Last week, Apple dropped what some people considered a bomb by allowing third-party payments in the apps distributed on the App Store and, most importantly third-party App Stores on iOS in Europe.
These changes are part of a bigger compliance update forced upon Apple by the European Union as a consequence of its Digital Markets Act (DMA).
This is not the first time Apple is facing this kind of regulation, but this is the first time it reached such a large market scale:
In all these territories Apple applied the same rule: You can use a 3rd party payment system and benefit from a … 3% discount. You have to declare how much revenue was generated using the 3rd party payment and pay a 27% (or 12% for SMB and some other programs) commission fee. Which ended up being the same but having to handle more by yourself (billing, VAT, refunds, and declaration to Apple).
We were expecting the same kind of response for DMA but Apple came with a new one.
The Digital Markets Act (DMA) is a new regulation that was voted by the European Union in 2022 and applicable since May 2nd, 2023.
This new regulation aims to free competition and end monopolistic positions.
For months we were waiting for Apple answers that had to come before March 1st, 2024 - the deadline set by the EU.
This January 25th, 2024, Apple announced its answer to this new regulation and what it will do to comply with it. Truth be told, the provided solutions were quite far from what anyone expected and were also quite complex to figure out.
This impacts several things:
Developers will also be able to:
In this article, we will focus on Side Loading and 3rd party payments.
| Current terms | New using Apple’s payment | New using 3rd party payment | New using Third party App Store | |
|---|---|---|---|---|
| Can distribute App on third party stores | ❌ | ✅ | ✅ | ✅ |
| Can use of 3rd party payment in the app | ❌ | ✅ | ✅ | ✅ |
| Handled invoicing, VAT and refunds | ✅ | ✅ | ❌ | ❌ |
| Payment Commission | 15%* / 30% on In-App Purchases 15% after one year of subscription |
13%* / 20% on In-App Purchases 13% after one year of subscription |
10%* / 17% on In-App Purchases 10% after one year of subscription |
0% from Apple Depending on the 3rd party store |
| Fee | ✅ No other fee | ⚠️ Core Technology Fee €0.50 for each first annual install per year per app over a 1 million threshold. |
⚠️ Core Technology Fee €0.50 for each first annual install per year per app over a 1 million threshold. |
⚠️ Core Technology Fee €0.50 for each first annual install per year per app over a 1 million threshold. |
* for SMB, Video Partner and News Partner programs
These new terms are much more complex to analyze than the previous ones (which were always a lost cause). The huge discount on commissions must be balanced with the Core Technology Fee.
This is why a few hours after the announcement we created a simulator to check if these new terms were more interesting.
We collected more than 400 simulations and most of them led to the same results. Stay on the current terms unless …
It may seem that the consensus is leaning towards "no one will benefit", which is the widely spread sentiment across the Internet.
But now the dust has settled, we can pinpoint specific scenarios where switching could actually be beneficial.
Of course, if your app boasts a huge LTV, paying the Core Technology Fee can be manageable. There are also particular cases where the new terms might offer an advantage:
No this is not possible. Once you accept, you’ll have to stick to these terms and won’t be able to go back to the current ones. What’s more come below… 👇
Accepting the new terms and then selling your app means the acquiring company must also adopt these terms for the app.
No.
You will have the option to either accept the current terms or the new terms. This choice will be available to you regardless of when you subscribe.
Yes. Apple requires notarization for each app distributed through third-party stores to ensure the security of iPhone users, protect their privacy, and maintain the integrity of their devices, including photos and contacts. Access to developer tools and the notarization process will necessitate having an Apple developer account.
Besides the integrity checks described in the previous questions, Apple won’t filter apps that are distributed in third-party stores.
It is up to each vendor to settle their rules. This can lead to the availability of new types of apps that were previously rejected by Apple, such as those involving explicit content, gambling, or realistic violence.
Apple also aims to prevent the proliferation of identical or similar apps, leaving it up to the individual store vendors to establish their own guidelines.
At this stage, as long as there are no third-party vendors it is hard to predict precisely how it will evolve or what boundaries will be pushed forward by new store vendors.
No matter how apps are distributed or paid for, Apple will continue to provide services to developers. Apple also wants to make sure that the iPhone remains a safe place and will be notarizing (review) each application.
This review covers various aspects including safety, security, privacy, accuracy, and functionality, ensuring that apps meet certain standards before being made available on third-party stores. This assessment combines both automated and human controls.
Apple opened consultations with their experts to help you make the best decisions and fully understand the consequences and opportunities of this new regulation.