by Apple has unveiled a comprehensive plan to dismantle some of the competitive barriers it has built around its lucrative iPhone franchise, but the new options available to consumers and app developers will only be available in Europe to begin with.
Thursday’s announcement comes as Apple moves to comply with upcoming European regulations aimed at giving consumers the choice to use other app stores and providing app developers with unprecedented ways to avoid fees that have become a gold mine for the tech giant.
The overhaul, due to take effect in early March, will include concessions Apple has previously refused to make in its app store, including lowering the fees it collects from developers in Europe.
The most significant thing is that for the first time Apple will allow iPhone users in Europe to use app stores other than the one operated by the company installed on the mobile device. It will also enable developers to offer alternative payment systems that could help them make more money while lowering their prices.
But Apple says it fears opening up the iPhone to outsiders will increase the chance that consumers venturing outside its proprietary system will be exposed to hackers and other security problems.
The Cupertino, California company is taking what it sees as a risky step just to comply with European rules known as the Digital Markets Act, or DMA, which comes into effect on March 7. Apple has promised to bundle all the complex changes into the iPhone software. update — iOS 17.4 — to be released in 27 countries in the European Union in early March. A test version of that software update will be distributed to app developers first.
In line with that EU mandate, there will be “unavoidable increased privacy and security threats,” warned Phil Schiller, who oversees Apple’s app store. “Our priority is always to create the best and most secure experience possible for our users in the EU and around the world.”
The revisions in Europe will reduce the 15% to 30% commission that Apple plans to continue charging worldwide for in-app transactions completed on the iPhone. The DMA will prevent Apple from imposing a 30% commission in Europe when it comes into effect.
So in Europe alone, Apple is lowering its commissions on in-app transactions to 10% to 17% for developers who choose to stay within the company’s payment processing system. Apple will not collect any commissions on in-app transactions completed through other payment systems.
That’s a stark contrast to how Apple is complying with a court ruling that took effect last week that required it to allow iPhone apps to provide links to various payment options in the U.S. If a transaction is placed in -app completed outside the Apple system in the US. , the company plans to collect commissions from 12% to 27% to prevent freeloading on its iPhone software.
Apple will continue to charge 15% to 30% on app transactions made through its US payment system
Those in-app commissions are a big moneymaker for Apple’s services division, which has been one of the company’s fastest-growing parts in recent years. In Apple’s last fiscal year, the services division generated $85 billion in revenue, making it the company’s second-largest segment behind sales of the iPhone itself.
While Apple does not plan to charge for in-app transactions outside of its payment system in Europe, it will introduce a “central technology fee” for installing apps on the iPhone. That fee will also apply to other app stores downloaded to the iPhone after they have been reviewed and authorized by Apple.
That review process and other steps Apple says it is taking in Europe have prompted ridicule from one of the company’s most prominent critics, Epic Games CEO Tim Sweeney, whose company makes the popular video game Fortnite. Sweeney described the revisions made by Apple in Europe as “an egregious new example of malicious compliance” in a Thursday social media post.
Epic took Apple to trial in 2021 in a fight over the iPhone commission system in the United States Although Apple prevailed on most of the claims in that lawsuit, the result was the ruling that prompted the recent adjustments to the iPhone app payment processing system in the US.
It’s still too early to tell how all these changes in Europe might affect Apple’s revenue, but investors didn’t seem worried, leaving the too many teeth. Apple shares barely fell in Thursday afternoon trading after the news came out.
Apple’s changes to its iPhone app commission structure in Europe could prompt regulators and lawmakers in the United States and other major markets to push for similar cuts.
Spotify, the world’s biggest music streaming service and an Apple competitor, is already vowing to fight for changes in markets outside Europe, where it believes consumers will benefit from more freedom.
“If you live outside of certain markets, you’ll continue to encounter frustrating roadblocks due to Apple’s ridiculous rules,” Spotify said in a blog post. “That’s why developers everywhere are continuing to ask other governments to pass their own laws like the DMA.”
In addition to overhauling its iPhone app store in Europe, Apple will make it easier for consumers to switch to different default options other than its own Safari browser to comply with the upcoming regulations.
