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Highlights Apple's plan for third-party app stores faces backlash for imposing high costs. Spotify CEO Daniel Ek condemns Apple's new policy as 'extortion.' €1M letter of credit requirement seen as prohibitive for small developers. Legal challenges expected over Apple's approach to DMA compliance. Apple's recent announcement to open iOS to third-party app stores in Europe, as per the Digital Markets Act (DMA), has stirred significant debate and criticism. This move, while complying with the DMA, has drawn flak from various corners of the tech industry, including major players like Spotify and the Coalition for App Fairness (CAF). Contentious Implementation by Apple Contentious Implementation by Apple Apple’s plan to integrate third-party app stores includes imposing a "Core Technology Fee" for apps sold outside its own App Store and requiring a hefty €1,000,000 letter of credit for those wishing to open an app store. These requirements are being said to be quite prohibitive, especially for smaller developers, as they impose financial and operational hurdles that could limit the diversity and innovation in the app market. Spotify CEO Criticizes Apple’s Approach Spotify CEO Criticizes Apple’s Approach Spotify CEO Daniel Ek has been vocal in his criticism of Apple's new policy. In a blog post, Ek condemns the move as “extortion, plain and simple,” highlighting the combination of the new 0.50 Euro fee per app install and the lack of flexibility around App Store in-app payments as major issues. Ek’s concerns are legitimate and stem from the potential financial burden these policies would place on developers, especially those relying on large numbers of downloads for freemium apps. The Spotify CEO's stance reflects a broader discontent within the industry regarding Apple’s approach to DMA compliance. Implications for Developers and the Industry App Store icon displayed on a phone screen is seen in this illustration photo taken in Krakow, Poland on January 29, 2023. (Photo by Jakub Porzycki/NurPhoto via Getty Images) The requirement of a €1M letter of credit essentially excludes smaller developers from establishing their own app stores, as it necessitates having a significant amount of funds set aside. Additionally, the per-install fee poses a considerable financial risk, especially for apps that rely on high download volumes without immediate monetization. Potential Legal Battles Ahead Potential Legal Battles Ahead Apple's strategy, while in compliance with the DMA, is more than anticipated to lead to legal challenges. The company's approach, as per several deevlopers, is positioned as a calculated move to make leaving its App Store an expensive and complex endeavour. While Apple may have bought some time with its intricate plan, the likelihood of regulatory scrutiny and future legal disputes seems inevitable. FAQs What is Apple's new policy regarding third-party app stores? Apple announced plans to allow third-party app stores in Europe, including a "Core Technology Fee" for apps sold outside its App Store and a €1,000,000 letter of credit requirement for opening an app store. Why is Apple's new policy being criticized? Critics, including Spotify's CEO, argue that Apple's new policy imposes high financial burdens on developers, especially smaller ones, potentially stifling innovation and diversity in the app market. What did Spotify's CEO say about Apple's new app store policy? Spotify CEO Daniel Ek criticized Apple's policy in a blog post, calling it "extortion" due to the combination of the per-install fee and restrictions on in-app payments. How does Apple's policy affect smaller app developers? The requirement of a €1M letter of credit and per-install fees pose significant financial challenges for smaller developers, potentially excluding them from establishing their own app stores. Are there potential legal implications for Apple's policy? Apple's approach to DMA compliance is expected to lead to legal challenges, with accusations that the company is making it difficult and costly to leave its App Store. App Store, Apple Music, and More Experiencing Outage .Details? The App Store, Mac App Store, Apple Music, subscription purchases, and AppleCare on Device are all experiencing an outage, according to Apple's System Status page. Apple says that the services have been unavailable for some users since 6:30 p.m. Eastern Time. Affected users may be unable to make purchases in the iTunes Store, Mac App Store, and App Store, and are also experiencing intermittent issues with Apple Music. Update: Apple has fixed the outage. Spotify CEO slams Apple’s App Store changes; Apple fires back .Details? Ek said Apple's reaction to the Digital Markets Act is "a masterclass in distortion." Under Apple's new changes, apps with over one million downloads will need to pay a "core technology fee" for "each first annual install per year." That puts an app like Spotify — which Ek said has more than 100 million downloads in the EU — in an "untenable situation" because it drastically increases the cost of acquiring new customers. In a statement, Spotify described the fee as "extortion, plain and simple." The company says the fee will likely hurt developers, potential start-ups, and those offering free apps who might not have the funds to pay Apple — especially if their app suddenly goes viral. That means that even a multibillion-dollar company like Spotify will need to "stick with the status quo" to remain profitable, Ek said. For its part, Apple said in a statement that it seeks to support developers, including Spotify, which it acknowledged as the world's "most successful" music streaming app. "The changes we're sharing for apps in the European Union give developers choice — with new options to distribute iOS apps and process payments," a spokesperson for Apple told Business Insider by email. "Every developer can choose to stay on the same terms in place today. And under the new terms, more than 99% of developers would pay the same or less to Apple." While Apple's tight hold over the iOS ecosystem has helped it reap billions in revenue, it has also caused it to run afoul of regulators who believe its tactics stifle innovation and suppress new entrants. Ek, too, is a longtime critic of Apple's tactics and has previously said the company has a ways to go before it becomes an "open and fair platform." Apple's App Store change not only falls short of that ideal, but "mocks the spirit of the law and the lawmakers who wrote it," Ek said. Apple's third-party app store announcements guarantee the company will end up in court .Details? Apple has bought itself some time here for sure – in part, because what it has come up with is so complicated it will take regulators some time to digest all the details and run all the numbers. But there seems little doubt that Apple is aiming to do everything it can to make leaving the App Store as difficult and expensive as possible. Some tiny fraction of 1% of developers will be big enough to create their own ‘app marketplace,’ and developers who work on a freemium model could end up punished for their own success. Apple’s third-party app store plan is a ‘shameless insult’ and ‘must not stand’, says Coalition for App Fairness.Details? Full statement: “Apple clearly has no intention to comply with the DMA. Apple is introducing new fees on direct downloads and payments they do nothing to process, which violates the law. This plan does not achieve the DMA’s goal to increase competition and fairness in the digital market – it is not fair, reasonable, nor non-discriminatory,” said Rick VanMeter, Executive Director of the Coalition for App Fairness. “Apple’s proposal forces developers to choose between two anticompetitive and illegal options. Either stick with the terrible status quo or opt into a new convoluted set of terms that are bad for developers and consumers alike. This is yet another attempt to circumvent regulation, the likes of which we’ve seen in the United States, the Netherlands and South Korea. Apple’s ‘plan’ is a shameless insult to the European Commission and the millions of European consumers they represent – it must not stand and should be rejected by the Commission.” Apple announced its plan to comply with the Digital Markets Act (DMA) in Europe yesterday which will allow third-party app stores. However, the Coalition for App Fairness believes Apple’s approach will be found illegal and says the iPhone maker’s plan is a “shameless insult to the European Commission and the millions of European consumers they represent. iPad users will miss out on third-party app stores, browser engines, and more .Details? Changes coming to the App Store are coming to all of Apple’s platforms, while changes to the iPhone are coming only to the iPhone, even if iOS shares a lot of the same codebase as iPadOS. Here’s what that means in practice. The ability to install third-party app marketplaces and download apps from third-party app marketplaces will be an option only on the iPhone. The new prompt in Safari that asks users to pick a default browser engine is coming only to the iPhone. Support for third-party browser engines is coming only to the iPhone. The ability to set default NFC and wallet apps will only be available on the iPhone. Changes to App Store policy to allow alternative payments and lower commissions affect the App Store across all Apple platforms. Changes to the App Store guidelines to allow game streaming apps impact all of Apple’s platforms. All of these changes are coming as part of iOS 17.4, which is currently available in developer beta testing. What are the Changes to iOS in the E.U. which Apple has made ? In the EU, Apple is making a number of changes to iOS to comply with the DMA. For developers, those changes include new options for distributing apps. The coming changes to iOS in the EU include: New options for distributing iOS apps from alternative app marketplaces — including new APIs and tools that enable developers to offer their iOS apps for download from alternative app marketplaces. New framework and APIs for creating alternative app marketplaces — enabling marketplace developers to install apps and manage updates on behalf of other developers from their dedicated marketplace app. New frameworks and APIs for alternative browser engines — enabling developers to use browser engines, other than WebKit, for browser apps and apps with in-app browsing experiences. Interoperability request form — where developers can submit additional requests for interoperability with iPhone and iOS hardware and software features. As announced by the European Commission, Apple is also sharing DMA-compliant changes impacting contactless payments. That includes new APIs enabling developers to use NFC technology in their banking and wallet apps throughout the European Economic Area. And in the EU, Apple is introducing new controls that allow users to select a third-party contactless payment app — or an alternative app marketplace — as their default. Inevitably, the new options for developers’ EU apps create new risks to Apple users and their devices. Apple can’t eliminate those risks, but within the DMA’s constraints, the company will take steps to reduce them. These safeguards will be in place when users download iOS 17.4 or later, beginning in March, and include: Notarization for iOS apps — a baseline review that applies to all apps, regardless of their distribution channel, focused on platform integrity and protecting users. Notarization involves a combination of automated checks and human review. App installation sheets — that use information from the Notarization process to provide at-a-glance descriptions of apps and their functionality before download, including the developer, screenshots, and other essential information. Authorization for marketplace developers — to ensure marketplace developers commit to ongoing requirements that help protect users and developers. Additional malware protections — that prevent iOS apps from launching if they’re found to contain malware after being installed to a user’s device. These protections — including Notarization for iOS apps, and authorization for marketplace developers — help reduce some of the privacy and security risks to iOS users in the EU. That includes threats like malware or malicious code, and risks of installing apps that misrepresent their functionality or the responsible developer. However, Apple has less ability to address other risks — including apps that contain scams, fraud, and abuse, or that expose users to illicit, objectionable, or harmful content. In addition, apps that use alternative browser engines — other than Apple’s WebKit — may negatively affect the user experience, including impacts to system performance and battery life. Within the DMA’s constraints, Apple is committed to protecting the privacy, security, and quality of the iOS user experience in the EU as much as possible. For instance, App Tracking Transparency will continue to work with apps distributed outside of the App Store — asking a user’s permission before a developer tracks their data across apps or websites. However, the DMA’s requirements mean that App Store features — including Family Purchase Sharing and Ask to Buy — will not be compatible with apps downloaded from outside of the App Store. When these changes come into effect in March, Apple will share more detailed resources explaining the options available to users — including best practices for protecting their privacy and security. What are the Changes to Safari by Apple in EU? Today, iOS users already have the ability to set a third-party web browser — other than Safari — as their default. Reflecting the DMA’s requirements, Apple is also introducing a new choice screen that will surface when users first open Safari in iOS 17.4 or later. That screen will prompt EU users to choose a default browser from a list of options. This change is a result of the DMA’s requirements, and means that EU users will be confronted with a list of default browsers before they have the opportunity to understand the options available to them. The screen also interrupts EU users’ experience the first time they open Safari intending to navigate to a webpage. What are the Changes to the App Store by Apple in EU? On the App Store, Apple is sharing a number of changes for developers with apps in the EU, affecting apps across Apple’s operating systems — including iOS, iPadOS, macOS, watchOS, and tvOS. The changes also include new disclosures informing EU users of the risks associated with using alternatives to the App Store’s secure payment processing. For developers, those changes include: New options for using payment service providers (PSPs) — within a developer’s app to process payments for digital goods and services. New options for processing payments via link-out — where users can complete a transaction for digital goods and services on the developer’s external website. Developers can also inform EU users of promotions, discounts, and other deals available outside of their apps. Business planning tools — for developers to estimate fees and understand metrics associated with Apple’s new business terms for apps in the EU. The changes also include new steps to protect and inform EU users, including: App Store product page labels — that inform users when an app they’re downloading uses alternative payment processing. In-app disclosure sheets — that let users know when they are no longer transacting with Apple, and when a developer is directing them to transact using an alternative payment processor. New App Review processes — to verify that developers accurately communicate information about transactions that use alternative payment processors. Expanded data portability on Apple’s Data & Privacy site — where EU users can retrieve new data about their usage of the App Store and export it to an authorized third party. For apps that use alternative payment processing, Apple will not be able to issue refunds, and will have less ability to support customers encountering issues, scams, or fraud. Helpful App Store features — like Report a Problem, Family Sharing, and Ask to Buy — will also not reflect these transactions. Users may have to share their payment information with additional parties, creating more opportunities for bad actors to steal sensitive financial information. And on the App Store, users’ purchase history and subscription management will only reflect transactions made using the App Store’s In-App Purchase system. What are the New Business Terms for Apps in the EU ? Also today, Apple is sharing new business terms available for developers’ apps in the European Union. Developers can choose to adopt these new business terms, or stay on Apple’s existing terms. Developers must adopt the new business terms for EU apps to use the new capabilities for alternative distribution or alternative payment processing. The new business terms for apps in the EU are necessary to support the DMA’s requirements for alternative distribution and payment processing. That includes a fee structure that reflects the many ways Apple creates value for developers’ businesses — including distribution and discovery on the App Store, the App Store’s secure payment processing, Apple’s trusted and secure mobile platform, and all the tools and technology to build and share innovative apps with users around the world. Developers operating under either set of business terms can continue to use the App Store’s secure payment processing and share their apps on the App Store in the EU. And both sets of business terms reflect Apple’s long-standing work to make the app ecosystem the best opportunity for all developers. Developers operating under the new business terms will have the option to distribute their iOS apps from the App Store and/or alternative app marketplaces. These developers can also choose to use alternative payment processors in their EU apps on the App Store, across Apple’s operating systems. The new business terms for iOS apps in the EU have three elements: Reduced commission — iOS apps on the App Store will pay a reduced commission of either 10 percent (for the vast majority of developers, and subscriptions following their first year) or 17 percent on transactions for digital goods and services. Payment processing fee — iOS apps on the App Store can use the App Store’s payment processing for an additional 3 percent fee. Developers can use a payment service provider within their app or link users to their website to process payments for no additional fee to Apple. Core Technology Fee — iOS apps distributed from the App Store and/or an alternative app marketplace will pay €0.50 for each first annual install per year over a 1 million threshold. For apps on iPadOS, macOS, watchOS, and tvOS in the EU, developers who process payments using a PSP or by linking out to their website will get a 3 percent discount on the commission they owe to Apple. Apple is also sharing a fee calculator tool and new reports to help developers estimate the potential impact of the new business terms on their app businesses. Developers can learn more about the changes for EU apps on a new Apple Developer Support page and can begin testing these capabilities today in the iOS 17.4 beta. What are the key changes Apple is making in the EU to comply with the Digital Markets Act? Apple is rolling out significant updates in response to the EU’s Digital Markets Act, including the introduction of new APIs, alternative app marketplace and payment processing options, and revised functionality for browser engines. How will Apple’s changes impact app developers and marketplace options in the EU? Developers will now have access to new tools and APIs for creating alternative app marketplaces, utilizing different browser engines, and managing app updates, significantly expanding their capabilities within the EU market. What security measures is Apple implementing in light of these changes? To counter potential risks from more open platforms, Apple is introducing safeguards like app Notarization and required authorization for marketplace developers, aiming to protect users from malware and other security threats. Will Apple’s compliance with the DMA affect user experience in Safari and the App Store? Yes, users in the EU will notice changes such as a new default browser choice screen in Safari and additional payment options in the App Store, though some existing features like Family Sharing might not be compatible with externally downloaded apps. Also Read: EU’s DMA Pushing Apple to Enable App Sideloading on iPhones Also Read: Apple Announces iOS, Safari, and App Store Changes in EU to Comply with DMA

Developer Challenges

Apple Faces Criticism Over New Third-Party App Store Policy in Europe