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

[baryon]

I don't understand why the developer should pay Apple for developing an app that they make no money from... If anything, the developer should be paid by Apple for making their iPhone a more desirable product. Imagine you went to work, and at the end of the day your boss would ask YOU to pay THEM for the work you did that day. Why would you ever work there?

 

[cupcakes2000]

Yeah, that's the choice of the business model you choose then. You can choose to rev share with Apple and have no out of pocket expense. Or you can use a 3rd party and pay for use the things you use on the device and Apples infra. Your call which business model you want to leverage. No matter which route you take, you are using Apples tools and services in perpetuity in the form of updates and online services on the phone.

Where there should be an exception is if you make an app with zero entitlements and you can't use any back end Apple services. No iMessage, no iCloud Drive, Notes, no App State, no Continuity, no Photo Stream, etc. If you, as a dev, want to build your own back end services and distribute the App owing nothing to Apple, you should have that ability as a 3rd choice.

But that’s not the case. You can only have the preferential ‘deal’ if you release it in the ‘proper’ App Store. There’s no way of avoiding potential losses if you release a free app outside. And there are many reasons one may want to release an app outside of the AppStore (apples moral dictation for one)

 

[1129846]

You think Russia and China are less regulated?

No the entire point is the entire argument of if you dont like that one part of iOS then you are welcome to leave is the exact same as you dont like the law in your country you are welcome to leave.

The argument just buy an android is that level of BS. iOS Geek is saying go buy an android and I respond in kind at his level. He doesn't like the law he is welcome to move to another country.

 

[Shirasaki]

Nothing in the way Apple operates, even in the EU, is illegal or immoral. Any business that operates in the same way, in the EU, but without a "Gatekeeper" status is operating under normal business practices. Spotify can "crush" a small record label, in the way you choose to discuss these issues, and people aren't raising pitchforks over the way they operate.

And that’s why Apple is considered not operating their business morally, maybe also illegally in some cases. Unlike Spotify, which only operates in music streaming industry, Apple sells various devices, provide services to a much wider range of people for deeper influence compared to spotify. Most people can agree that they have no problem living their own modern lives without subscribing to spotify all the time. But not too many can say they can live modern lives without a smartphone of sort, and Apple provides exactly that.

Yes, people don’t need to buy an iPhone to survive. But that doesn’t make Apple any less of a ”gatekeeper”. And because apple influences so many people in so many areas, any time individual or small businesses getting crushed and Apple turning a blind eye, many will be upset. Examples like genuine apps being pushed out by copycats yet Apple does nothing. Happened a couple times. EU bureaucrats will likely receive many of these complaints and start thinking “hmm, Apple can do whatever they like, good or bad, without consequences? That’s not good”.

You think Apple is just “doing business normally”. What I see is Apple abusing its massive influence to fiercely protect their own bottom line at the cost of everything else. It’s absolutely correct that apple has the obligation to remain profitable and continue to grow, else shareholders will pull their money. It’s not correct to operate businesses with little to no accountability And social responsibility, unless all of their shareholders also don’t think Apple should be responsible for The society that brings them to today.

 

[little2v]

I don't understand why the developer should pay Apple for developing an app that they make no money from... If anything, the developer should be paid by Apple for making their iPhone a more desirable product. Imagine you went to work, and at the end of the day your boss would ask YOU to pay THEM for the work you did that day. Why would you ever work there?

Except every app made on Apple stuff is using Apple services? So why should a dev get those services for free?

That's why the app store fee has worked well in so many business models for so long. No out of pocket expense if you don't generate revenue. If you generate revenue, you split it with Apple for all the things Apple provides. Apple keeps building and updating things for you and you keep building for them.

 

[Shirasaki]

I don't understand why the developer should pay Apple for developing an app that they make no money from... If anything, the developer should be paid by Apple for making their iPhone a more desirable product. Imagine you went to work, and at the end of the day your boss would ask YOU to pay THEM for the work you did that day. Why would you ever work there?

Paying employer for work exists in Australia for visa purposes. But that’s a topic for another day. And I would walk away immediately after the interview if such company exists.

 

[little2v]

But that’s not the case. You can only have the preferential ‘deal’ if you release it in the ‘proper’ App Store. There’s no way of avoiding potential losses if you release a free app outside. And there are many reasons one may want to release an app outside of the AppStore (apples moral dictation for one)

But why should you get to use all that stuff for free? What incentive does Apple have to keep updating all these libraries you use and back end services you use and they get nothing at all? Have to be a little pragmatic about it.

 

[1129846]

Personally, I'm okay with freemium app developers being bankrupted. Just let me pay for apps and cut the bs.

Part of the problem that the app store created that encourage freemium is once someone buys your app they get updates for ever at zero cost. This is what encourage the SAAS and freemium model even more. There was no way to charge for an upgrade from say version 1 to version 2 and have say an upgrade price vs a new user price. Some times the charges are worth that type of upgrade.
It boys down to how do you get more money once your app reaches market near market saturation. Only way is to get new users but your earlier ones get updates for free.
Remember software is very expensive to right. The time for software developers is far from cheap. If you want a US based iOS developer at a senior level you are taking $150-200 an hour. Most happens take 100's - 1000's of hours. That just puts things in perspective. Maintenances is not free as again I point to that 150-200 an hour on the cheap side and you need several of them.

I totally get some upgrade force to pay for a rip off but it the model I can understand as well. Now freemium is the only other choice. That is a different usage.
Oddly enough in a lot of ways it is Apple's fault for this freemium model starting to exist as the Apple help kill the paid upgrade model.

 

[cupcakes2000]

But why should you get to use all that stuff for free? What incentive does Apple have to keep updating all these libraries you use and back end services you use and they get nothing at all? Have to be a little pragmatic about it.

If I release an app on the AppStore for free, it IS free for me, aside the dev yearly fee.
If I release an app on an alternate store for free, it IS NOT free for me if it turns out popular, even though I pay the same yearly dev fee.

Pragmatism has nothing to do with it. There is no explanation aside Apple making a sweetened deal for indie devs to stay in the AppStore, therefore completely going against the essence of the new regulation.

 

[little2v]

If I release an app on the AppStore for free, it IS free for me, aside the dev yearly fee.
If I release an app on an alternate store for free, it IS NOT free for me if it turns out popular, even though I pay the same yearly dev fee.

Pragmatism has nothing to do with it. There is no explanation aside Apple making a sweetened deal for indie devs to stay in the AppStore, therefore completely going against the essence of the new regulation.

Right, but you are using stuff Apple built. Why should you get to use HomeKit, ResearchKit, HealthKit, etc for free on another app store with no chance for Apple to monetize? That's what the Core Tech Fee is about. You are paying for use of Apple's backend and dev kits one way or another. You don't get them for free. So many of these Kits have corresponding backend things on Apples servers. Your $99 doesn't pay for all that.

Here's another way to look at Rev Share vs Consumption and where Apples value is:

Say we build our hypothetical sex toy app above. As a dev, I want to add a feature that when I turn on my sex toy, the lights in my house automatically dim and change color to set the mood and my sound system starts playing some rocking 80's jazz.

Without the SDK's Apple provides, I would have to reach out to every light vendor and smart home maker and get API docs or reverse engineer them to support Philips vs TP-Link vs whomever. Some of them are cloud solutions, that's easier. Some of them are local controllers, so I'd also have to write the network stack to try to discover via mDNS or some other means the devices on my network. What about the music system? I have to make API calls to my Sonos stuff or my Bose stuff. A lot of work to develop that from scratch.

Apple provides HomeKit. They leveraged their size to create a standard across vendors and get it implemented for every vendor. The testing and validation is done for you. As a dev building on Apple, I only need to interact with HomeKit. Apple keeps it updated and runs all the back end integration services for me. If philips changes a bunch of things, Apple and Philips sort it out, I just make my abstracted API calls via HomeKit.

So yes, I do think Apple deserves a fee for everything installed if you want to use their stuff. Otherwise, enjoy building it on your own (why I advocate for the 3rd choice).

Consumption models suck as a consumer, we figured this out a long time ago. Can you imagine if you paid per GB of data transfer on your home internet? You would go broke if you're a heavy user. The days of cell providers having tiered plans like 500 minutes/mo, 1,000 minutes/mo, etc didn't work out well. The app store fee is the unlimited data plan. Everyone pays in the same way and some people do benefit more than others, of course, but it levels out all the costs for everyone. If you build an app that's a total dud and never monetizes but uses a petabyte of Apple cloud storage, you pay $0. If you build an app that makes a killing, you and Apple both win. And those oversubscribed wins enables everyone to play in the same park instead of just a few.

I don't think the model needs to change foundationally. It's worked really well for 20 years. A lot of people have made hundreds of billions off the app store. Do some of the app store rules need to be chilled out? Yes. There's an entire market thriving and working just fine. Do we need to reinvent the wheel just so Epic can have an app store without paying Apple and our vape pens can work? No.

 

[vipergts2207]

But why should you get to use all that stuff for free? What incentive does Apple have to keep updating all these libraries you use and back end services you use and they get nothing at all? Have to be a little pragmatic about it.

What incentive does Apple have? Does Apple want to keep selling phones at a high margin? If they'd like to cause their software to stagnate while their competitor continues to innovate, I wonder what would happen.

 

[cupcakes2000]

Right, but you are using stuff Apple built. Why should you get to use HomeKit, ResearchKit, HealthKit, etc for free on another app store with no chance for Apple to monetize? That's what the Core Tech Fee is about. You are paying for use of Apple's backend and dev kits one way or another. You don't get them for free. So many of these Kits have corresponding backend things on Apples servers. Your $99 doesn't pay for all that.

Here's another way to look at Rev Share vs Consumption and where Apples value is:

Say we build our hypothetical sex toy app above. As a dev, I want to add a feature that when I turn on my sex toy, the lights in my house automatically dim and change color to set the mood and my sound system starts playing some rocking 80's jazz.

Without the SDK's Apple provides, I would have to reach out to every light vendor and smart home maker and get API docs or reverse engineer them to support Philips vs TP-Link vs whomever. Some of them are cloud solutions, that's easier. Some of them are local controllers, so I'd also have to write the network stack to try to discover via mDNS or some other means the devices on my network. What about the music system? I have to make API calls to my Sonos stuff or my Bose stuff. A lot of work to develop that from scratch.

Apple provides HomeKit. They leveraged their size to create a standard across vendors and get it implemented for every vendor. The testing and validation is done for you. As a dev building on Apple, I only need to interact with HomeKit. Apple keeps it updated and runs all the back end integration services for me. If philips changes a bunch of things, Apple and Philips sort it out, I just make my abstracted API calls via HomeKit.

So yes, I do think Apple deserves a fee for everything installed if you want to use their stuff. Otherwise, enjoy building it on your own (why I advocate for the 3rd choice).

Consumption models suck as a consumer, we figured this out a long time ago. Can you imagine if you paid per GB of data transfer on your home internet? You would go broke if you're a heavy user. The days of cell providers having tiered plans like 500 minutes/mo, 1,000 minutes/mo, etc didn't work out well. The app store fee is the unlimited data plan. Everyone pays in the same way and some people do benefit more than others, of course, but it levels out all the costs for everyone. If you build an app that's a total dud and never monetizes but uses a petabyte of Apple cloud storage, you pay $0. If you build an app that makes a killing, you and Apple both win. And those oversubscribed wins enables everyone to play in the same park instead of just a few.

I don’t get what you’re arguing. A free app is a free app. They’ve never monetised them.

 

[wbeasley]

So if an app is Freemium and very popular, they need to leverage that popularity and make money.
Add extra functions that are paid?
Sell skins or other customisations?
Link to a "buy us a coffee" payment option?

 

[little2v]

I don’t get what you’re arguing. A free app is a free app. They’ve never monetised them.

I'm arguing that distributing on the Apple app store pushes the risk to Apple in the fee model. If your app is a flop, you get to use everything free. If you don't monetize, you get to use everything from free. Apple is balancing the successes and failures in the app store fee so everyone gets to use the backend stuff and everyone wins. They are taking the risk that their upfront investment in your app will pay for them at some point in some way. They build all these tools and services for you to use so you don't have to.

If you distribute on an app store that has zero monetization for Apple on your app or any app, then they have to charge something to support the massive infrastructure and development that makes your app possible. In this world, without the Core Tech Fee, they are giving everyone all this technology to use and they have to support backend infrastructure to support these things so Epic can take a smaller cut and Apple gets nothing and no potential for anything? That's a bit silly.

The backend to support Apple's ecosystem is in excess of a million servers. People greatly underestimate how much of every day things that app's you use every day, rely on Apple for everything. 300,000+ nodes just of Cassandra. That's more than 14x the footprint powering Netflix.

https://twitter.com/x/status/1578063811495477248

 

[Mrkevinfinnerty]

How quick people are to forget

 

[little2v]

What incentive does Apple have? Does Apple want to keep selling phones at a high margin? If they'd like to cause their software to stagnate while their competitor continues to innovate, I wonder what would happen.

Apple innovates for their devs. I don't think there's any risk of stagnation. But I think people think that the devs do stuff like AR, VR, ML, etc in their apps. It's built on Apples work, not the devs. The wayfair app that can put a couch in your living room, is using AR Kit, not something wayfair built from scratch. Your sleep watch, uses HealthKit to get info from your scale. No one wrote that from scratch. HomeKit being tested with every light system, security camera, smart watch, etc is built and tested by Apple, maintained in a lab by Apple, with all that hardware purchased to test every combination.... so you don't have to buy all that crap as a dev to test. If you want to test your app on every phone ever made by Apple on every carrier in every country. Apple built that so you don't have to as a dev.

It's why I call the app fee a rev share model. Apple incurs the risk and upfront capital, takes a cut and enables devs to build great things for mutual customers. It's a symbiotic relationship. Everyone wins, everyone makes money, everyone is happy (except Epic/Spotify).

 

[d686546s]

Really? You think the DMA mandates this for all businesses? Here's a hint: it doesn't.

Did I say it did? Hint: I didn't.

Because that's how Apple chooses to operate its business.

If I ran my business exactly the same way, but I weren't considered a "gatekeeper" then you'd have zero problem with my business. So, it's not the business practice you're objecting to. It's the idea that Apple is a gatekeeper.

Yes, so? I saw that you seem to take issue with the fact that the EU didn't outright prohibit certain actions for everyone, but the fact of the matter is that certain actions only really become an issue with size and scale.

There's always been differentiated rules for larger companies and I don't think it's the worst idea in the world to take into account potential harm when legislating. Otherwise this whole thread would be full of people complaining how certain provisions in the DMA are incredibly onerous and prohibitive for small companies, which they potentially would be.

In any case, it does not appear that these new conditions have been signed off by the Commission, so it remains to be seen if they are compliant:

https://www.reuters.com/technology/apple-faces-strong-action-if-app-store-changes-fall-short-eus-breton-says-2024-01-26/

 

[Rogifan]

What’s the difference between a free (or free with ads) app on the App Store and one that would be on a 3rd party App Store and thus subject to this core technology fee? Why would one be subject to the fee and the other not?

 

[vipergts2207]

In any case, it does not appear that these new conditions have been signed off by the Commission, so it remains to be seen if they are compliant:

https://www.reuters.com/technology/apple-faces-strong-action-if-app-store-changes-fall-short-eus-breton-says-2024-01-26/

Interesting. The way some folks here have talked would have everyone believe that the EU has already signed off on Apple's proposed changes. While Apple and the EU may have had discussions around the new regulations, that doesn't necessarily mean the EU has OK'd anything. Apple may be forced to go further yet, but it sounds like we'll have to wait and see. Personally what Apple is having to do already is huge, further changes would be welcome though.

 

[little2v]

What’s the difference between a free (or free with ads) app on the App Store and one that would be on a 3rd party App Store and thus subject to this core technology fee? Why would one be subject to the fee and the other not?

One (the Apple App Store) has potential to make Apple money and is part of a revenue pool of all other apps so it doesn't need to make Apple money so long as the pool is making Apple money.

The other (3rd party store) has zero chance to make Apple any money ever from an App store that makes Apple no money and still uses Apple resources to build, support and run.

 

[Abazigal]

How quick people are to forget

View attachment 2341536

It's basically the lesson taught by "Fight Club".

History has shown that there's no way to break the rules without creating new rules. Those who are rebels eventually turn into part of the system or the system itself. Those who go against the establishment eventually become part of the establishment or replace it altogether. Every counter-cultural movement is culture by definition.

Every revolution in history has been like this.

 

[vipergts2207]

It's basically the lesson taught by "Fight Club".

History has shown that there's no way to break the rules without creating new rules. Those who are rebels eventually turn into part of the system or the system itself. Those who go against the establishment eventually become part of the establishment or replace it altogether. Every counter-cultural movement is culture by definition.

Every revolution in history has been like this.

So what you're saying is, it's time for a revolution.

 

[Abazigal]

So what you're saying is, it's time for a revolution.

It always has been.

The only thing one isn't entitled to is a victory just because the individual believes they are on the right side of history. Laws still matter, facts still matter, and if you want your seat at the table, you will have to fight for it. And the rebels didn't always win.

And then the side you backed goes on to establish a new world order, the next upstart feels those rules are "unfair" to them, and the whole cycle repeats.

There's really no right or wrong in this situation. Only winners and losers. Only what is to one's advantage, and what isn't.

 

[Nuno Lopes]

This is good, it means it will be more economical to just use the default app store. I would like Apple to win this va. EU so they give up.

It's also another evidence that Cooks Apple is once again misusing its dominant position. Within the value chain their valuation of what they call Core Technologies is as artificial as the evaluation of the App Store roles in ones business. It's a value driven by the strong hold on peoples device, not choice. If there was any doubt this is the proof.

The actual value being played here is in gatekeeping you through the device. Not in the Core Technologies neither the App Store services. That is why the EU is regulating and will not allow this. How much of a strong hold these companies have on citizens, hence the flow of money and value, through their technology, is just too important to the fabric of a democracy. That is where the power actually is, not the tech or the service itself. Once any company gets a hold on that it's priceless.

PS: Apple should just stop these objectives. They cannot argue that aren't being payed amazingly well for their services. If they pursue these objectives I believe they will be banned from the EU market and face billions and fines, and another billions in customers law suits. Well, that is if the EU does not blow in flames due a third world war. It's crazy. Anyway, they might have better luck with the Chinese ... who knows ... they seam to understand them better. Microsoft will rise again as the #1 consumer tech brand in the EU, smoking Apple ... by simply getting along well with democracies.

As an Apple customer that appreciates their products and services, our family tech is Apple driven, we pay thousands of dollars a year for Apple tech, is with frustration I see these moves from the company.

 

[AppliedMicro]

What incentive does Apple have to keep updating all these libraries you use and back end services you use and they get nothing at all

Selling devices.
It is just not true that they are getting nothing - they're making tons of money from that.
And most, probably almost all those libraries are part of (the OS) of their devices anyway.

As a dev, I want to add a feature that when I turn on my sex toy, the lights in my house automatically dim and change color to set the mood and my sound system starts playing some rocking 80's jazz.

Without the SDK's Apple provides, I would have to reach out to every light vendor and smart home maker and get API docs or reverse engineer them to support Philips vs TP-Link vs whomever

Some of these companies may have figured out a better API than Apple.
I'd argue that, for example, Sonos has.

Why should you use Apple's API then? Furthermore...:
👉 Why should you pay for Apple's API, when you're using a competing, better API?
Why should Apple be allowed to force you into paying for that then?

Apple provides HomeKit. They leveraged their size to create a standard across vendors and get it implemented for every vendor. The testing and validation is done for you.

...and it sucks! Big time.

Especially from a privacy standpoint. HomeKit can not be enabled without enabling iCloud - and iCloud Keychain.
Apple's latest redesign and update has rendered my HomeKit-enabled devices useless paperweights. I'm unable to use them anymore without enabling iCloud Keychain. Which I don't need and don't want. And there's no technical reason I should. I'm perfectly happy to control my devices locally, thank you very much.

👉 Great example why there should not be a unitary gatekeeper that controls all these services and devices. And I'd support regulation for interoperability - and unbundling/untying these services.

Can you imagine if you paid per GB of data transfer on your home internet? You would go broke if you're a heavy user.

Great that you're mentioning it. Why should I go broke?

👉 Apple should pay for the data transfer they're using!

If Apple generate revenue, they split it with my internet provider for all the things they're making money from. Why should Apple get all that bandwidth and data volume for free, when they're delivering gigabytes of iOS updates and Apps/updates over it? From which Apple are making good money.

What incentive does my internet provider have to invest in and maintain all this expensive infrastructure that Apples uses to deliver all those services - an my internet provider gets nothing in return?

👉 I take it that you must agree that Apple deliver its fair share to my internet provider. For all the internet traffic and data volume Apple use to make money. Don't you?

It's why I call the app fee a rev share model. Apple incurs the risk and upfront capital, takes a cut and enables devs to build great things for mutual customers. It's a symbiotic relationship.

I call it a rev share model. My internet provider incurs the risk and upfront capital of setting up his networks, takes a cut a cut - and enables App Stores and operating system developers - Apple that is - to deliver great software for mutual customers. It's a symbiotic relationship.

And of course the video/music streaming services (which, again, Apple themselves is operating among others).
To put it in more concrete terms:

Let's say my internet connections costs €45 a month (which it does, approximately). I estimate about a half of the monthly data volume accounts for video streaming, and a quarter each for traffic from Apple's software delivery network - and another for other, general www usage. I'd also estimate that there's about a 50:50 split on my consumer spending for digital services/goods between my video streaming subscription and digital purchases/subscriptions from Apple.

👉 So... It's just fair if Apple contribute to about a quarter of my monthly traffic - or the price of my internet.

That's €11.25 * 30% commission rate that my internet carrier takes (Apple makes more than a million a year) * 12 months/year = €40.5 / year. Apple should pay a commission of about €40 / year to my internet provider. It'd be just fair.