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After 15 years of dictating how apps are distributed on iPhones, Apple has been forced to take marching orders from European regulators. A new law to bolster tech competition has demanded that Apple open its devices to competing app stores and payment alternatives.
But app makers say Apple’s response to the law, which is intended to give consumers and developers more choice, is a false choice. Tucked inside the plan, they argue, are new fees and rules that make it prohibitively expensive and risky to make the changes that the law was intended to bring.
The backlash is the latest chapter in a long-simmering fight between Apple and app makers. Apple says it must keep a tight grip on the App Store to ensure quality and safety, while many developers say the company rules with an iron fist and abuses its power to squeeze them for fees and thwart competition to its own services like Apple Music and Apple Pay.
European regulators largely sided with developers in writing the Digital Markets Act, a 2022 law that requires Apple to give app makers alternatives for selling to iPhone and iPad users. In response to a March deadline for compliance, Apple told developers last week that they essentially had three options in the European Union, home to roughly 450 million people.
They could stick with the status quo App Store system and continue paying Apple up to a 30 percent commission of all sales. Alternatively, they could reduce their commission to 17 percent, while taking on a new 50-euro-cent charge on every download above one million annually. Or they could avoid Apple’s commission by distributing through a competing app store, while still paying Apple’s download fee.
After doing the math, many developers said Apple was offering a worse alternative. Several pointed out that a maker of a free app with 10 million downloads a year that opted to distribute through a competing app store would owe Apple about $400,000 a month because of the new 50-euro-cent fee, according to a fee calculator that Apple released. That essentially guaranteed that they would stay with the existing App Store model, where they can distribute free, rather than sell through alternative marketplaces.
Spotify, the streaming music app that filed an antitrust complaint against Apple in Europe, said it might abandon plans to add credit card payments for audiobooks and subscriptions because of the fees.
Epic Games, the maker of Fortnite, which sued Apple in 2020, said it had major questions around its plans to release a new game store because Apple’s plan would give it the power to vet and approve competing app stores. And Hey.com, an email and calendar service, said the proposal had upended its plan to distribute software directly to users, which Apple isn’t making possible.
“This can’t be what the European Commission meant because it doesn’t change the fundamental dynamics,” said David Heinemeier Hansson, one of the founders of Hey.com. “Apple has made the provisions so poisonous and the bar so high that it’s clear no one should ever use this.”
The mounting criticism will test how aggressively the European Union will enforce its landmark new digital policy. Executives at dozens of app companies have already called on E.U. regulators to reject Apple’s proposal.
Apple said the policies complied with the E.U. law while limiting potential risks to users. “Apple’s focus remains on creating the most secure system possible within the D.M.A.’s requirements,” the company said in a statement.
Andreas Schwab, a member of the European Parliament who helped write the Digital Markets Act, said the commission would have to weigh Apple’s proposal after March 7, when the rules take effect. Should the European Commission open a formal investigation, it could set up a lengthy legal battle between the E.U. regulators and one of the world’s largest tech companies.
“Everything has to do with money,” Mr. Schwab said. “Those that complain would like to earn more money, and Apple wants to earn money with its own App Store.”
The backlash comes at an important moment for Apple. The U.S. Justice Department is considering antitrust charges against Apple for uncompetitive business practices, a case that could force the company to make more policy changes. Apple is also facing slowing sales of iPhones, iPads and Macs. Wall Street analysts believe that trend will continue when Apple reports quarterly results on Thursday for the three months that ended in December. This week, the company is also releasing its first new product in nearly a decade, an augmented reality device called the Vision Pro.
The Digital Markets Act aims to create more competition in a digital economy dominated by the biggest tech companies. These large platforms, which include Amazon, Apple, Google, Meta, Microsoft and TikTok’s owner, ByteDance, will now face new limits on using their dominance in one area like smartphones, social media or e-commerce to box in users and undercut rival services.
A spokesman for the European Commission, the 27-nation bloc’s executive branch, said it would not comment on Apple’s policy changes before the March deadline. He noted, however, that Apple and other large tech platforms had been urged to review any changes they planned to make to comply with the D.M.A. with the businesses likely to be most affected, to ensure that the changes wouldn’t create new anticompetitive problems.
Apple said it had spoken with several developers before releasing its plan, but Apple didn’t extend its outreach to some of its sharpest critics, such as the Coalition for App Fairness, a Washington trade group that has nearly 80 members, including Spotify and the Match Group, the maker of Tinder.
“If they were serious about complying with the law, they would have done that and tried to bring people on their side for their announcement,” said Rick VanMeter, executive director of the Coalition for App Fairness.
Apple said it had contacted more than 1,000 developers after the new policy was released last week and would hold sessions to answer their questions. The company said 99 percent of developers in the European Union would “reduce or maintain” the fees they owed, and it pointed to support from people like Justin Kan, one of the founders of the video game streaming service Twitch. “Apple’s making major concessions and game developers have more freedom now than ever,” he said on X.
Others disagreed. Andy Yen, the chief executive of Proton, a Swiss company providing encrypted email and internet services, said Apple was offering a false alternative to the existing App Store fee structure. He said the new option was so financially prohibitive, especially the 50-euro-cent technology fee, that “nobody in their right mind is going to choose it.”
Mr. Yen said the change would cost Proton millions of dollars, in part because many of its users use its free services. Even though it wants to try alternative app stores and payment methods, the company would have no choice but to stay with Apple’s current terms, he said.
Apple’s new system could upend many developers’ business models. More than 260,000 apps use a so-called freemium model where users pay nothing to download an app but have options to buy premium features, according to Data.ai, an app economy research firm.
Because only a fraction of subscribers pay for content or goods, developers say they couldn’t afford to pay a 50-cent fee for every download.
Apple also included terms in its new policy that prevents developers from reversing their decisions. Once a company like Spotify or Proton decides to move over to Apple’s new fee structure, there is no going back.
“It’s designed so that picking the new system is a massive risk for your business,” Mr. Yen said. “It’s a massive deterrent.”
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