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

[AppliedMicro]

But Apple might still think of delaying this by going to the courts. This might lead them to break up the company?

Thankfully, Apple can't break up their business themselves, since it would constitute circumvention of the law.

or better and for worse, this is who Apple is. They are only going to give up App Store revenue kicking and screaming, and the sooner people understand and accept that, the less shock (real or feigned) there will be when decisions like this are made.

Totally agree. It was absolutely to be expected that Apple would try to evade, circumvent and defy that regulation as best as they can. Also, that their first proposed solution would be challenged (which it will).

That said, they're quite a few people that take this for granted and legal. See here:

it does not seem that you and others asking for regulation are happy with the regulation-compliant solution that Apple created.

We'll see if this will remain legal - the last word hasn't been spoken on it, I guarantee you that.

Especially given how the EU commissioner already stated that they'll take into account feedback of third parties.

What they can’t do is insist on private companies to be forced by government edict to adopt someone else’s vision for their product.

They can. The DMA spell out very explicitly how the government wants them to change product.

 

[Abazigal]

I also still struggle to fully reconcile the verdicts on both of Epic's cases against Apple and Google. Not so much on the basis that Google engaged in different conduct than Apple, that's quite straightforward, but if one has a monopoly position, surely so must the other.

The crux of the matter is that it is not illegal to be a monopoly, dirty as the word may seem. Even if Apple is ruled to be one, they are still allowed to monetise their IP and are not obligated to transact with any under company under US law. Apple is also offering an integrated product that it fully controlled and which users were fully aware of. As such, Apple is free to set whatever price of entry they want.

An argument can even be made that users specifically chose the iPhone because of said lock-in. For them, it's a feature (improved security), not a bug.

Google on the other hand differs in that it isn't selling an integrated product the way Apple is. Instead, Google is entering into contractual agreements with phone makers, and then violated the terms of those agreements via backroom dealing.

So the difference is that Google broke the terms of their agreements, while Apple didn't (because they didn't need to). That one contractual agreement is more onerous than the other is besides the point. A deal's a deal.

 

[AppliedMicro]

Thanks to the EUSSR, people are now being spammed by accepting Cookies to every website they go.

You're ignoring the real cause here:

We have them thanks to the creepy and unregulated data collection practices developed and practiced mainly by American companies and the American advertising and social media industry.

The E.U. mandating Cookie banners is just a reaction trying to make that data collection more transparent.

Well, for one, China is not calling for Apple to do anything which would result in them losing control over their own platform.

Well, iCloud being operated by a Chinese company in China is one of the concessions Apple made.
But for the Chinese censorship and surveillance system, Apple's single gatekeeper status is certainly a boon.

 

[heretiq]

If developers would abandon iOS tomorrow, their iPhone business would be toast in short time. If Apple abandoned developers, most would simply move to the other platform and and their business be fine.

Two things:

1. Users flocked to iOS long before there was an AppStore. I think users are choosing the iPhone first because of its design, usability, built-in functionality, security and privacy. The third-party app ecosystem is a secondary consideration. If every third party app I use went away tomorrow the thought of switching would never occur to me.

2. I suspect Developers (with the exception of a few vocal Prima Donnas like Sweeney and DHH) build iOS apps because the AppStore gives them relatively easy access to a large concentration of high value customers at a reasonable cost.

If those dynamics hold true it seems very unlikely that developers will leave Apple in any substantial way in the foreseeable future.

 

[Mrkevinfinnerty]

Two things:

1. Users flocked to iOS long before there was an AppStore I think users a choosing the iPhone first because of its design, usability, built-in functionality, security and privacy. The third-party app ecosystem is a secondary consideration. If every third party app I use went away tomorrow the thought of switching would never occur to me.

2. I suspect Developers (with the exception of a few vocal Prima Donnas like Sweeney and DHH) build iOS apps because the AppStore gives them relatively easy access to a large concentration of high value customers at a reasonable cost.

If those dynamics hold true it seems very unlikely that developers will leave Apple in any substantial way in the foreseeable future.

Um, are you sure

First iPhone launched 2007, the App Store launched 2008. Also most of the average users would switch in a heartbeat if they couldn't use Instagram, Tiktok, Youtube etc, don't kid yourself.

 

[darngooddesign]

Two things:

1. Users flocked to iOS long before there was an AppStore I think users a choosing the iPhone first because of its design, usability, built-in functionality, security and privacy. The third-party app ecosystem is a secondary consideration. If every third party app I use went away tomorrow the thought of switching would never occur to me.

Bear in mind that one of the main reasons PalmOS failed was a lack of 3rd party apps; and back in 2009 people were far less reliant on apps than they are now where a phone is the main daily personal computer for many people. WindowsPhone had a similar issue which is a shame because I really liked my work-issued one.

 

[vipergts2207]

Um, are you sure

First iPhone launched 2007, the App Store launched 2008. Also most of the average users would switch in a heartbeat if they couldn't use Instagram, Tiktok, Youtube etc, don't kid yourself.

Yeah to say users flocked to iOS before the App Store would be wildly inaccurate. The vast majority of people were still on flip phones in 2008 when the App Store launched. Even talking exclusively about smartphones Nokia and RIM were still number one and two respectively in 2008.

 

[heretiq]

Um, are you sure

First iPhone launched 2007, the App Store launched 2008. Also most of the average users would switch in a heartbeat if they couldn't use Instagram, Tiktok, Youtube etc, don't kid yourself.

Good points — I definitely overlooked the attractiveness of social media apps to a lot of people; however, I don’t recall any mention of TikTok, Facebook, Instagram or any of the social media apps threatening to leave the App Store because of sideloading or alternate App Store desires. So, while I agree that scenario could motivate a significant number of users to switch, I don’t believe it is plausible.

 

[maxoakland]

In a heart beat I'd support that. I'd rather the apps I need be placed in the security of the walled garden.

Absolutely horrible idea.

 

[Onelifenofear]

If developers would abandon iOS tomorrow, their iPhone business would be toast in short time. If Apple abandoned developers, most would simply move to the other platform and and their business be fine.

Still, it's one company against many - it's an interesting power dynamic.

Except of the loss of 1.46 Billion Potential customers. I'm a developer - I have zip all issue paying Apple 30%.. In the old days you'd be lucky to take home 30% after all your costs at the same point. Retailer alone was 50%. Let alone DVD manufacturing etc.

Everyone just want's everything for free these days and some are under the inane belief that all software should be free... not sure they have homes, kids or stomachs.

 

[bcortens]

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.

Why does Netflix, which is one of the highest earning companies with an iOS app get the services for free? Why does YouTube? Why does Adobe? Why does Microsoft?

If Apple really cared about this all of the big players would pay too, they don't and never will because this isn't a principled position on apple's part. It is all about making money from companies without enough market power to stop them from extorting them.

 

[Beautyspin]

I'm not sure. People would still want those apps.

Are you aware of why Windows Phone bombed? It was due to lack of apps such as Instagram, snapchat, and tiktok. If Apple thinks they are untouchable, they will come crashing to the ground. People use phones to use Apps, not just to stare at them

By the way, I'd consider that one of the fairest "per-use" compensation methods (if they'd only charge such an amount for a user's initial download) for Apple's notarisation and app review - that still does not overburden small developers with niche apps (as a fixed fee for everyone would).

We'll know once the EU checks the proposal. If they don't suggest any changes, then Apple will be fine. Otherwise, they will be fined ..

Attorneys are pursuing the interest of their client. There's only so much even the best attorneys can do, according to the instructions of their client. Coming up with a "solution" that is most likely able to withstand regulatory or legal scrutiny doesn't mean that it will.

 

[ksj1]

There sure are a lot of people who think Apple makes 'obscene' profits. It isn't terribly hard to look that up. In 2022 Apple had a net profit of just over 25%. While that is healthy it is not 'obscene'. Google was at ~22.5%, Microsoft at 35.3%.

 

[Beautyspin]

The EU cant sue for global revenue, only revenue in the EU.

Yes. They can. They can fine upto 10% of global revenue for first offense and upto 20% for repeat offense, and breakup the company if there is no change in the behaviour.

1. Fines of up to 10% of the company’s total worldwide annual turnover, or up to 20% in the event of repeated infringements
2. Periodic penalty payments of up to 5% of the average daily turnover
3. Remedies In case of systematic infringements of the DMA obligations by gatekeepers, additional remedies may be imposed on the gatekeepers after a market investigation. Such remedies will need to be proportionate to the offence committed. If necessary and as a last resort option, non-financial remedies can be imposed. These can include behavioural and structural remedies, e.g. the divestiture of (parts of) a business.

The Digital Markets Act: ensuring fair and open digital markets

Discover how the Digital Markets Act ensures large online platforms in the EU behave fairly, and allows new players to enter the market, thus developing a fast evolving digital sector.

commission.europa.eu

 

[Timo_Existencia]

Absolutely horrible idea.

For you, perhaps. Not for me.

 

[Beautyspin]

I’m assuming fines such as these would go to court and drag in for years.

In a normal anti-competition verdict, it will take a lot of time because they are ex-post. They have to wait for the non-compliance and then prove it before they can be fined. However, DMA is ex-ante.

x-ante regulations:

• Identify issues: Identify issues in the market beforehand and shape stakeholder behavior and responses through regulatory intervention.
• Prevent harmful conduct: Seek to prevent harmful conduct from occurring.
• Tell businesses what to do: Tell businesses precisely how to behave, or what to do.
• Are proactive: Intervene before specific issues or anti-competitive practices even arise.

 

[Beautyspin]

That remains to be seen (see my link above to John Gruber’s coverage of this). I genuinely believe the EU may have been blindsided here.

Don't go by what McGruber says. He is an Apple shill. Apple will be in serious trouble.

 

[Beautyspin]

Well, for one, China is not calling for Apple to do anything which would result in them losing control over their own platform.



And then maybe Apple will finally decide to withdraw from the EU.

But in all honesty, I think this quote says this best.

Apple’s Plans for the DMA in the European Union

The delicious irony in Apple’s not knowing if these massive proposals will be deemed DMA-compliant is that their dealings with the European Commission sound exactly like App Store developers’ dealings with Apple. Do all the work to build it first, and only *then* find out if it passes muster...

daringfireball.net

Just because Apple gave a proposal does not mean the EU will accept it. It will take action and it will be strict. Apple will know. Apple is welcome to withdraw from the EU. What will it do when India, UK, USA, Japan, South Korea, Brazil and other countries deliver similar rulings in their antitrust investigations against Apple? Will they leave all those countries? Remember, if it leaves the EU, it may be very difficult for it come back even it does so on their knees.

 

[Timo_Existencia]

Just because Apple gave a proposal does not mean the EU will accept it. It will take action and it will be strict. Apple will know. Apple is welcome to withdraw from the EU. What will it do when India, UK, USA, Japan, South Korea, Brazil and other countries deliver similar rulings in their antitrust investigations against Apple? Will they leave all those countries? Remember, if it leaves the EU, it may be very difficult for it come back even it does so on their knees.

I doubt Apple will leave the EU. But it would be an interesting test of flexing muscle. The disadvantage Apple has in the EU is that IOS is ONLY 27% marketshare (which of course, highlights the ridculousness of concluding they are a "gatekeeper." If anything, you'd want to strengthen the minority player to leverage against the dominant player who has 70% marketshare. But alas, this isn't logical, it's emotional for the EU). BUT...if Apple withdrew, what would the reaction be from Apply loyalists and businesses in the EU? Who would they side with?

 

[AppliedMicro]

I'm a developer - I have zip all issue paying Apple 30%.

Well, it's not as if you have choice on iOS/iPadOS, do you?

Admittedly, the digital licensing / rights management on these OS is also pretty robust (due to app notarisation).
That said, you may change your mind if someone offered you the distribution for 15% or 10%.

I fully support Apple taking 30% or whatever percentage and you paying that - as long as it's competitive rate.

In the old days you'd be lucky to take home 30% after all your costs at the same point. Retailer alone was 50%. Let alone DVD manufacturing etc.

...and I paid 20 cents or so per SMS message.

We're not living in those times anymore. When someone uses prices or margins from decades ago to justify today's pricing as "fair", one should immediately be suspicious.

Everyone just want's everything for free these days and some are under the inane belief that all software should be free... not sure they have homes, kids or stomachs.

I certainly don't. I am paying for my software.

 

[AppliedMicro]

Are you aware of why Windows Phone bombed? It was due to lack of apps such as Instagram, snapchat, and tiktok

Completely agree.

I just think that charging 50 cent on initial purchases or installs will have as much an immediate effect. It will give Apple some bad press and (only) slowly and gradually erode their market share into more of luxury brand for the rich.

 

[iOS Geek]

Yes. They can. They can fine upto 10% of global revenue for first offense and upto 20% for repeat offense, and breakup the company if there is no change in the behaviour.

1. Fines of up to 10% of the company’s total worldwide annual turnover, or up to 20% in the event of repeated infringements
2. Periodic penalty payments of up to 5% of the average daily turnover
3. Remedies In case of systematic infringements of the DMA obligations by gatekeepers, additional remedies may be imposed on the gatekeepers after a market investigation. Such remedies will need to be proportionate to the offence committed. If necessary and as a last resort option, non-financial remedies can be imposed. These can include behavioural and structural remedies, e.g. the divestiture of (parts of) a business.

The Digital Markets Act: ensuring fair and open digital markets

Discover how the Digital Markets Act ensures large online platforms in the EU behave fairly, and allows new players to enter the market, thus developing a fast evolving digital sector.

commission.europa.eu

And quite honestly...that should be illegal. Their power ends where their boundaries end. The EU should only be "entitled" to fine revenue earned within their boundaries. That is 100% abuse of authority. If they want to have this kind of worldwide power/authority...they need to start letting the world have a say in their policies and elections. Either let the world have a say...or keep their meddling to within their own territory.

And to add to it...they should NOT have the power to force a company from another country, therefore NOT headquartered in their territory...to break up. Imagine the outcry if the US threatened to break apart a European company. I doubt that would fly without a fight.

Things like this...are why the EU looks like nothing more than power hungry. They are crossing far too many lines for a government that does NOT have world encompassing power. The EU's power is for the countries in their membership and that's where it should remain. With how much unchecked power the EU seems to have...maybe they should be broken up. Maybe the world should reign them in a bit and remind them that they aren't the rulers of the world.

 

[Timo_Existencia]

And quite honestly...that should be illegal. Their power ends where their boundaries end. The EU should only be "entitled" to fine revenue earned within their boundaries. That is 100% abuse of authority. If they want to have this kind of worldwide power/authority...they need to start letting the world have a say in their policies and elections. Either let the world have a say...or keep their meddling to within their own territory.

And to add to it...they should NOT have the power to force a company from another country, therefore NOT headquartered in their territory...to break up. Imagine the outcry if the US threatened to break apart a European company. I doubt that would fly without a fight.

Things like this...are why the EU looks like nothing more than power hungry. They are crossing far too many lines for a government that does NOT have world encompassing power. The EU's power is for the countries in their membership and that's where it should remain. With how much unchecked power the EU seems to have...maybe they should be broken up. Maybe the world should reign them in a bit and remind them that they aren't the rulers of the world.

Yeah...the US fought a War with the UK over this "Taxation without representation." This clause, more than anything else the EU is doing, shows the ridiculousness of their intents.

 

[Mrkevinfinnerty]

And quite honestly...that should be illegal. Their power ends where their boundaries end. The EU should only be "entitled" to fine revenue earned within their boundaries. That is 100% abuse of authority. If they want to have this kind of worldwide power/authority...they need to start letting the world have a say in their policies and elections. Either let the world have a say...or keep their meddling to within their own territory.

And to add to it...they should NOT have the power to force a company from another country, therefore NOT headquartered in their territory...to break up. Imagine the outcry if the US threatened to break apart a European company. I doubt that would fly without a fight.

Things like this...are why the EU looks like nothing more than power hungry. They are crossing far too many lines for a government that does NOT have world encompassing power. The EU's power is for the countries in their membership and that's where it should remain. With how much unchecked power the EU seems to have...maybe they should be broken up. Maybe the world should reign them in a bit and remind them that they aren't the rulers of the world.

If Apple wants a say in how the EU runs they could always pay all that tax they owe.

 

[iOS Geek]

If Apple wants a say in how the EU runs they could always pay all that tax they owe.

And to turn that argument against you...since NO ONE outside the EU pays EU taxes...we should NOT be subject to EU laws and companies not headquartered in their territory should not have a threat of being broken up held over their heads. If those of us outside the EU are going to be subject to their bs...we should have a say in their elections. But then, there would be a possibility of them finding out they aren't too popular...

If they want to have this kind of power that affects people's lives outside of the EU...we deserve a say. If they won't let us have a say...then they need to butt out and limit their mandates to their area and stop using "worldwide" as a threat. Governments are supposed to represent, remember? The days of our governments "ruling" us...ended a long time ago. Welcome to the modern era, where we would rather be represented than be "subjects".

But yes, you're right...Apple should pay the taxes they owe in the EU. But I ask you...if they did pay every cent owed in taxes...would the EU give them a say? I doubt it, because giving someone a say kind of throws a wrench in being able to inflict their will unopposed.