Apple has been forced into a range of sweeping changes to the way apps are sold, distributed and paid for. The $USD100B business will be subject to a litany of changes after the EU’s regulators said Apple must comply with the Digital Markets Act (DMA).
The EU’s Commission has designated iOS, Safari, and the App Store as “core platform services” under the DMA. In simple terms, it has deemed that Apple has created a monopoly that hinders competition and reduces choice for consumers.
Until now, app distribution has been handled completely through the App Store. Any developer wishing to make an app available for iOS had to do so through the App Store. For paid apps, Apple takes a commission of either 15% or 30%. Apple collects a 30% fee for apps and in-app purchases. Subscriptions are charged at 30% for the first year dropping to 15% for subsequent years.
With close to two million apps in the App Store, it’s easy to see why Apple wishes to protect this revenue.
To be 100% clear, the changes being forced onto Apple do not, for the time being, apply outside the 27 member countries in the EU. For the other 148 countries serviced by the App Store, there is no plan or intent to change.
What’s going to change?
For iOS users in the EU, the ability to load apps from alternate app stores is likely to be the first, most obvious change. To support this, Apple has created a slew of new APIs that Apple says “enables marketplace developers to install apps and manage updates on behalf of other developers from their dedicated marketplace app, and have their app notarized for security and system integrity.”
Apple says:
Notarization for iOS apps is a baseline review that applies to all apps, regardless of their distribution channel, focused on platform policies for security and privacy and to maintain device integrity. Through a combination of automated checks and human review, Notarization will help ensure apps are free of known malware, viruses, or other security threats, function as promised, and don’t expose users to egregious fraud.
Information from the Notarization process is also used for app installation sheets, which provide at-a-glance descriptions of apps and their functionality before users download, including the developer, screenshots, and other essential information.
Source: Apple announcement
Since iOS arrived 17 years ago, it has always made Safari the default web browser. And while other browsers can be installed, they aren’t made obvious. That will change in the EU. In order to comply with the DMA’s requirements, Apple is introducing a new choice screen that will surface when users first open Safari in iOS 17.4 or later. That screen will prompt EU users to choose a default browser from a list of options.
Payments also change. Apple is being compelled to make access to the iPhone’s Near Field Communication (NFC) chip available so alternate wallet and payment providers have access.
The commission/payment structure for distributing apps via the App Store will also change. The 30%/15% system I described earlier will be replaced with a new pricing regime in the EU.
iOS apps on the App Store will pay a reduced commission of either 10% (for the vast majority of developers, and subscriptions following their first year) or 17% on transactions for digital goods and services. Transaction fees for using Apple’s services payments also change. Developers can use the App Store’s payment processing for an additional 3% fee or they can use a payment service provider within their app or link users to their website to process payments for no additional fee to Apple.
There is some controversy here as well. Apps distributed from the App Store and/or an alternative app marketplace will pay €0.50 for each first annual install per year over a 1 million threshold. So, even if developers choose an alternative App Store and payment system, they will still be paying Apple.
Begrudging compliance
Reading through Apple announcement regarding the changes being forced through the DMA, one gets the feeling that the compliance is being agreed to through gritted teeth. Apple is not complying because they think the changes are a good thing.
There are several instances where Apple highlights it will do its best to ensure a secure and seamless user experience but that the new rules may impede that. More than once, the company notes the ability for unscrupulous developers to skip the Apple iOS App Store and use third party stores to make iOS less safe and user-friendly.
This includes risks from installing software from unknown developers that are not subject to the Apple Developer Program requirements, installing software that compromises system integrity with malware or other malicious code, the distribution of pirated software, exposure to illicit, objectionable, and harmful content due to lower content and moderation standards, and increased risks of scams, fraud, and abuse. Apple has less ability to address these risks, and to support and refund customers regarding these issues. Even with safeguards, many of these risks remain.
Source: Apple announcement
When will this happen?
iPhone users in the EU will see these changes on their iPhones in March 2024 when iOS 17.4 is expected to be released.
There is no announcement suggesting this will become a global system although regulators all over the world will, no doubt, be watching keenly to see what happens. While the EU’s intentions are good, there’s no real way to know how the Law of Unintended Consequences will play out.
Will you download apps from alternate app stores?
While Apple will make its bank of over 600 new APIs available to developers almost immediately and iOS 17.4 will come in just a few weeks, it’s likely to take a little while for alternate app stores to arrive.
And once they do, their popularity will be dictated by the apps they make available. For example, if Epic Games, a longtime combatant that has railed against Apple’s control over app distribution and payments creates its own App Store for game distribution, that could be successful.
My gut feeling is that niche stores will be more likely to succeed. They will address specific needs and talk to audiences in targeted way. And there are already companies such as Microsoft and Steam that run their own stores successfully. Microsoft could, for example, offer Microsoft Office apps through its own app store at a lower price than through Apple’s App Store as they would not be subject to the same fees.
And we may even find operators create app stores that simply undercut Apple’s commissions and fees.
But is this enough to overcome Apple’s massive market advantage? I suspect it will take some time, perhaps years, for this to make a noticeable impact on Apple.
For what it’s worth, it will take me sometime to shift to an alternate app store. And that’s because of trust.
Will you shift to an alternate app store?
Anthony is the founder of Australian Apple News. He is a long-time Apple user and former editor of Australian Macworld. He has contributed to many technology magazines and newspapers as well as appearing regularly on radio and occasionally on TV.