EU Opens Non-Compliance Investigations into Apple, Meta, and Google

[truthsteve]

The resources wouldn't be wasted if they would just comply to the rules...?

the rules were never needed in the first place.

 

[AlexESP]

I'm shocked. Shocked, I say.

Not really, tho. That these companies weren't actually following the rules properly was kinda clear (and yes people, the rules are perfectly clear). It's telling that Microsoft of all companies is not being investigated.

The rules are not clear in any way. The EU is asking companies to create secure and closed OS while open at the same time. I’m not shocked because the EU has a history of trying to ruin the tech market.

 

[spazzcat]

The DMA is largely focused on developers with the theory that giving developers more competition that it will provide greater innovation, prices, and user experiences, to consumers.

The DMA doesn't care about closed platforms per se, it cares about closed platforms that can dictate market success. As I said in this post I don't know enough about the game market to know if they should be regulated or not. Maybe they should be, which I would support if it is the case that access to Xbox and Microsoft can determine success or failure in the game market.

The same issue applies to Devs who pay 30% to sell on the Xbox store. Why shouldn't they have options as well?

 

[AlexESP]

Then maybe Apple should've complied in good faith.

No, Apple shouldn’t have complied in good faith. This act hurts customers, so I expect that they do everything in their hand to avoid its consequences.

 

[spazzcat]

You do know you can go to a many physical (or internet) stores you like and buy the game disc? You can take “Side loading” quite literally in case of game consoles. Even better, I can buy them second hand!

Much harder on digital only xbox.

Edit: also, I believe devs still pay the 30% on physical media.

 

[bcortens]

The same issue applies to Devs who pay 30% to sell on the Xbox store. Why shouldn't they have options as well?

I just said that if it is the case that the Xbox store is found to be a gatekeeper that they should have options? If you live in the EU you can suggest this to them.

Edit: People (like myself and probably the others in this thread) defending the DMA are not somehow in favour of the consoles being closed, if the consoles are behaving badly that does not somehow provide a defence for Apple behaving badly. It's a red herring, a side issue.

 

[WiseAJ]

Those can’t innovate regulate to hobble those that can and steal their money.

 

[DaPhox]

Those can’t innovate regulate to hobble those that can and steal their money.

This is exactly what its all about.

 

[neuropsychguy]

Epic loses money but it also gives away huge numbers of games. We've been over this in other threads that we don't have enough insight into Epics cost structure to know why they are loosing money and thus no one can say for certain that the 12% loses money because it costs more than that to run the store or because running the store while also giving away millions of dollars of software is the problem.

That's basically what I said (although we need to clarify that Epic loses money on their game store, and not as a company).

We can make some educated guesses about what commission will allow Apple to make money and then figure out if Epic really can make money from a 12% fee.

This is more or less what I've written in multiple other threads.

Apple's services’ gross (not net) margins are about 70%. Let's just assume the App Store is at a 70% margin (there are claims that it's higher, but the best we know is Apple's overall services margin). With an assumed 70% margin and a 30% fee (most developers are not paying that much), Apple gross "break even" point is a 9% fee. Apple would lose money at that fee though because gross>net. Apple’s overall net margin is about 60% of gross margins. If Apple needs a 9% fee to break even with the App Store gross margin, Apple needs about a 13% fee to make money.

However, most developers pay 15% fees. Let's assume Apple still makes money on that and is grossing a 70% margin (which is extremely unlikely for reasons to be discussed). In that case, Apple’s bare minimum gross "break even" point is a 4.5% commission. Again, that's not net, so a 4.5% commission will lose Apple money. More importantly, Apple, while charging most developers a 15% fee, collects most of the money from the companies paying 30%, which means Apple margins come from the bigger developers who subsidize the smaller ones paying lower fees (i.e., most developers pay the 15% fee but most revenue comes from the minority paying the higher fees).

What this means is 8-10% is a reasonable calculation of Apple's gross break even point for the App Store. This makes Apple's net break even point most likely around 11-13%. Maybe Apple breaks even with a 10% fee, but Apple is a margins focused company and has been since at least the early 1980s.

The issue is why would it not be okay for Apple to make money on the App Store but okay for Epic to make money. Epic loses money with their games store but apparently had a 43% gross profit margin in 2019, even with the costs of the Epic Store factored in: https://craft.co/epic-games/financials

We don't know what their financials have looked like since then, but Epic makes money from licensing and a ton of money from the high margin Fortnite. It seems somewhat hypocritical for Epic to cry over Apple's cut, when Epic has margins as high as or higher than Apple does!

 

[KevinN206]

Europe is in the end, the smallest market who is in decline as their countries are in recession. Europe is simply not as important as the USA and Asia.

To do it for Asia, it makes sense as it is literally the biggest market in the world.

Europe represents 25-30% of Apple's annual revenue. I would think it's a lot cheaper to be in compliance than pulling out from the region completely.

 

[bcortens]

That's basically what I said.

We can make some educated guesses about what commission will allow Apple to make money and then figure out if Epic really can make money from a 12% fee.

This is more or less what I've written in multiple other threads.

Apple's services’ gross (not net) margins are about 70%. Let's just assume the App Store is at a 70% margin (there are claims that it's higher, but the best we know is Apple's overall services margin). With an assumed 70% margin and a 30% fee (most developers are not paying that much), Apple gross "break even" point is a 9% fee. Apple would lose money at that fee though because gross>net. Apple’s overall net margin is about 60% of gross margins. If Apple needs a 9% fee to break even with the App Store gross margin, Apple needs about a 13% fee to make money.

However, most developers pay 15% fees. Let's assume Apple still makes money on that and is grossing a 70% margin (which is extremely unlikely for reasons to be discussed). In that case, Apple’s bare minimum gross "break even" point is a 4.5% commission. Again, that's not net, so a 4.5% commission will lose Apple money. More importantly, Apple, while charging most developers a 15% fee, collects most of the money from the companies paying 30%, which means Apple margins come from the bigger developers who subsidize the smaller ones paying lower fees (i.e., most developers pay the 15% fee but most revenue comes from the minority paying the higher fees).

What this means is 8-10% is a reasonable calculation of Apple's gross break even point for the App Store. This makes Apple's net break even point most likely around 11-13%. Maybe Apple breaks even with a 10% fee, but Apple is a margins focused company and has been since at least the early 1980s.

The issue is why would it not be okay for Apple to make money on the App Store but okay for Epic to make money. Epic loses money with their games store but apparently had a 43% gross profit margin in 2019, even with the costs of the Epic Store factored in: https://craft.co/epic-games/financials

We don't know what their financials have looked like since then, but Epic makes money from licensing and a ton of money from the high margin Fortnite. It seems somewhat hypocritical for Epic to cry over Apple's cut, when Epic has margins as high as or higher than Apple does!

This is fair.

The main issue I have with Apple's fee structure (with respect to the fees required to run the AppStore) is that it applies to some devs but not others. I would be much happier if the costs of running the App Store were distributed evenly among all monetized Apps. If your app is monetized in any way, you have to pay some fee to Apple to run the store. Apps outside the store should not need to pay this fee. I would also appreciate it if Apple separate it's claims of fees for IP/SDK/Tooling and App Store expenses into separate line items so we could actually see what it costs and could thus decide if it is fair to stay in the store or not.

 

[Starflyer]

I'm shocked. Shocked, I say.

Not really, tho. That these companies weren't actually following the rules properly was kinda clear (and yes people, the rules are perfectly clear). It's telling that Microsoft of all companies is not being investigated.

No, these laws are poorly written and the American companies are following the letter of the law and not the spirit of the law.

 

[Volk.JP]

Europe is in the end, the smallest market who is in decline as their countries are in recession. Europe is simply not as important as the USA and Asia.

To do it for Asia, it makes sense as it is literally the biggest market in the world.

Europe is the second biggest Apple’s market after Americas, bigger than China and the Apple does whatever the China wants, basically. Why will it pull out from Europe all of a sudden?

 

[AND411]

The EU would be better off prohibiting manufacturers from gluing and soldering batteries and components in their devices. The right to repair should refer to the fact that an owner can change the battery, memory and SSD in his laptop himself.
This would help to limit Apple's incredible greed. Microsoft, for example, has made it possible to change the SSD in its Surface devices by means of a simple hatch on the back of the devices. There I can upgrade from 256 GB to 2 TB for less than € 200. At Apple, something like this costs a crazy €920.

 

[j26]

Yet, why did these companies and the EU commission not discuss these changes before they went live. Like hello. You make new rules, you give time for companies to make adjustments and then when you find their adjustments don’t meet your laws you fine them.

My understanding is that is precisely what happened, and what is happening now.

Someone posted an article a while back, suggesting that the Apple execs treated it like a negotiation rather than what what it was - an explanation about the law, and missed their opportunity to clarify things.

This wasn't dropped on the EU out of the blue. It was started in 2020 and came into force in 2022. It's just now that the adjustment period has ended. Apple, and all the other gatekeepers have had almost 2 years to sort all this out.

To be honest, it looks like a stunning lack of planning on their part

 

[macintologist]

Apple is not a monopoly when Android exists. This whole issue is stupid.

 

[itti]

EU seems to be doing this every year now

 

[gatorvet96]

I have finally found a good reason for Brexit! It will end up these big companies pulling out of Europe!

There is WAY more profit for companies like Apple than the AppStore. They won't be "pulling out". Hardware is vast majority of their EU profits, with also many other services, along with the likely situation where most people continue to use AppStore (me) regardless of other options.

 

[d686546s]

I get Apple being fined for not complying, not trying to defend a trillion dollar company. But why would they need to pay from money they made in countries where EU law doesn't cover them, such as US? Shouldn't they only be fined based off of EU turnover?

My guess is that otherwise multinational companies will find all kinds of clever accounting tricks to avoid and minimise fines.

There might be other solutions, but basing it on worldwide revenue seems to be an effective way to make it harder to get out of fines and make them sting at the same time, which is really the only way to change behaviour.

 

[gatorvet96]

Because all of these companies make a lot of money from the EU continent and enough for board/shareholders to simply fire every exec that things not complying with DMA in good faith is a good idea.
As much as shareholders and board members love these CEO's like Tim, they love money and profits more, so they would sacrifice him just so the company does not bleed unnecesarry money because of bad or not full compliance with all the laws of any country they operate in.

If this was any other continent, singular country apart from USA, EU, China they would have pulled out but from these 3 they will never pull out.

Also, it is highly likely Apple has been expecting these regulatory changes from the onset, and is milking it for as long as they can. The US is also likely to make similar changes as the EU soon. But why shouldn't they try and make the profit while they can? It would be surprising if any company voluntarily gave up billions in revenue unless they had to.

 

[Ctrlos]

I have finally found a good reason for Brexit! It will end up these big companies pulling out of Europe!

I think I'd still rather have subsidised regeneration schemes and no barriers to working abroad in exchange for the option of using 3rd party app stores.

 

[dbrose]

I think I'd still rather have subsidised regeneration schemes and no barriers to working abroad in exchange for the option of using 3rd party app stores.

I only said one reason. No way could anything more justify Brexit. It is the indefensible!!

 

[Ctrlos]

Apple would have been better off using a carrot instead of a stick, in this case building a better version of the App Store so that whilst devs would be free to set up shop elsewhere it would be better for them to stay because Apple gave them better value rather than just making other products nasty.

 

[JimmyHook]

It’s hilarious how people say “Apple is only complying with the letter of the law, not its spirit. That’s malicious compliance.”

Sorry, that’s how laws work. Nobody goes out of their way to comply with things that aren’t explicitly written. I don’t pay extra taxes, I find every damn loophole possible to reduce my burden. We can’t expect corporations to comply with regs not written. For example, Apples Core Technology fee. Someone show me where it’s written that they can’t charge for all the work their own engineers do to provide developers with APIs.

 

[j26]

Apple would have been better off using a carrot instead of a stick, in this case building a better version of the App Store so that whilst devs would be free to set up shop elsewhere it would be better for them to stay because Apple gave them better value rather than just making other products nasty.

I searched for a particular app in the App Store that I know exists. It's companion software for a hardware item. Could 't find it, even though I was putting in the exact name. I had to go to manufacturers website to get a link to the App in the App Store.

Generally, I find the search function really poor, and that's a bad user experience.
Apple should put some focus on that.