Apple is
bringing sideloading and alternate app stores to the iPhone
iPhone users — but only those in the EU
— will be able to download apps from third-party app stores as a result of
the bloc’s new Digital Markets Act in March
The iPhone’s app
ecosystem is about to go through its biggest shake-up since the App Store
launched in 2008. Today, Apple announced how it plans to
change the rules for developers releasing iOS software in the European Union in
response to the bloc’s Digital Markets Act (DMA) coming into force in March.
The big news is that third-party app stores will be allowed on iOS for the
first time, breaking the Apple App Store’s position as the sole distributor of
iPhone apps. The changes will arrive with iOS 17.4 in March.
Here’s how the new
“alternative app marketplaces,” as Apple called them, will work. Users in the
EU and on iOS 17.4 will be able to download a marketplace from that
marketplace’s website. In order to be used on an iPhone, those marketplaces
have to go through Apple’s approval process, and once you download one, you
have to explicitly give it permission to download apps to your device. But once
the marketplace is approved and on your device, you can download anything you
want — including apps that violate App Store guidelines. You can even set a
non-App Store marketplace as the default on your device.
Developers, meanwhile,
can choose whether to use Apple’s payment services and in-app purchases or
integrate a third-party system for payments without paying an additional fee to
Apple. If the developer wants to stick with Apple’s existing in-app payment system,
there’s an additional 3 percent processing fee.
Apple still plans to
keep a close eye on the app distribution process. All apps must be “notarized”
by Apple, and distribution through third-party marketplaces is still managed by
Apple’s systems. Developers will only be allowed to distribute a single version
of their app across different app stores, and they’ll still have to abide by
some basic platform requirements, like getting scanned for malware.
The new cost of doing business
Going forward,
developers could pay no commission to Apple at all in the EU, depending on how
they choose to distribute their apps. Apple is making changes to how its fee
structures work, both in the App Store and for apps newly distributed outside
of it. Developers can either choose to use these new business terms or stick
with the existing model and continue to distribute through the App Store as
normal.
Under the new terms,
apps distributed through the App Store that choose to use an alternative
payment system will pay a 17 percent commission (rather than 30 percent) on
digital goods and services. This commission rate falls to 10 percent for any
apps that currently qualify for Apple’s reduced “small business” rate. The
additional 3 percent fee then applies for developers that choose to use Apple’s
payment processing system.
NFC is being opened up, alternate browser
engines are coming, and game streaming is arriving globally
The company is also
introducing a new type of fee for particularly popular apps. The new Core
Technology Fee will charge developers €0.50 (around 54 cents) per annual app
install; however, this fee only kicks in after a million annual installs in the
EU. Apple estimates that over 99 percent of developers will either “reduce or
maintain the fees they owe to Apple” under the new business terms and that
“less that 1 percent” of developers would pay a core technology fee.
As well as allowing
alternative app stores and payment systems, Apple is also opening up other
aspects of the iOS ecosystem in the EU. Alternative browser engines to WebKit will be allowed
for the first time, and users will get a choice of alternative browsers to
install when they open up Safari for the first time on iOS 17.4. The App Store
itself is also opening up to allow game streaming services globally, which,
until now, have been all but banned under Apple’s existing policies. As
announced last week by the European Commission, Apple is also preparing to
allow developers in the European Economic Area to offer NFC payments in their third-party apps.
The DMA effect
These changes are
likely to be seized upon by developers that have been critical of Apple’s
control over iOS app distribution. Earlier this week, Spotify — a longtime critic of Apple’s 30 percent commission rate — announced
plans to bring in-app purchases back to its iOS app to let users
upgrade subscriptions or buy audiobooks in the EU after the DMA comes into
force. But it’s unclear whether the company will be happy to continue to pay a
17 percent commission to Apple if it’s using an alternative payment processor —
it has already been critical of Apple’s plans to charge a 27 percent
commission on alternative payments in the US.
Passed in 2022, the DMA is the EU’s
strongest attempt yet to rein in the alleged anticompetitive practices of Big
Tech companies, which the regulation refers to as “gatekeepers.” The EU designated Apple as a gatekeeper last September and listed its
App Store, Safari browser, and iOS operating system as “core platform services”
that would have to comply with the DMA’s rules.
The DMA is the EU’s strongest attempt yet to
rein in the alleged anticompetitive practices of Big Tech companies
The regulation is
broad, but it includes obligations around letting users
install third-party apps or app stores, uninstall stock apps, and change
default services; making large messaging services interoperable with rivals;
and banning gatekeepers from ranking their own products higher in app stores
than third-party rivals or requiring app developers to use a gatekeeper’s
in-app payment system.
As well as designating
iOS, Safari, and the App Store as core platform services, the European
Commission also opened an investigation into whether iMessage should be included (which would
include having to make it interoperable with rivals), but reports suggest it
might avoid being designated, and today’s
announcement from Apple makes no mention of changes coming to iMessage.
As well as Apple, the
European Commission also designated Amazon, Meta, and Microsoft, alongside
TikTok parent ByteDance and Google parent Alphabet, as gatekeepers under the
DMA. Several of the companies, including Meta, Google, and Microsoft, have publicly
announced upcoming changes to their services as a result of the regulation.
Alongside iOS, Google’s Android operating system has also been designated as a
core platform service under the DMA, but it’s likely to have to make fewer
changes than iOS given it technically already allows sideloading and
third-party app stores (even if its policies around them have proved contentious).
Apple has continued to
take a cut when it’s been forced to allow third-party payments in the past. In
response to a US ruling that said Apple had to allow links to outside payments, the iPhone maker said
it would allow developers to link out but said it would continue to charge a 27 percent commission (as
opposed to 30 percent). It’s also taken a similar approach in South Korea and the Netherlands.
We’ll have to wait and
see whether Apple’s changes, including its new commission rates, will satisfy
its loudest critics, such as Spotify and Epic Games, which have fought hard against the so-called
“Apple Tax.” But after years of theoretical debates and hard-fought court
arguments, we’re about to find out whether users, at least in the EU, care as
much about alternative app stores and payment methods or whether they’ll choose
to stick with Apple
’s in-house options.
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