Apple App Store changes for EU DMA spark outrage

Try building a word cloud to capture what competitors and software developers are saying about the proposed Apple App Store changes in Europe, and you’ll wind up with one dark cloud.

Under pressure to meet a March 7 deadline for complying with the European Union’s 2022 Digital Markets Act (DMA), which required that it allow developers to sell their wares on other online sites, the iPhone maker in January unveiled a set of policies for how they’d do that.

Apple’s plan has been roundly criticized by many tech leaders and developers as a way of undercut DMA’s anticompetitive intent. There isn’t much vocal support because Apple doesn’t seem to be loosening the reins on which apps can run on its devices as much as some had hoped.

The controversial policy changes are happening as the EU takes steps to curb the power of Apple and other big tech firms. On Monday, the European Commission fined Apple $1.8 billion euro, accusing the company of abusing its position in the music streaming market.

Apple’s App Store changes under fire

So, what’s in Apple’s DMA plan that’s stirring so much controversy? On the face of it, it looks fairly straightforward. The new rules would let iOS developers go outside the App Store and give Apple users more choice by letting them download apps from other online marketplaces in the European Union.

But some say the new policy contains hidden fees that could end up costing developers dearly if they choose to leave the App Store, undermining the spirit of the DMA.

Tech leaders and Apple competitors didn’t hold back on saying exactly what they thought of the new App Store rules:

• Epic Games CEO Tim Sweeney, whose company has sued both Apple and Google for alleged anti-competitive activities related to their app marketplaces, called it a “devious new instance of malicious compliance.” Epic is the maker of the popular Fortnite video game.
• David Heinemeier Hansson, co-founder of email provider Hey.com, which knocked heads with Apple a few years ago over whether its product could be in the iOS App Store, reportedly said, “This can’t be what the European Commission meant because it doesn’t change the fundamental dynamics. Apple has made the provisions so poisonous and the bar so high that it’s clear no one should ever use this.”
• Microsoft and Meta, two major Apple competitors, urged EU regulators to reject Apple’s proposed changes, saying they would hurt developers who sell apps on other stores. They reportedly want the EU to extract more concessions from Apple.
• Proton CEO Andy Yen, whose Swiss email and cloud service company has also accused Apple of anti-competitive practices, told Wired, “If I was the European Commission, I would probably look at this as an insult.”

Center of the storm: App Store $$$

Some regulators say much of the controversy over the App Store changes comes down to revenues. Opponents of Apple’s plan see the company standing in the way of their earnings while Apple is doing everything possible to protect one of its strongest streams of income in the App Store.

Citing data from Analysis Group, Apple said App Store developers generated $910 billion in total billings and sales from physical goods and services in 2022.

Market Research Future estimates Apple earned $10 billion to $25 billion from its App Store that year.

“Everything has to do with money,” Andreas Schwab, a member of the European Parliament who helped write the DMA, told The New York Times. “Those who complain would like to earn more money, and Apple wants to earn money with its own App Store.”

Justin Kan, co-founder of Twitch and the game developer platform Stash, calls Apple’s App Store proposal “a mixed bag.”

“On one hand, many of their new terms are predictably frustrating in their restrictions and fees,” he says. “On the other hand, we shouldn’t lose sight of the fact that, even as drafted, these policies open iOS up in ways that weren’t possible a few years ago.”

Apple’s App Store EU policy: Devil’s in the details

In addition to Europe, Apple has been battling legal challenges in the United States over its App Store policies. In January, the Supreme Court turned down an appeal by Epic Games of a lower court ruling rejecting its antitrust lawsuit from 2020. The Justice Department, meantime, is reportedly in the late stages of a broader antitrust probe that could lead to a federal lawsuit.

Most notably, Apple’s EU plan would require:

• Companies that sell digital goods and services through the App Store to pay 30% of their earnings from those products to Apple.
• Those that choose to develop for alternate iOS marketplaces to pay a reduced 17% or 10% commission to Apple, depending on their sales volume.
• Developers who accept the new fee arrangement must stay the course; they reportedly wouldn’t be able to go back to the previous App Store structure.
• Developers using outside marketplaces will also have to pay Apple an additional €0.50 “core technology fee,” or CTF, for each App Store install after the first million – regardless of whether the app is paid or free.

This is where things get tricky. Even with the lower 17% and 10% fee structures, critics note developers would still have to fork over payment processing fees of about 3% to Apple or other companies.

When combined with the CTFs, this can really add up to the point that some developers could end up losing money with the new EU arrangement, they say.

“This new fee structure would be devastating for apps that are mostly free, like Proton Mail or Proton VPN,” Yen wrote. “Under this new scheme, app developers like Proton would have to potentially pay millions per year to Apple or stop offering a free app at all, meaning that we would have to stop providing privacy to people who can’t afford it.”

Big Tech showdown: EU regulators say Apple Pay is anticompetitive

European regulators are investigating Apple Pay, accusing Apple of thwarting mobile payment competitors on iOS devices. The EU continues to lead the way globally with concerns and legislation around Big Tech.

An alternative view of the changes

Kan of Twitch, however, believes the new Apple App Store terms are “exciting” and will save money for many developers.

“To illustrate, if your game makes $25 million on iOS per year off five million installs, and you shift 50% of your installs to alternative (non-App Store) channels, you will halve the fee you pay to Apple,” he says.

Apple’s own data seems to agree. The company says 99% of developers would reduce or maintain the fees they owe under the new plan, and fewer than 1% would be large enough to face a CTF for apps distributed in the Europe.

The company also maintains it needs to have some level of control over apps on its devices to ensure consistent quality and protect the security and privacy of its users.

In fact, Apple has argued that opening the door to other marketplaces and payment processing alternatives opens new avenues to cyber-threats like malware, fraud and scams, and illicit or harmful content. Apple said it would introduce protections such as Notarization for iOS apps and an authorization system for marketplace developers. Developers can learn about these changes on the Apple Developer Support page.

“Apple’s approach to the Digital Markets Act was guided by two simple goals: complying with the law and reducing the inevitable increased risks the DMA creates for our EU users,” Apple spokesperson Julien Trosdorf, told Wired.