Apple Working on Solution for EU Core Technology Fee Possibly Bankrupting Apps That Go Unexpectedly Viral

[MacRumors]

Since Apple announced plans for the 0.50 euro Core Technology Fee that apps distributed using the new EU App Store business terms must pay, there have been ongoing concerns about what that fee might mean for a developer that suddenly has a free app go viral.

Apple's VP of regulatory law Kyle Andeers today met with developers during a workshop on Apple's Digital Markets Act compliance. iOS developer Riley Testut, best known for Game Boy Advance emulator GBA4iOS, asked what Apple would do if a young developer unwittingly racked up millions in fees.

Testut explained that when he was younger, that exact situation happened to him. Back in 2014 as an 18-year-old high school student, he released GBA4iOS outside of the App Store using an enterprise certificate. The app was unexpectedly downloaded more than 10 million times, and under Apple's new rules with Core Technology Fee, Testut said that would have cost $5 million euros, bankrupting his family. He asked whether Apple would actually collect that fee in a similar situation, charging the high price even though it could financially ruin a family.

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In response, Andeers said that Apple is working on figuring out a solution, but has not done so yet. He said Apple does not want to stifle innovation and wants to figure out how to keep young app makers and their parents from feeling scared to release an app. Andeers told Testut to "stay tuned" for an answer.

What we are trying to do is tear apart a model that has been integrated for 15 years. And so for 15 years, the way we've monetized everything was through the commission. It covered everything from technology to distribution to payment processing, and the beauty of that model is that it allowed developers to take risks. Apple only got paid if the developer got paid, and that was an incredible engine for innovation over the last 15 years. We've seen it go from 500 apps to more than 1.5 million.

To your point, we've seen kids everywhere from 8-year-olds, 9-year-olds, 10-year-olds, to teenagers come up with some amazing applications and it's been one of the great success stories of the App Store. In terms of the Core Technology Fee and our business model, we had to change. The mandates of the DMA forced us to tear apart what we had built and price each component individually. And so we now have a fee associated with technology, tools, and services, we now have a fee associated with distribution and the services we provide through the App Store, and then we have a separate fee for payment processing if a developer wants to use it.

To your point - what is the impact on the dreamer, the kid who is just getting started. It could be a kid, it could be an adult, it could be a grandparent. We want to continue to encourage those sorts of developers. We build a store based on individual entrepreneurs, not so much catering to large corporate interests. And so we really wanted to figure out how do we solve for that.

We haven't figured out that solution here. I fully appreciate that. We looked at the data. We didn't see many examples of where you had that viral app or an app just took off that incurred huge costs. That said, I don't care what the data said. We don't care what the data said. We want people to continue to feel... and not be scared... some parents... hey, I've got four kids who play around with this stuff. I don't have five million euros to pay. This is something we need to figure out, and it is something we're working on. So I would say on that one, stay tuned.

It is not clear when Apple might come up with a solution or what that solution might be, but it sounds like the company might soon have some kind of option for these rare fringe cases when an app goes unexpectedly viral.

The 0.50 euro Core Technology Fee (CTF) that Apple is charging applies to all apps created under Apple's new business terms, both those distributed in the App Store and those distributed outside of the App Store in the European Union. The CTF must be paid for every "first" app install over one million installs.

A free app that is distributed outside of the App Store and downloaded over a million times will owe 0.50 euros for every subsequent "first" install, aka the first time a customer downloads an app on a device each year. The fee is incurred whether or not an app charges, creating a situation where an app developer could owe Apple money without ever making a dime.

As it stands, the CTF is a major unknown for any kind of freemium or free app built under the new business terms that might go viral, effectively making it very risky to develop a free or freemium app outside of the App Store. A free or freemium app that gets two million annual "first installs" would need to pay an estimated $45,290 in fees per month, or more than half a million dollars per year, even with no money earned. That's not a sustainable model for free apps, and freemium apps would need to earn at least 0.50 euros per user to break even.

App developers are able to continue to use Apple's current App Store business terms instead of adopting the new terms, paying just 15 to 30 percent commission to Apple with no change. That prevents distribution outside of the App Store, and it prevents developers from using third-party alternative payment solutions in the App Store. Adopting any of the new features that Apple has implemented because of the Digital Markets Act requires opting in to the updated business terms.

Apple has been tweaking the app ecosystem rules that it introduced in the European Union based on developer feedback. Developers can now opt back in to the current App Store rules after trying out the new rules, though this is only available one time. Apple also recently did away with an app marketplace restriction that required alternative marketplaces to offer apps from any third-party developer that wanted to participate.

Third-party app stores are now able to offer apps only from their own catalog, and developers will soon be able to distribute apps directly from their websites as long as they meet Apple's requirements. Note that all of these changes are limited to the European Union, and the App Store is operating as before in the United States and other countries.

Article Link: Apple Working on Solution for EU Core Technology Fee Possibly Bankrupting Apps That Go Unexpectedly Viral

 

[mvwoensel]

The only acceptable solution is to completely remove this anti-competitive junk fee.

 

[jarman92]

The only acceptable solution is to completely remove this anti-competitive junk fee.

So you think Apple should just allow everyone to distribute their apps on the App Store for free?

EDIT so people stop replying to say the same thing: The Core Technology Fee applies to any developer who accepts the new EU terms, whether they remain in the App Store or not. If Apple got rid of the CTF, developers would be able to continue distributing their apps on the App Store without paying Apple a dime.

 

[PhatRS]

One possible solution is to get rid of free apps. They were necessary in the beginning, so Apple could build its catalog of apps on the AppStore, but they just devalue people's work.

 

[till]

I honestly take this as a sign that they know regulators won't accept the CTF, because it's incredibly late in the game to not have an answer to such an obvious question.

 

[Mrkevinfinnerty]

So generous of them. Apple is the peoples monopolist.

 

[AlmightyKang]

Well GBA4iOS isn't exactly a good starting point. Apple don't allow emulators as a rule, not because emulators are illegal as such but the ROMS, including the GBA ones, are illegal. So at no point would they be allowed to distribute them anyway so the only distribution market is outside of any legitimate app store, licensed or otherwise. Apple would not offer any signing or distribution even by proxy for this and they probably shouldn't.

But that's beside the point. Pick a better app and there might be a better negotiating position!

 

[AppleTO]

The only acceptable solution is to completely remove this anti-competitive junk fee.

No, it's not. Apple is not required to give a free all access pass to their platform. It costs money to develop a platform and SDKs.

 

[vercordio]

It could be a kid, it could be an adult, it could be a grandparent. ... We build a store based on individual entrepreneurs, not so much catering to large corporate interests.

I’d like “scripted answer” for 500.

 

[AppleTO]

One possible solution is to get rid of free apps. They were necessary in the beginning, so Apple could build its catalog of apps on the AppStore, but they just devalue people's work.

Would you pay to download your banking apps, food delivery apps, Amazon, Google Maps, YouTube?

 

[Art Mark]

Gee...forcing companies to change everything to suit a ridiculous group of jealous companies and misinformed politicians isn't working out great. Imagine that.

 

[I7guy]

Would you pay to download your banking apps, food delivery apps, Amazon, Google Maps, YouTube?

The apps mentioned above are not in the target demographic for going bankrupt.

 

[I7guy]

So generous of them. Apple is the peoples monopolist.

There was a very good system in place, but that’s now shot to ****.

 

[User 6502]

So you think Apple should just allow everyone to distribute their apps on the App Store for free?

You seem to fail to understand that this fee is applied to apps that are NOT on the App Store and to developers who chose to NOT use the App Store. So yeah, Apple should NOT charge them any fee, other than the developer fee of $99 per year they already pay and that is meant to cover the cost of using Xcode and the APIs.

 

[User 6502]

One possible solution is to get rid of free apps. They were necessary in the beginning, so Apple could build its catalog of apps on the AppStore, but they just devalue people's work.

Only the work of people who can’t even beat the features of a free app is devalued. People are happy to pay for a more feature reach or more polished app. But nobody wants to pay for an app equal or worse to free alternatives.

 

[ghanwani]

The amount of money at stake here makes it very hard to come up with a good solution. If Apple's fee was not 30% but some smaller reasonable number 5% or 10%, they probably wouldn't be in this soup to begin with. Also they need to taper that fee as the revenue goes up. Kind of like how volume discounts work.

 

[Mescagnus]

My advise to budding developers would be go with the tried-and-tested original App Store agreement. For most, it is not broken – except for the likes of Spotify and Epic, who successfully lobbied the not-so-smart EU law makers (case in point: Vestager's tweet about Fortnite).

 

[sw1tcher]

Apple's VP of regulatory law Kyle Andeers today met with developers during a workshop on Apple's Digital Markets Act compliance. iOS developer Riley Testut, best known for Game Boy Advance emulator GBA4iOS, asked what Apple would do if a young developer unwittingly racked up millions in fees.

Testut explained that when he was younger, that exact situation happened to him. Back in 2014 as an 18-year-old high school student, he released GBA4iOS outside of the App Store using an enterprise certificate. The app was unexpectedly downloaded more than 10 million times, and under Apple's new rules with Core Technology Fee, Testut said that would have cost $5 million euros, bankrupting his family. He asked whether Apple would actually collect that fee in a similar situation, charging the high price even though it could financially ruin a family.

Some here who are against the DMA would tell him:

(1) Tough 💩
(2) No one is forcing him to develop for iOS
(3) If he doesn't like it he can go develop for Android
(4) Apple absolutely deserves (yes, deserves) that $$$
(5) The annual developer fee is not enough
(6) Apple needs to be compensated for the infrastructure that Apple is not paying for

iOS 17.4 SDK introduces new capabilities that let marketplace developers build and distribute marketplace iOS apps as part of an alternative app marketplace in the EU. These apps can install and support software on devices, access data across a catalog of apps, manage users’ purchases and subscriptions, and more. Marketplace apps must meet Notarization requirements, like all iOS apps, and can only be installed from the marketplace developer’s website.


Did I miss anything?

 

[AppleTO]

You seem to fail to understand that this fee is applied to apps that are NOT on the App Store and to developers who chose to NOT use the App Store. So yeah, Apple should NOT charge them any fee, other than the developer fee of $99 per year they already pay and that is meant to cover the cost of using Xcode and the APIs.

The $99 is surely subsidized based on average income from app sales. Apple would probably start charging $999 or more otherwise.

 

[User 6502]

No, it's not. Apple is not required to give a free all access pass to their platform. It costs money to develop a platform and SDKs.

This is already covered by the developer fee, as clearly specified in terms and conditions.

 

[bradman83]

So you think Apple should just allow everyone to distribute their apps on the App Store for free?

The fee applies to apps not distributed on the App Store though.

Apple is free to charge a hosting fee for the App Store so that all of the free apps that pay nothing but get tens of millions of downloads pay their fair share.

Apple should not be entitled to a cut from apps that users download from external app stores of websites, much as they are not entitled to a cut for similar apps downloaded on a Mac.

 

[TimFL1]

You seem to fail to understand that this fee is applied to apps that are NOT on the App Store and to developers who chose to NOT use the App Store. So yeah, Apple should NOT charge them any fee, other than the developer fee of $99 per year they already pay and that is meant to cover the cost of using Xcode and the APIs.

That developer fee is only $99 because they had the commission bringing in the real compensation for providing this rich ecosystem.


They could‘ve also gone the Microsoft route, pulling a Visual Studio per seat licensing system for enterprise but they chose to only use IAP monetization to cover their bases.

 

[ElectricPotato]

Sell your app for the price of the new fee. Or, implement a download limit to what you can afford to cover.

 

[avkills]

So you think Apple should just allow everyone to distribute their apps on the App Store for free?

Yes if the developers are not charging a fee for the app.

 

[User 6502]

Some here who are against the DMA would tell him:

(1) Tough 💩
(2) No one is forcing him to develop for iOS
(3) If he doesn't like it he can go develop for Android
(4) Apple absolutely deserves (yes, deserves) that $$$
(5) The annual developer fee is not enough
(6) Apple needs to be compensated for the infrastructure that Apple is not paying for

iOS 17.4 SDK introduces new capabilities that let marketplace developers build and distribute marketplace iOS apps as part of an alternative app marketplace in the EU. These apps can install and support software on devices, access data across a catalog of apps, manage users’ purchases and subscriptions, and more. Marketplace apps must meet Notarization requirements, like all iOS apps, and can only be installed from the marketplace developer’s website.


Did I miss anything?

Yes, you missed the core point that the EU has the last word, and it is almost guaranteed to fine Apple for its malicious compliance, and after (or even before) that Apple will do further U turns until it complies properly with the DMA.