Responding to the European Commission Digital Markets Act (DMA), which aims to regulate the "gatekeeper power" of digital companies, Apple has opened up the possibility for developers to distribute their iPhone apps through alternative marketplaces in EU countries. Developers, though, will be required to pay a new Core Technology Fee if they do.
To be DMA compliant, Apple is introducing three key changes for iPhone apps in the EU: allowing the use of alternative marketplaces; allowing collection of payments through alternative payment systems; and allowing browsers to use alternative rendering engines to WebKit. In addition, users will be allowed to select their default browser.
While Apple's announcement could sound "game changing" on the surface, the reality is more complex than that. In fact, to comply with DMA, Apple has published a set of complex rules, policies, and new APIs developers should adopt. Tellingly, in Apple's own wording those rules and policies are meant to "safeguard" from the new risks that DMA poses to EU users, including:
threats like malware or malicious code, and risks of installing apps that misrepresent their functionality or the responsible developer.
Most significantly, if iOS developers want to opt into the new DMA-compliant rules, they will be required to pay a new Core Technology Fee (CTF) for every install over the first 1 million. Apple goes to a great length to define the concept of "first annual install" to clarify how installs are calculated and to ensure that no two installs by the same user can be counted as two distinct "first annual installs":
A first annual install may result from an app’s first-time install, a reinstall, or an update from any iOS app distribution option — including the App Store, an alternative app marketplace, TestFlight, an App Clip, volume purchases through Apple Business Manager and Apple School Manager, and/or a custom app.
The first million "first annual installs" will be free for all developers. Beyond that threshold, developers will pay a Core Technology Fee of €0.50 for each additional "first annual install". This will apply to free as well as paid apps.
Developers can choose to remain under the current, non-DMA rules, which means everything will remain as it is —in short, free apps will be free to both users and their developers, while paid apps and in-app purchases will pay according to the 30%/15% rule— and there will be no Core Technology Fee.
If developers adopt the new DMA-rules, they will have several options to choose from.
First, they can decide to stay with the App Store as the only distribution channel for their apps while leveraging the opportunity of using alternative Web engines. In this case, developers can still use Apple's payment system and pay 20%/13% commission (instead of the usual 30%/15% split) + CTF. Additionally, they can integrate alternative payment systems and/or external links to websites and pay 17%/10% percent + CTF.
As a second option, they can distribute their apps through alternative marketplaces. In this case, they will not be allowed to use Apple's payment system and their only monetary obligation to Apple will be the CTF.
From a technical point of view, marketplaces will be implemented through third-party apps which will be themselves available on the App Store. No provision is given for installing apps directly from a developer's website, anyway, and the requirements to run a marketplace appear quite exacting.
Surprisingly, even apps to be distributed through alternative marketplaces will be subject to "notarization" by Apple. This will take the form of an app review aiming to ensure the app is secure, is not misrepresenting things, is safe, and protects privacy. The rules used for review will be entirely different and most specifically Apple will not object to the app's content, which means apps with adult content will not be rejected, as it happens for the App Store.
Apple has always considered sideloading on iOS detrimental to users' interests due to the risks in terms of privacy and security it poses. So it comes as no surprise that they are now trying to make it not easy for developers to use alternative marketplaces.
Reviewing Apple's announcement, long-time technology investor and writer M.G. Siegler observed most rules seem convoluted changes to ensure the status quo actually doesn't change much. He also predicts Apple is going to likely be at war with the EU over these matters for years.
As Apple-focused tech blogger John Gruber remarks, Apple's new rules and policies are just an attempt to be compliant with DMA, while preserving what the company sees as its interests. Ironically, he adds, Apple's "dealings with the European Commission sound exactly like App Store developers’ dealings with Apple. Do all the work to build it first, and only then find out if it passes muster".
According to Tim Sweeney, Epic Games founder and CEO, Apple is "forcing developers to choose between App Store exclusivity and the store terms, which will be illegal under DMA". Despite all the hindrances he sees in Apple's proposed solution to DMA compliance, he says Epic is "determined to launch on iOS and Android and enter the competition to become the #1 multi-platform software store, on the foundation of payment competition, 0%-12% fees, and exclusive games like Fortnite."