Context: In January, Apple announced a set of new EU app distribution terms with a view to the bloc’s Digital Markets Act. Initially, Apple did not allow direct web installs (January 26, 2024 games fray article). Various details of Apple’s DMA compliance strategy have been in flux. Apple re-enabled home-screen web apps (March 1, 2024 games fray article), ensured that small developers would not be ruined in the event of a sudden surge of download figures (March 6, 2024 games fray article) and reinstated the developer account of a Swedish Epic Games subsidiary planning to offer an alternative app store (March 8, 2024 games fray article).
What’s new: Less than a week before the EU Commission’s Apple DMA Compliance Workshop (February 24, 2024 games fray article), Apple has made a few changes (March 12, 2024 Apple Developer news) that up the ante for any DMA enforcement action by the EU Commission and/or private parties. Installing apps (not only app store frontends) from a developer’s website will be allowed now (though Apple will collect the same per-install per-year fee as for apps distributed through alternative app stores); alternative app stores can elect to carry only the operator’s own apps; and links to external purchasing options can be freely designed (though nothing changes about Apple’s related charges).
Direct impact: These changes will not enable alternative app store operators and app makers to overcome the strong network effects of the iOS ecosystem (March 3, 2024 games fray article). The fundamental challenges already outlined remain essentially the same. Therefore, Apple’s calculus is still going to be that enforcement of the current DMA does not pose a major risk to its business that would have to be avoided by making meaningful concessions (March 5, 2024 games fray article). Minor adjustments may still happen, such as after next Monday’s DMA Compliance Workshop.
Wider ramifications: Apple’s changes do not change the fact that Google’s EU app rules are fundamentally more difficult to challenge under the current DMA than Apple’s (March 11, 2024 games fray article).
To understand the motivation behind Apple’s rule modifications (which have recently been fairly frequent), it bears recalling what Apple CEO Tim Cook said in response to certain questions by Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California almost three years ago. Mr. Cook confirmed that he does not receive reports on developer satisfaction. Apple does care about end users, which explains the re-enablement of home-screen web apps in the EU. But as Mr. Cook’s deposition in that Oakland courtroom showed, it’s essentially just regulatory pressure (including potential legislative measures) that persuades Apple to improve certain terms and conditions for developers. There may be exceptions to that rule, but by and large that’s how it goes.
If Apple had seriously wanted to do developers a major favor with a view to its DMA-specific rules, it would have prioritized other things. For instance, a major problem for developers is fragmentation: in order for developers to enjoy some of the liberties theoretically afforded to them by the DMA, they must request so-called “entitlements” at the app level, forcing them to offer different apps (they can have the same name, but they must have different IDs) in the EU and various other jurisdictions, which practically means they’ll have to get their EU-based users to migrate to a new app. That also means a significant incremental maintenance effort. Apple has not done anything to address that obvious and serious concern by developers.
This here is all about Apple optimizing its terms to complicate enforcement. And by making minor changes from time to time, Apple also dissuades the initiation of enforcement action by presenting a somewhat moving target. This is a tactical game.
Let’s take a quick look at what they’ve changed and why it doesn’t move the needle in the marketplace.
Single-brand alternative app stores
Apple previously required alternative app stores to be prepared to carry third-party apps. Now they can also operate a store that offers only the app store operator’s own apps. The requirement that an app store must carry third-party apps would have been debatable under the DMA. Apple now avoids that debate. But it doesn’t make any app store more attractive or otherwise more competitive.
Linking out to external purchasing options
For what Apple describes as “linking out to your webpage to complete a transaction for digital goods and services,” developers still face a variety of restrictions, such as that they can’t pass any data on in the URL. That means users have to actually sign up again and then search for the product they want to buy, which will adversely impact the conversion rate (the percentage of people who actually complete the purchase). And nothing changes about those rules.
All that has changed is that Apple now allows developers to use different designs for promoting those options. Apple’s templates are now optional, not mandatory.
What remains the same is that Apple charges the same commission as for in-app purchases, minus 3%, which is what payment processing services will charge developers anyway. Therefore, developers don’t generate a profit the first time. The attribution window is seven days, and for auto-renewing subscriptions Apple also keeps charging. So the only way that developers could save fees (and then split the savings with users) is that users might in the future make web purchases in some situations where they’d otherwise go via Apple’s payment system. But with Apple’s commission being so high, app makers will find it very difficult to offer web purchases at lower prices than in-app purchases, and the conversion rate for in-app purchases will always be the highest.
Web installs (“sideloading”)
When Apple announced its EU app rules initially in January, the term “sideloading” was defined differently than by Google. For Android apps, “sideloading” means that you install them directly from the web. That would only have applied to the storefront apps of alternative EU app stores in Apple’s case, but not to all other apps. All other apps would have had to be downloaded either from Apple’s App Store or from an alternative app store.
The letter of the DMA supported Apple’s interpretation, as the DMA did not mandate web installs: it merely required Apple to allow installations that don’t depend on Apple’s Core Platform Services (in this case, the App Store).
Apparently Apple has decided that fighting over that question of interpretation is not worth it as web installs won’t be commercially relevant. Apple has announced that later in the spring there will be an update that will allow web installs of all apps (provided the developers meet certain criteria, which rule this out for countless small developers and generally for new entrants).
A developer may offer an app only on its own website. This means there won’t be a “sideloading”-based app store on the internet that aggregates apps from various developers.
Apple imposes the same per-install per-year fee of 50 eurocents as on apps that are distributed via an alternative app store. The impact of that charge is disproportionate (January 28, 2024 games fray article).
Google does not charge Android app developers if apps are installed from the web. Google makes sure that not too many users will actually go through the process (and that’s what Apple will presumably do as well), but doesn’t charge.
From an enforcement point of view, the problem is that the DMA doesn’t mandate free-of-charge web installs. It doesn’t even say explicitly that the related terms must be fair, reasonable and non-discriminatory (FRAND), but even if one assumed that there was a FRAND obligation, the fact that Google doesn’t charge for it would most likely not be considered sufficient evidence by a court of law to determine that zero is the correct FRAND rate for the intellectual property royalty Apple is seeking in the form of its Core Technology Fee (CTF). Direct web installs aren’t charged on a Windows PC or Mac, but those are different devices (personal computers, not mobile phones). It will take more to fight that charge (March 8, 2024 games fray article) than just pointing to other platforms where “sideloading” is free.
On balance, Apple’s rules are still considerably more onerous and restrictive than Google’s. The EU will now have to analyze what measures it can take against Apple’s and Google’s current rules in order to open up the market, and what may require an amended law as a German state secretary (vice minister) already mentioned on the record as a consequence of a failure by the DMA to open up certain markets (February 29, 2024 MLex article).