Default Line: How being the easy option is worth billions to some firms

RTÉ News​

7 hours ago

We probably all like to think of ourselves as being savvy, critical thinkers with a good eye for a deal.
But humans are also generally inclined to choose the path of least resistance - we favour inertia and the status quo. And that's especially true of small, day-to-day things that might not be all that important, and that we'd rather not have to devote a huge amount of mental space to.
At the same time, while we all recognise that having choice is a good thing, we're also nowadays all to familiar with how overwhelming having too much choice can be. There's always too many great TV shows and films that are just a click away; too many radio shows and audiobooks and podcasts and songs to listen to. And often we end up going back to something we've watched or listen to a hundred times, purely to avoid having to make a decision on something new.
And so, if we're presented with an easy option, we are inclined to go with that. Especially if it's something that involves one click, and saves us from having to think about a decision – especially in an area where we might be entirely confident.
Yes – a lot of companies make a lot of money from the power of the default.
Some of that can be in very direct ways – like how existing customers get worse deals than new ones. But others can be less direct.
A good example of that is Apple's Safari web browser. It is the default on all Apple devices and, while users can download an alternative, most don't.
For many years Safari had a relatively tiny userbase – but the popularity of the iPhone – and the fact that it's the default option on there too – means it is now the second most popular browser in the world.
But the power of the default goes beyond that. As users of Safari will know, the address bar also doubles as a search box, and when you use that it defaults to Google for the result.
Again, users can change their search engine away from the default option – and select an alternative like Duck Duck Go or Bing. It only takes a few clicks in the Settings app, but most people just don't bother.
And so, they default to Google, which is hugely valuable to the ad giant. To the extent that they give Apple a cut of the revenue they make from ads they serve through these Apple-device searches.
That deal has been in place in one form or another since 2002, and until recently the details were kept well hidden from the public. But a competition case in the US last year finally blew the whole thing wide open – and it revealed that Google had paid Apple $20 billion in 2022 for its privileged position.
That's how valuable being the default option was to them.
Has this kind of deal attracted any criticism?
Yes – for a start rivals like Microsoft have argued that Apple effectively plays king-maker in the search market through this deal.
After all, the iPhone has such a big user base so it's argued that any company that is the default search option would immediately become a huge player in the global search market. And so it's in Google's interests, as the dominant player, to stop this from happening.
But regulators have taken an interest in this arrangement too.
The details of the Google-Apple deal came to light in a US competition case that was focusing in on the ways Google maintains its dominance of the likes of search – and uses that to boost the popularity of its other services.
And these kinds of arrangements have been in the sights of European regulators for years too.
There have been multiple cases that looked at Google's use of its search engine in the promotion of other services it operates – like shopping and maps.
Because there have been multiple studies to show that most people searching for information will inevitably take the first option given to them. Not many of us get passed the first two or three results, few get to the bottom of the page – and the vast majority of us don't click on to the second page.
So if you're offering a rival service to Google - but if their offering is at the top of every relevant search result, you're immediately at a huge disadvantage.
In a similar vein, Google has also been fined more than €4 billion for how it has used its Android mobile operating system to benefit its other products – including its web browser, Chrome – which is now far and away the most popular in the world.
Google is appealing that case at the moment.
And something that has echoes to how both Google's and Apple's browsers have benefitted from the success of their own operating systems is an EU case from 15 years ago, relating to Microsoft and its Internet Explorer.
As people may remember, that was the default web browser on Windows back when the internet was really taking off and, given that most people had Windows computers, it tended to be the one people used. That's despite the fact that there were alternatives available – many of which were more feature-laden and often more secure than Microsoft's browser.
Eventually, in late 2009, Europe forced Microsoft to give people a choice of browsers when they were first setting up their computers – and that opened the door to the likes of Firefox, Opera and Chrome, to gain market share.
How does the power of default affect the TV?
Anyone who has bought a TV in the past five or even 10 years has almost certainly seen how important the default is – because on their remote, alongside the normal numbers and volume and settings buttons – is likely to be at least one (but more likely multiple) app launcher buttons.
It's almost a guarantee that one of them is for Netflix – but they might also have a button to bring them straight to Amazon Prime, Disney Plus, or YouTube – or possibly some other service.
And this is hugely important to these providers, because it first and foremost acts as a constant advert. Every time a user looks at their remote, they see the branding.
But it also makes people far more likely to use those services, because it's just one button push away. - which is far more attractive than even having to go into the menu and move up or down to find the right app. It's considerably more attractive than having to switch over to a separate set-top-box and connect to a service that way.
And, again, this is seen as something worth spending money on.
Roku, which sells streaming sticks and boxes, charges $1 per button, per remote – and it tends to have four services on each remote – so that's $4 extra it earns per device.
Now that might not sound like a huge amount – but when you think that Roku's streaming stick retails at €50-60 – then an few euro on their margin is going to be very welcome. And when you multiply that across tens or hundreds of thousands of devices, and it suddenly becomes a lot of money.
And of course Roku are a relatively small player in all of this – big TV makers like Samsung, Sony and LG would operate at a much bigger scale, and be far more attractive to streamers because they don't require the user connecting a separate box. As a result the big streaming apps would have relationships with all of those companies, because they'd be well aware of just how important it is to make sure they're as accessible to users as possible.
No doubt this is controversial too, though...
Absolutely – not least with some consumers, who don't like having these buttons clogging up their remote. That's especially true if there's a service there that they don't use – in that case a dedicated button is a total waste of space.
But, like with search engines and browsers, smaller providers have argued that these TV-streamer relationship effectively blocks them from being able to compete on a level playing field. And European regulators have had an initial look at these relationships between to see if they're distorting competition.
One of the big fears in Europe is that deals to give major apps prime position will just add to the pressure on national services. And as people become more and more reliant on apps rather than a programme guide for their TV consumption, those that aren't on the remote or who haven't paid for a prominent position will become less visible.
Two years ago the BBC floated the idea that manufacturers should be required to have an iPlayer button on UK remotes for this very reason. There has also been a significant amount of debate in France about what's dubbed a 'Button Law' - that would require French services get a spot on a remote.
And there is something of a precent here, because cable and satellite providers Sky and Virgin already agree to list Irish stations first in their electronic programming guide. This is done to ensure local channels get good visibility – without having to pay for it.
So extending that kind of requirement to the list of apps – and even the remote - could make sense as our viewing habits shift towards on-demand services.
The challenge, though, would be where you draw the line.
In Ireland, for example, it's almost certain that RTÉ would love to have a Player button on every TV remote. But Virgin Media would too, as would TG4.
If they all got their wish that would be three buttons taken up on a each remote – which manufacturers would argue is limiting their options to add others. Or it could lead to even more complicated remote controls than we already have.
Can our love of default cost us money too?
Absolutely.
Us favouring the default tends to boil down to us choosing the easiest option – and on a day-to-day basis that ends up with us sticking with the same companies and providers, rather than doing the often small amount of work required to find a cheaper option.
We all know that you need to shop around for the best deal, but it turns out we're not very good at putting that into practice.
In fact surveys have shown that we in Ireland are particularly bad at switching for a better deal – though we've probably gotten a little bit better at it in recent years, especially in reaction to the cost-of-living crisis.
But even with that experience, we do it a lot less than we should – and hardly ever in really important areas.
A survey published by the Competition and Consumer Protection Commission in late 2023 found that nearly 80% of consumers here had never switched banks, for example.
And because we tend to default to our bank when we're getting out a loan, or getting a credit card, or a mortgage – maybe even our car and home insurance - we can often overlook a better deal being offered by others. And that means we're costing ourselves real money.
A survey earlier this year by mortgage broker Doddl.ie said that the gap between the highest and lowest mortgage rates would work out at a more-than €7,000 difference in real terms for the average mortgage. That's in one year.
So if you get a mortgage with your bank just because it's easier than setting up an account with another provider, you could be costing yourself tens, maybe even hundreds of thousands of euro over the loan's lifetime.
And this all could be based on a decision you made when you started your first part time job as a teenager – or whichever bank was offering the flashiest freebies during Freshers Week.
We're a little bit better at switching when it comes to utilities but even there we could do a lot better.
A survey by the Commission for Regulation of Utilities last year found that just 12% of electricity customers and 14% of gas customers had switched in the past year.
And utilities tend attract new customers with a decent discount on their main rate if you sign up for a year; but once that term is up you default onto the higher, standard rate. So if you don't switch – or at the very least get in touch with them and ask for their best deal – every year, you're almost certainly paying more than you should.
And the CRU reckoned that dual fuel customers saved up to €2,000 in a year by switching – but the vast majority just didn't bother, and they lost money as a result.
TV and broadband providers also tend to lure new customers in with special discounts, and quietly remove them once the term of the deal is over.
That means that customers who are not contacting their providers – or taking their business elsewhere – are likely losing out on thousands of euro of savings each year.