Xbox, Spotify leaders blast Apple for App Store changes. Here’s why.

Fortnite is coming back to iOS for iPhone users in the EU. However, the game’s creator, along with other tech businesses and app developers, are blasting Apple for policy changes based on the EU-law that facilitated Fortnite’s return in the first place.

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Spotify CEO Daniel Elk called Apple’s announced App Store policy changes a “new low” from the company.

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Xbox president Sarah Bond said the policy “a step in the wrong direction.”

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And Epic Games CEO Tim Sweeney’s opinions on Apple’s new rules? “Hot garbage,” a “new horror show,” and “a devious new instance of Malicious Compliance.”

What’s going on here? How could regulation meant to stop businesses like Apple from instituting anticompetitive practices elicit such responses from leaders in the industry?

Here’s what Apple is doing that’s so controversial

As Mashable previously reported, a new EU law called the Digital Markets Act (DMA) has basically forced Apple’s hand in allowing alternative application marketplaces to distribute apps to the iPhone. 

Fortnite creator Epic Games, for example, has been embroiled in a years-long legal battle with Apple over this very issue. The gaming giant’s decision to allow gamers to purchase in-game currency directly from the company, avoiding Apple’s fees, resulted in Fortnite being booted from the official App Store in 2020. Fortnite gamers have been unable to play the game through official channels on their iPhone ever since.

Regulators in the European Union created the DMA in order to deal with cases just like this by requiring businesses like Apple to allow alternative marketplaces to distribute apps on their devices and platforms.

This should be a win for consumers and developers alike. However, app developers believe that Apple’s new policy, created directly in response to the DMA, was crafted in a way to still stick it to anyone who decides to circumvent Apple and the App Store through these alternatives.

A new fee structure from Apple

Apple is giving developers a choice, if one can really call it that.

App developers can decide to stick with the status quo and distribute their apps through the App Store and under the current terms, which see Apple taking as much as 30 percent of the revenue cut. If developers go with this model, everything continues as is for those developers.

However, if developers would like to take advantage of the DMA forcing Apple to open up to alternative marketplaces, things can drastically change for them…and not all for the better.

Perhaps the most significant change is the introduction of a Core Technology Fee (CTF) for any app released by a developer that agrees to these new terms. Basically, Apple is rolling out a fee for developers for user installs. Once an app receives more than one million installs, Apple will begin charging a developer a €0.50 first annual install fee per user. That fee allows a user to download an app as many times as they want on their devices and install as many updates as needed within a 12-month period. At the end of that year, Apple would once again charge the developer a fee for an install from that user, if the app has more than one million total installs.

The CTF is applied to all apps, free or paid, and regardless of whether they are distributed through Apple’s App Store or an alternative marketplace. That is, unless the developer decided to stay with the current status quo agreement with Apple.

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Nikita Bier, a tech founder who has been behind many popular free social media apps like tbh and Gas, pointed out that under this new fee structure, apps can potentially end up making less than they would via the current App Store revenue share agreement. In fact, some developers can end up owing more money to Apple than they make.

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In addition, alternative marketplaces will have a barrier to entry under Apple’s new terms. In order to launch such a platform to compete with the App Store, Apple is requiring these marketplaces to provide the iPhone-maker with a “letter of credit from an A-rated financial Institution of €1,000,000 to establish adequate financial means in order to guarantee support for your developers and users.”

The blowback

The negative attention towards Apple for its reaction to the DMA has been unanimous among developers.

As previously mentioned, Xbox and Epic Games has criticized Apple’s new terms. As well as well-known tech founders like Bier and Ruby on Rails creator David Heinemeier Hansson.

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Jacob Eiting, the CEO of mobile analytics platform RevenueCat, said in a post that these new rules somehow led to a situation where, for the first time, developers could owe Apple more than they make.

But, perhaps the most interesting statement came out from ProtonMail founder and CEO Andy Yen.

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ProtonMail is a popular email service that has long held a staunch pro-DMA stance before it even became law. In a statement, Yen made it clear that Apple is “trying to profit off of the DMA” and basically called on the EU to take action based on Apple’s policy changes.

“The European Commission can’t let this blatant bending of the rules fly,” he said.

But, will they take action? It sure seems like they would.

According to EU Commissioner for Internal Market Thierry Breton, who readers might me most familiar with for taking on Elon Musk over the past year, a review of Apple’s proposals will be made starting early March. And the EU will be assessing third-party feedback as well.

“If the proposed solutions are not good enough, we will not hesitate to take strong action,” Breton told Reuters in a statement.