamless ecosystem can be both a blessing and a curse. The more entrenched these ecosystems become, the more competition shrinks, and technological advancements stagnate.

The question we must ask ourselves is whether today’s seamlessness comes at the expense of tomorrow’s innovation.

Sources

Altchek, A., & Shamsian, J. (2024). Google’s monopoly drama should have Apple, Meta, and Amazon nervous. Retrieved from https://www.businessinsider.nl/googles-monopoly-drama-should-have-apple-meta-and-amazon-nervous/
Hills, C. (2023). Big Tech’s dominance over US stocks poses no risk according to history. Retrieved from https://www.tradealgo.com/news/big-techs-dominance-over-us-stocks-poses-no-risk-according-to-history
Podesta, A., & Tsoni, M. (2022). Antitrust: Commission accepts commitments by Amazon barring it from using marketplace seller data, and ensuring equal access to Buy Box and Prime. Retrieved from https://ec.europa.eu/commission/presscorner/detail/en/ip_22_7777
Zuber, L., & Simonini, S. (2024). Commission sends Statement of Objections to Microsoft over possibly abusive tying practices regarding Teams. Retrieved from https://ec.europa.eu/commission/presscorner/detail/en/ip_24_3446

Should platform owners be allowed to vertically integrate?

16

September

2021

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Within the dynamics of a multi-sided platform there are three groups present, namely the users, complementors and platform owner. The platform owner provides the infrastructure through which complementors can offer their products to the users. Complementors thus compete with each other to sell their products on the platform to the users, and the platform owner captures value for providing the infrastructure.

Complementors however do not only face competition from their peers, but also from their platform owner since they tend to vertically integrated. Meaning that the platform owners produces a product itself and offers it on its own platform, e.g. Apple developing their own app. When a platform owner enters its own platform it affects complementor’s performance significantly, in some cases even resulting in complementors leaving the affected category or platform in its entirety. There are two main reasons why the vertical integration significantly affects complementors.

Firstly, there is an information asymmetry present between the platform owner and the complementors. It is no secret that platform owners harvest a vast amount of data regarding all the activity on the platform. These data are highly relevant for both the platform owner and the complementors, however they are largely only available for the platform owner. For example, Apple know exactly how much time all users spend on which applications.

Secondly, complementor’s products are sometimes made obsolete. Due to the fact that the platform owner often controls the ecosystem the platform it is in, the platform owner is able to only offer their own products. For example, Apple made walkie-talkie apps obsolete by only making their own version available on the apple watch.

Platform owners themselves argue that capturing value which previously belonged to the complementors is not the incentive of their vertical integrations. Amazon explains that by offering some products themselves, they are able to meet the unmet demand in popular categories. Platform owners also claim that the enter crowded categories to steer complementor’s innovation to other categories. Next to that, platform owners are in some cases able to offer better products to the users due to the information asymmetry with the complementors.

Since the true motivation for the market entry of the platform owner cannot be observed, discussions regarding antitrust regulations and ethics are taking place. However, there has not been an unambiguous answer to the question yet if the vertical integration of platform owners is to be considered fair competition.

Are Antitrust Laws Fit to Fight Tech Giants from Killing Tradition Businesses?

18

September

2019

No ratings yet. Are today’s antitrust laws fit for the new business models? Major tech giants, such as Facebook, Amazon, and Apple have been the subject of several antitrust investigations. The list of fines resulting from these investigations are ranging from a €110 million fine for Facebook due to misleading information about the WhatsApp takeover (European Commission, 2017), to a $4.34 billion fine on Google for misusing Android software to hold off competition (D’Onfro, 2018). U.S. Lawmakers are hence urging ‘aggressive action’ from regulators on the big tech giants (McCabe, 2019).

In order to understand what has changed in recent years’ business models, let us make a comparison between Amazon and a traditional supermarket. Supermarkets, equal to other forms of retailing, have lower profit margins compared to other industries, on average ranging from 0.5% to 3.5%. That is why supermarkets, such as Wal-Mart, are focused on gaining a high sales volume (Ross, 2019). Amazon, on the contrary, has a staggering $141.3 billion in international sales via its web shop with an operating income of $7.2 billion, nearly 5% profit margin. Although this profit margin is slightly higher than the retailers average, 5% profit margin is nothing to panic about. However, Amazon also has another operation namely, Amazon Web Service (AWS). AWS has grown to a $26 billion revenue in 2018, with an operating income of $7.3 billion, creating a 28% profit margin on its webservice (Frankenfield, 2019). Consequently, while supermarkets are struggling with their 0.5% to 3.5% profit margin, AWS makes a 28% profit margin. This $7.3 billion can be used by amazon to finance its other operations, such as retailing, while Wal-Mart needs to make money solely on its retail operations. Amazon is now competing with Wal-Mart with its Amazon Go operations, a supermarket chain without any checkouts. The difference is, however, Wal-Mart needs to make a profit to survive, while Amazon Go does not. They could potentially lower their prices without risking the future of their business, but would they do that?

The answer is yes. As an example, diapers.com has been the victim of a price war with Amazon rapidly lowering its prices on Amazon’s diapers. This price war resulted from diapers.com refusing a takeover bit made by Jeff Bezos, CEO of Amazon. Diapers.com was forced to sell its diapers at a loss (Lecher, 2019). What might look as predatory pricing, which is anti-competitive, misses one component: Amazon does not have to increase its prices after their competitors went out of business. That is why Amazon can perform this strategy without too many troubles, caused by market watchdogs. According to Baumol (1979), companies are not allowed to increase its prices within a five-year period after their competitors run out of business. Subsequently, businesses would be discouraged to commit in any form of predatory pricing. Nevertheless, since Amazon can finance this pricing strategy with its other operations, such as AWS, they can play the long game. The Federal Trade Commission (FTC), responsible for fighting antitrust, is therefore having a hard time prosecuting big tech giants with this ‘new’ business model for predatory pricing.

Should we thus change the rules of the game regarding antitrust to give market watchdogs, such as the FTC, more tools to prevent antitrust breaches. As Khan (2016) stated: “this Note argues that the current framework in antitrust – specifically its pegging competition to “consumer welfare,” defined as short-term price effects – is unequipped to capture the architecture of market power in the modern economy.” The so called: Antitrust Paradox, requires antitrust laws to increasingly secure the economies welfare over the short-term consumer welfare. If lawmakers do not act now, we might end up with Amazon Go being America’s only supermarket.

References

Baumol, W.J., 1979. Quasi-permanence of price reductions: A policy for prevention of predatory pricing. The Yale Law Journal, 89(1), pp.1-26.

Khan, L.M., 2016. Amazon’s antitrust paradox. Yale LJ, 126, p.710.

*All websites were viewed on 18 September 2019.

D’Onfro, J. 2018: https://www.cnbc.com/2018/07/18/googles-5-billion-fine-what-you-need-to-know.html

European Commission, 2017: https://europa.eu/rapid/press-release_IP-17-1369_en.htm

Frankenfield, J. 2019: https://www.investopedia.com/how-amazon-makes-money-4587523

Lecher, C. 2019: https://www.theverge.com/2019/5/13/18563379/amazon-predatory-pricing-antitrust-law

McCabe, D. 2019: https://www.nytimes.com/2019/09/17/technology/senate-antitrust-tech-hearing.html

Ross, S. 2019: https://www.investopedia.com/ask/answers/071615/what-profit-margin-usual-company-retail-sector.asp