https://www.nytimes.com/2024/02/01/technology/apple-app-store-europe.

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Apple Has a New Plan for Its App Store. Many Developers Hate It.
To comply with European regulations, Apple has proposed reducing its commission on app sales while adding new fees and
hurdles.

By Tripp Mickle and Adam Satariano

Tripp Mickle reports on Apple from San Francisco. Adam Satariano reports on European tech regulation from London.
Feb. 1, 2024, 10:44 a.m. ET

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.”
 Andreas Schwab, a member of the European Parliament, helped write the Digital
Markets Act. Jean-Francois Badias/Associated Press

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.
 Andy Yen, chief executive of Proton, said Apple’s proposal was so financially
prohibitive that “nobody in their right mind is going to choose it.” Aurelien Bergot for The
New York Times

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.”

Tripp Mickle reports on Apple and Silicon Valley for The Times and is based in San Francisco. His focus on Apple includes product launches, manufacturing issues and political
challenges. He also writes about trends across the tech industry, including layoffs, generative A.I. and robot taxis.

More about Tripp Mickle

Adam Satariano is a technology correspondent based in Europe, where his work focuses on digital policy and the intersection of technology and world affairs. More about Adam
Satariano