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

[Appleman3546]

This is a pretty bad deal…and Apple really thought this app install fee would comply with the new EU rules? Sounds like lots more litigation. The per app install fee literally only exists for greed, not security.

 

[rorschach]

Lets play this out then - All Apps are now entitled to a cut of Apple's iPhone revenue above some sales threshold, lets say for every market share percentage point above 10% Apple has to pay developers a 30% cut. Why? Because without developers the iPhone would struggle to break 10% marketshare.

iPhone doesn't need massive marketshare to be successful. The Mac is barely above 10%. So this logic makes no sense. On top of which, Apple provides concrete tools and software (frameworks and APIs) that are directly used by apps. What you're talking about is entirely intangible.

Apple's market share is bigger than BMW's or Mercedes's or Porsche's in the automotive market. What's wrong with being BMW or Mercedes — Steve Jobs

 

[iOS Geek]

From my understanding of the press reporting that was a fairly small short meeting, not something that would involve a detailed description of Apple's new terms. Aside from that, I can still see MS, Spotify, etc... fighting this fee.

Ahh ok, got it. I haven’t really seen too much about that meeting…other than seeing the post about it happening. (Hence the speculation)

 

[JPack]

It’s a fee basically for access to devtools. DMA can force Apple to offer access to those for free? Don’t think so.

Quite frankly, yes.

Basically, it would put devs at a disadvantage compared to Apple. Does Apple charge itself $0.50 per download? Do other app stores charge $0.50 per download?

 

[tebruno99]

It’s a fee basically for access to devtools. DMA can force Apple to offer access to those for free? Don’t think so.

These developers are still benefitting from tools and frameworks that Apple provides for free. Try developing an app using zero Apple frameworks. I'm sure it's *possible*, but how many native apps do it? I suppose there could be an additional option: use no Apple tools or frameworks developing your app and you can pay nothing.

There is already a fee to access the dev tools. It is $100/yr and according to the article you have to still pay the fees even if you pay the $100/yr. If you decide to not pay that, there is still the cost of every person developing and using the application having to buy a iOS device. Its a clever double-dip on Apple's part.

Apple maintains the software stack to sell phones & make money. Apps help sell phones. Charge developers claiming "we are only maintaining this for you!"

 

[bcortens]

Remember the days when you had to pay $129.00 to get the next major update to OS X?

Apple eventually made the OS "free", but only after "service revenues", not hardware revenues, financed it.

Developers won't be getting a free lunch. They want to play, they need to pay.

Costs are only going *up* for Apple to support this new model. They can't just carry on with a potential major drop in revenue.

This just isn't true:

iOS was always free to update on iPhone, only iPod had paid updates, and they were nominal $9.99 update cost because they had to for accounting reasons.

macOS 10.6 was $29 in 2008 well before service revenue took off...

macOS has no such "service revenue" to support its updates but it is still free.

Apple has many pointless things that eat revenue right now, the entire Apple TV+ edifice is likely operating at a huge loss (given the production quality and the price it costs)

 

[frenchcamp49er]

Except this fee is clearly a steering measure. As others have pointed out, it can create incentive structures that mean that Apple is steering developers to its own App Store and making it financially impossible to create alternative stores.

Don't see how that's a bad thing?

 

[TonnyM]

Sorry, developers can’t just take all the benefits of being on the most lucrative consumer platform ever created and contribute nothing 💁‍♂️.

 

[rorschach]

There is already a fee to access the dev tools. It is $100/yr and according to the article you have to still pay the fees even if you pay the $100/yr. If you decide to not pay that, there is still the cost of every person developing and using the application having to buy a iOS device. Its a clever double-dip on Apple's part.

Apple maintains the software stack to sell phones & make money. Apps help sell phones. Charge developers claiming "we are only maintaining this for you!"

The annual fee is subsidized by the commission take from app sales and in-app purchases. If they're not getting the commission, they are subsidizing it in another way. Not double-dipping at all.

Before the App Store, the developer program had multiple tiers that went up to $1,499/year and you paid for OS upgrades.

 

[frenchcamp49er]

There is already a fee to access the dev tools. It is $100/yr and according to the article you have to still pay the fees even if you pay the $100/yr. If you decide to not pay that, there is still the cost of every person developing and using the application having to buy a iOS device. Its a clever double-dip on Apple's part.

Apple maintains the software stack to sell phones & make money. Apps help sell phones. Charge developers claiming "we are only maintaining this for you!"

The camera sells the phone.

 

[bcortens]

iPhone doesn't need massive marketshare to be successful. The Mac is barely above 10%. So this logic makes no sense. On top of which, Apple provides concrete tools and software (frameworks and APIs) that are directly used by apps. What you're talking about is entirely intangible.

Apple's market share is bigger than BMW's or Mercedes's or Porsche's in the automotive market. What's wrong with being BMW or Mercedes — Steve Jobs

The iPhone doesn't need massive marketshare to be successful, that's true, but I never said it needed high marketshare to be successful. I said that the iPhone would struggle to crack 10% without third party apps.

Thus by the logic that Third party apps get value from Apple therefore Apple entitled to 30% of revenue the same logic works for third party apps. Apple gets value from third party apps therefore third party apps are entitled to 30% of apple's iPhone revenue.

 

[JPack]

Not quite sure you understand what an ADS is.

Apple know what they’re doing…

Unfortunately in Europe once you have tabled a law that is that, you can’t say “but it isn’t what I meant, stop!”. It is all about the letter of the law and Apple will be going by the letter of the law.

It could end up in court, but I think, and Apple will think, the EU would lose. Apple will successfully argue a fee would be regarded as reasonable.

It violates the letter and spirit of the law. There are several yardsticks in the regulation to determine the fairness of general access conditions.

Apple knows what they're doing, similar to Masimo. In other words, Apple fights in court even if they know they're wrong. That's why Apple has a $1B legal budget to literally take on high-risk strategies.

Apple’s former top lawyer: $1 billion budget enabled high-risk strategies

Apple has been riding the fine line of legal conduct, profiting handsomely from coming close to the edge, while occasionally taking a hit for crossing it.

venturebeat.com

 

[tebruno99]

Costs are only going *up* for Apple to support this new model. They can't just carry on with a potential major drop in revenue.

Yeah it sucks when you have to tell the shareholders the cops came in and took away the money you earned busting kneecaps.

 

[AppliedMicro]

well no, you can use the old agreement. just don't switch to the new one.

Sounds like they should be investigated by the E.U. for violating the anti-circumvention rules in the DMA then.

 

[bcortens]

The annual fee is subsidized by the commission take from app sales and in-app purchases. If they're not getting the commission, they are subsidizing it in another way. Not double-dipping at all.

Before the App Store, the developer program had multiple tiers that went up to $1,499/year and you paid for OS upgrades.

Paid OS updates were tiny amounts of money, $27 for macOS 10.6 - 10.8 or $9.99 for iOS for iPod touch.

Besides that, you're just speculating on the commission subsidizing the annual fee. Apple has thrown so many excuses about why it should get all revenue that occurs on its platform that I don't believe any of them anymore.

 

[frenchcamp49er]

Sounds like they should be investigated by the E.U. for violating the anti-circumvention rules in the DMA then.

So explain what the violated?

 

[JPack]

So explain what the violated?

Been highlighted several times by me already.

Few people here want to screenshot the law. Probably because they can't argue it.

Regulation - 2022/1925 - EN - EUR-Lex

eur-lex.europa.eu

 

[mdriftmeyer]

There is no such thing as a free lunch. millions of apps were deliberately listed as free with an in-app subscription option where the real app and full functionality resides.

Developers wanting to get all the benefits w/o paying rent then protest to the EU to keep all the freebies and pay no tolls. Life doesn’t work like that.

One way or another you want access to Apple assets, clients/consumers, accounting cost savings, global search and exposure you will have a fee. Don’t like it then get off the platform and try your company future with Google.

What’s that? You make a lot of profit on Apple, then pay up.

 

[Mrkevinfinnerty]

I am hopeful that thanks to existing language within the DMA that the 0.5/install fee will be shot down as a steering measure. Even if it isn't' shot down immediately I cannot see any of the other parties (Spotify, Microsoft, etc...) agreeing with it. I can see them bringing a further complaint to the EU. This is at best a short term win for Apple.

I think this is a hedge against the imminent antitrust suit in the US.

If they drop all fees for 'sideloaded' or apps from third party stores in the EU its going to make it very difficult for them to make a case for them elsewhere. Would be a quick kill for the DOJ and leaves Apple wide open for further regulatory action.

 

[bcortens]

So explain what the violated?

The provision for equal playing field for competition? If it costs 60% of your revenue (example earlier in the thread) to use an alternative App Store that is an example of an unequal playing field. It is also steering, providing a financial incentive to use Apple's store rather than their own... so two violations in one! (JPack has linked the relevant sections)

 

[rorschach]

The iPhone doesn't need massive marketshare to be successful, that's true, but I never said it needed high marketshare to be successful. I said that the iPhone would struggle to crack 10% without third party apps.

Thus by the logic that Third party apps get value from Apple therefore Apple entitled to 30% of revenue the same logic works for third party apps. Apple gets value from third party apps therefore third party apps are entitled to 30% of apple's iPhone revenue.

No, because Apple what provides is concrete. They provide developers with tools (like Xcode) and frameworks like UIKit, etc. These are tangible products. You can certainly calculate a cost for that if you wanted to (the engineers, etc). It's not some vague intangible "value" which is what third-party apps provide. Apps provide value, but not at all in the same way.

 

[AppliedMicro]

I suppose there could be an additional option: use no Apple tools or frameworks developing your app and you can pay nothing.

…if only the DMA hadn’t those provisions about interoperability „free of charge“.

 

[bcortens]

I think this is a hedge against the imminent antitrust suit in the US.

If they drop all fees for 'sideloaded' or apps from third party stores in the EU its going to make it very difficult for them to make a case for them elsewhere. Would be a quick kill for the DOJ and leaves Apple wide open for further regulatory action.

So another short term win at best? The longer they fight this the worse terms they are going to be forced to accept. I think they could have got better terms and more control if they hadn't fought so hard against this for so long.

No, because Apple what provides is concrete. They provide developers with tools (like Xcode) and frameworks like UIKit, etc. These are tangible products. You can certainly calculate a cost for that if you wanted to (the engineers, etc). It's not some vague intangible "value" which is what third-party apps provide. Apps provide value, but not at all in the same way.

Okay let's get concrete. These frameworks aren't just used by external devs, they provide value to Apple too. Apple gets free testing of the frameworks that they build their own Apps on as well. Should Apple be required to pay for all crashlogs from third party apps?

 

[dumastudetto]

Apple will always win.

There's nothing the EU can do to stop our team.

Consumers love Apple products and will turn against the EU if they continue this diabolical anti-Apple offensive.

Game over EU.

 

[rorschach]

Paid OS updates were tiny amounts of money, $27 for macOS 10.6 - 10.8 or $9.99 for iOS for iPod touch.

Besides that, you're just speculating on the commission subsidizing the annual fee. Apple has thrown so many excuses about why it should get all revenue that occurs on its platform that I don't believe any of them anymore.

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.