Antitrust questioning of Cook should focus on App Store fees

Days before Apple CEO Tim Cook appeared at an antitrust hearing alongside other tech CEOs on July 29, NYU Stern marketing professor Scott Galloway offered ideas for questions. that the House antitrust subcommittee might ask, to determine Apple’s power.

Cook, along with Alphabet and Google CEO Sundar Pichai, Facebook CEO Mark Zuckerberg, and Amazon CEO Jeff Bezos, will address the House antitrust subcommittee on Wednesday in an attempt to allay concerns that companies have too much power in their respective markets.

For Apple, discussions should focus largely on its App Store business, as well as the practice of third-party “Sherlocking” applications, as well as the management of parental control applications and other relevant topics.

In a blog post on Friday, Professor Scott Galloway offers suggestions on how proceedings will play out for each of the Big Four tech giants, as well as some pointed questions every company could potentially face from lawmakers in attendance.

Galloway, a professor of marketing at the Stern School of Business at New York University with a background in economics, has a great passion for writing and talking about big brands and the way they communicate with customers. As part of his research, he extensively analyzed the four companies, including their business models, strengths and strategies, and their impact on society.

As for how the meeting will go, Galloway believes the remote nature of the meeting will make it more difficult for the committee to “dig into a matter” and reduce the risk of an “unscripted moment that reveals something the American audience did not. I do not know before. ”

Most of the committee’s heat will be directed to Zuckerberg, while Bezos will have a much easier time with lawmakers. Cook and Pichai will try to “stay out of line of sight and flatter Zuck and Bezos respectively,” according to the professor.

For the kind of questions that might be asked, Galloway suggests the group could be under pressure on its revenue and growth, such as whether it “fears too much loot is being taken by fewer and fewer companies and companies. people?” Referring to how the market capitalization per employee is thousands of times higher than that of other companies in respective industries, such as Apple’s figure of $ 11,749,562 per employee, one might ask them “Think you know your businesses contribute to income inequality? ”

On the timely topic of COVID-19, it is pointed out that large tech companies and companies deemed “too big to fail” have avoided losing substantial levels of value, with all four companies benefiting instead from a increase in value and transfer of power. from most other companies to the group in one way or another. Galloway offers to ask “Should we be concerned that your considerable advantage before Covid is now unassailable?”

The issue of competition is raised by the claim that small business formations are at their lowest for several decades, with investors apparently avoiding providing much funding in the fastest growing sectors. With that in mind, Galloway asks “Why should anyone invest in a search engine right now, or a music streaming business, or a social media platform, or an e-commerce business, given the size of your businesses? ”

A graph showing where video streaming services are gaining subscribers in the United States (via Professor Scott Galloway)

For Apple-specific questions for Cook, Galloway is focusing on the App Store and the Apple TV and Apple Music streaming services.

Referring to the concept of “monopoly rent,” where a monopoly company can sell products at a higher price than in a more competitive market, Galloway sets the fees Apple applies to App Store purchases, in-app purchases, and subscriptions. Referring to 7% to 14% overall subscribers to App Store-derived video streaming services, the suggested question to Cook is “Do you think any of these companies think you paying this rent is a choice? ? ”

Regarding the Apple TV + subscription, Galloway believes that Apple has consumers paying $ 0.80 per billion dollars of content it invests in, a figure similar to Netflix’s $ 0.90 but nowhere near that. HBO equivalent of $ 7.50. Apple’s offer of one year of free access to buyers of its hardware is estimated to provide such a low relative cost to the consumer for the content itself.

Suggesting that the agreement allows Apple to offer a multimedia product at a production cost lower than its production cost, Galloway suggests “Isn’t Apple guilty of” dumping “, that is to say ‘buy market share at incredibly low prices?’

The professor’s focus on Apple Music centers on his ongoing dispute with Spotify, which filed antitrust complaints about Apple before reporting on its charges. After claiming that Spotify is “consistently rated as a superior music service” and pointing out Apple’s faster growth rate in the United States, Galloway suggests asking Cook “isn’t it a function of the fact that you own the rail and you are able to collect 30% tax on a competitor while illegally reducing its visibility in the App Store? ”

While the questions Galloway asked are not necessarily asked by the committee in such a straightforward manner, it is highly likely that the topics will be covered during the event. Lawmakers on the committee will then work on a report that could suggest new antitrust regulations that could impact tech giants and their respective products and services, with the aim of leveling the playing field.

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