Apple's EU Core Technology Fee Could Bankrupt Freemium App Developers

[hans1972]

OS X cost $129 before Snow Leopard. Guess when Snow Leopard came out? In 2009, after the App Store. That's when prices started dropping, eventually to free.

It's obvious that the commission subsidizes the fee because the fee hasn't changed in 16 years. Apple's costs certainly haven't gone down. The commission scales so it obviates the need to raise the fee.

It's the cost of the iPhone which pays for iOS, iCloud, Maps and Siri and some other services. It also pays for the upgrades. You can see this as deferred revenue in Apple's accounting.

"For arrangements with multiple performance obligations, which represent promises within an arrangement that are distinct, the Company allocates revenue to all distinct performance obligations based on their relative stand-alone selling prices (“SSPs”). [...] The Company has identified up to three performance obligations regularly included in arrangements involving the sale of iPhone, Mac, iPad and certain other products. The first performance obligation, which represents the substantial portion of the allocated sales price, is the hardware and bundled software delivered at the time of sale. The second performance obligation is the right to receive certain product-related bundled services, which include iCloud®, Siri® and Maps. The third performance obligation is the right to receive, on a when-and-if-available basis, future unspecified software upgrades relating to the software bundled with each device. The Company allocates revenue and any related discounts to these performance obligations based on their relative SSPs."
-Apple's latest 10-K

 

[d686546s]

We are discussing two separate matters.

There is a strong financial incentive for Apple to support their devices for as long as they can, because there are numerous ways they can continue to earn from their user base. This is how Apple has been able to tackle the issue of longer upgrade cycles - via higher prices, more accessories and more services.

Android phones, on the other hand, become a financial liability the moment it’s sold, because they will never see another cent of earnings aside from that sliver of profit from that hardware sale.

How much or how little money Google makes from their App Store is irrelevant when they are not the hardware manufacturers and not the ones responsible for ensuring said devices are kept up to date. They can continue to release a new version of android every year, but they have no power to compel OEMs to keep their devices updated.

That’s why I am an Apple user through and through. The areas they are strong in (like software updates) happen to be the areas I so happen to care about.

You are right in many ways, but I do think it's important to keep in mind that iOS and Android work differently in this regard.

Google has done a lot to decouple updates to its core services and apps from the operating system itself, so even devices on older versions of Android will see updates to Play Services. Apple, at the same time, basically has to keep your device on the latest version of iOS.

The result, for the purposes of your argument, is probably the same, in as far as Google has a vested interest to keep users of older devices being able to purchase new apps and subscriptions from within the Play Store.

 

[Zest28]

We are discussing two separate matters.

There is a strong financial incentive for Apple to support their devices for as long as they can, because there are numerous ways they can continue to earn from their user base. This is how Apple has been able to tackle the issue of longer upgrade cycles - via higher prices, more accessories and more services.

Android phones, on the other hand, become a financial liability the moment it’s sold, because they will never see another cent of earnings aside from that sliver of profit from that hardware sale.

How much or how little money Google makes from their App Store is irrelevant when they are not the hardware manufacturers and not the ones responsible for ensuring said devices are kept up to date. They can continue to release a new version of android every year, but they have no power to compel OEMs to keep their devices updated.

That’s why I am an Apple user through and through. The areas they are strong in (like software updates) happen to be the areas I so happen to care about.

Google has the same incentive as Apple to support older device to have a large enough user base. Apple is not a special snowflake like what you are trying to make it out to be.

Google also has shareholders it has to answer to, just like Apple. So the amount of money Google makes from the in-app store is very relevant when business decisions are made.

And Google is able to support Android phones properly, as what they are doing for the latest Samsung Galaxy S24 Ultra (will have 7 years of Android support). It’s all a matter of $$$$.

 

[Onelifenofear]

Clickbait title...

"Developers can choose to adopt these new business terms, or stay on Apple’s existing terms."

You carry on only selling via App Store - NOTHING CHANGES.

You want to use Apples technology and API and sell via another Store in Europe... you have to pay the core fee.

That is fair enough.

 

[2540497]

This won’t stand and they know it, it’s literally in EU law that this is not allowed and they’re just playing games. Pathetic from Apple tbh.

Erm, it will stand, and they know it.
And deep down I think you know it too.

 

[hans1972]

Again:

„the gatekeeper shall allow business users and alternative providers of services provided together with, or in support of, core platform services, free of charge, effective interoperability with, and access for the purposes of interoperability to, the same operating system, hardware or software features, regardless of whether those features are part of the operating system, as are available to, or used by, that gatekeeper when providing such services.“

Doesn’t seem so free, does it?

You have to read the whole section. It deals with access to hardware and software features controlled by the operating system or virtual assistant.

So, f.ex. Apple can't charge for access to NFC.

Apple's fee is an installation fee and doesn't charge specifically for any access to hardware and software features.

 

[Abazigal]

Google has the same incentive as Apple to support older device to have a large enough user base. Apple is not a special snowflake like what you are trying to make it out to be.

Google also has shareholders it has to answer to, just like Apple. So the amount of money Google makes from the in-app store is very relevant when business decisions are made.

And Google is able to support Android phones properly, as they are doing for the latest Samsung Galaxy S24 Ultra.

The issue is, as I was trying to point out, that Google has no power to push updates to android phones they didn't make themselves. Most android OEMs will skin android in a bid to differentiate their offerings, which in turn means that they are the ones who will decide if it's worth their while to skin the latest version of android and push an update, or simply declare said handset end-of-life.

In the case of the S24, it's Samsung, not google, who has the final say as to how long their phones will receive updates for. And if Samsung decides one day that they are not going to update the S24 any longer, there really isn't anything Google can do about it. They can't even try to force an update over the air because the S24 runs a different flavour of android than their own stock android offering.

I don't think Apple is some special snowflake, but it is undeniable that there are unique benefits to be had when you control every aspect of your ecosystem. And if outsiders want to wrest control away, they will have to be prepared to fight tooth and nail for every inch of progress. Apple has shown, again and again and again, that it is only going to give up App Store revenue kicking-and-screaming, and of course they are going to make it extremely unpleasant and unprofitable to steer users outside of the App Store. Again, it's not a matter of right or wrong. This is simply an acknowledgement of who and what Apple is, and the sooner people accept this, the less we will see posters acting all shocked and dismayed every time Apple makes decisions like this.

 

[ofarlig]

Erm, it will stand, and they know it.
And deep down I think you know it too.

I will be very surprised if the EU thinks this is good enough, the idea was to increase competition by opening up the platforms that the gatekeepers have. The fee Apple is incurring on third party app stores goes straight against that, it makes sure that free apps will still be forced to use the App Store instead of a third party one.

 

[ric22]

Honestly, bankrupting freemium developers would be an amazing thing for planet Earth. Or indeed any games manufacturer that builds their games around micro transactions and loot boxes. They have a special place in hell reserved for them.

On the other hand, bankrupting people that make genuinely profit free apps are saints, and shouldn't suffer.

 

[hans1972]

Apps that don't follow apples TOS these users better get ready for a monthly fee to have the free app installed.
My question is how will they know how many active installs are there per month are they going to use the secret hidden quiet notification test every month?
A lot of free apps I download and then delete, are these apps going to be allowed to download it into the computer via iTunes type store?

Apple controls the operating system. iOS on the device can just report this back to Apple if it isn't already doing so.

 

[2540497]

So where do we think we are all standing on the Kübler-Ross grief cycle?

I think a few are still in denial (shock, avoidance, "This is NOT allowed it’s literally EU law, rarrrrr!") whereas the rest are on anger ("Ok I actually read and understand the law and now realise they are allowed to do this but screw Apple this is typical of their greed, I hate them, I want a free for all, rarrrrrr!").

Can we all hurry up and fast forward to acceptance.

 

[hans1972]

Now that I’m thinking about it, what would Apple think if google suddenly starts to charge Apple the same rate as apple’s CTF to Apple Music app? Would Apple happily pay $20 million per month or fight google to the bitter end to not pay it?

A quick google search shows Apple Music hit 40m total downloads in Q1 2019, so I just use that number as a hypothetical.

Apple would just withdraw Apple Music from Android, which is what all app developers on iOS should have done if they're weren't satisfied with the deal they got with Apple.

 

[hans1972]

That’s true. But for some reason Apple doesn't want to put a price on Xcode. Instead they want money proportional to the success of an app, which is totally unrelated and not thanks to anything Apple did. One might call this rent-seeking.

Revenue sharing is a very common business arrangement across sectors and industries.

 

[AppliedMicro]

Apple's fee is an installation fee and doesn't charge specifically for any access to hardware and software features.

Installation on iOS is accessing operating/software features - what else?

Given that Apple incurs no costs for installation, it’s a fantasy fee.

 

[Zest28]

Apple would just withdraw Apple Music from Android, which is what all app developers on iOS should have done if they're weren't satisfied with the deal they got with Apple.

Genshin Impact could have withdrawn their game from the App Store also if they didn’t like Apple their terms. But then they would not have been able to make $2 billion per year also through in-app purchases.

 

[hans1972]

Oh boy. You are NOT a software developer and it shows. Pretty much ALL modern software is based on or uses software developed by others for free. All websites, for example, including this one and apple’s, are based on software developed by others for nothing. So the precedent was set... like 40 years ago. Have you heard of open source? We would not be having this conversation if macrumors couldn’t use software that was developed by thousands of developers for free. Matter of fact, iOS would not exist if it didn’t use software developed by others for free.

Have you heard about copyright?

The reason why so much software is free is because the author allowed it. Apple doesn't allow for it (most of the time) and copyright allows Apple to benefit financially in any way they see fit, unless there is a specific law making it illegal.

 

[AppliedMicro]

So where do we think we are all standing on the Kübler-Ross grief cycle?

I think a few are still in denial (shock, avoidance, "This is NOT allowed it’s literally EU law, rarrrrr!") whereas the rest are on anger ("Ok I actually read and understand the law and now realise they are allowed to do this but screw Apple this is typical of their greed, I hate them, I want a free for all, rarrrrrr!").

👉🏻 We do not know if they are (or will be) allowed to do it.

Given how Sweeney and others have branded it malicious compliance, this will be challenged - and it may take a while for the discussions between Apple, other stakeholders and regulators and the legal process to play out.

We‘re standing where I always thought we‘d be: Apple would get creative at introducing restrictions and/or new fantasy charges.

The DMA coming into force and Apple’s new rules are just the beginning that set the stage for the real battle in this war.

 

[platinumaqua]

The yearly developer program fee wasn’t enough for Apple for Xcode development and Notorization?

 

[mielie]

Still amazes me that there are people out there that genuinely expect Apple to run an online digital marketplace, provide cloud storage and worldwide digital distribution of iOS applications as well as toolchains, IDE's, etc, all for nothing. Apple spent billions building this ecosystem.

As others have said, producing a freemium app that 2 million people use should provide adequate revenue streams for you to pay something back to Apple for the excellent service they are providing.

 

[madeirabhoy]

Clickbait title...

"Developers can choose to adopt these new business terms, or stay on Apple’s existing terms."

You carry on only selling via App Store - NOTHING CHANGES.

You want to use Apples technology and API and sell via another Store in Europe... you have to pay the core fee.

That is fair enough.

i agree. this is an embarrassing article for macrumors, or certainly an embarrassing clickbait title.

no developer is going to be bankrupted.

tbh the title at least should be changed or does macrumors not want to be a serious news site?

next will we have a 'apple computers could kill users' with an article about how if someone wants to choose to take their macbook into the bath with it still plugged in...


And ignoring the clickbait and getting to the issue, why should apple put up with the costs for freemium apps who want apple to store their app and deal with the downloading of over a million apps so they can move their payments out of apple and keep all the money?

 

[LeHoangDev]

Does the CTF only count installations from EU users or also outside the EU?

 

[BadApe]

Still amazes me that there are people out there that genuinely expect Apple to run an online digital marketplace, provide cloud storage and worldwide digital distribution of iOS applications as well as toolchains, IDE's, etc, all for nothing. Apple spent billions building this ecosystem.

As others have said, producing a freemium app that 2 million people use should provide adequate revenue streams for you to pay something back to Apple for the excellent service they are providing.

Spotify is the best example. Their model is **** and Apple is apparently to blame for all of it.

 

[hans1972]

That's exactly how it works on macOS. You can use Xcode and all of the APIs but still sell your app outside of the App Store without any per-user fee. Why is this any different on iOS?

Because Apple doesn't have the market power to get the iOS model on the Mac.

Apple as the owner of the software should be free to give it away or make a lot of money on it.

 

[Zest28]

Still amazes me that there are people out there that genuinely expect Apple to run an online digital marketplace, provide cloud storage and worldwide digital distribution of iOS applications as well as toolchains, IDE's, etc, all for nothing. Apple spent billions building this ecosystem.

As others have said, producing a freemium app that 2 million people use should provide adequate revenue streams for you to pay something back to Apple for the excellent service they are providing.

It’s the EU we are talking about. They are used to getting everything for “free”. Heck, people all over the world are flocking to Europe to enjoy getting everything for ”free”.

 

[Mrkevinfinnerty]

View attachment 2341355So where do we think we are all standing on the Kübler-Ross grief cycle?

I think a few are still in denial (shock, avoidance, "This is NOT allowed it’s literally EU law, rarrrrr!") whereas the rest are on anger ("Ok I actually read and understand the law and now realise they are allowed to do this but screw Apple this is typical of their greed, I hate them, I want a free for all, rarrrrrr!").

Can we all hurry up and fast forward to acceptance.

We are at the stage just before Apple get sued by their own government and put in special measures like Microsoft in the 90's.