Apple is finally opening up the iPhone to third-party app stores in the European Union, ushering in a potentially vibrant, burgeoning and eclectic new era for its app ecosystem. At least, it may depend on how developers respond to one small and huge hurdle: the €0.50 fee.
Apple is introducing a new fee structure for apps that want to work on these third-party stores. On the surface, this sounds great: If apps are distributed through a third-party store they don’t give Apple any cut of the sales. And if a developer still wants to distribute through Apple’s App Store, the cut drops from the traditional 30 percent fee to 17 percent. That’s a 10 percent fee, down from the original 15 percent for “small business” apps. By far, a better deal.
The real caveats emerge only when apps become popular. Any app that sees more than 1 million installs per year must pay Apple a 50 euro cents fee (about 54 cents USD) for each new install over the first 1 million – this fee is charged to each user each year. Bar is taken. Importantly, app updates also count as installations. Since no major app goes more than a year without an update, this effectively means that any sufficiently popular app will pay 50 euro cents per user per year indefinitely, up from an initial $1 million. More than. These are not just apps. Third-party app stores also have to pay Apple 50 euro cents per user per year, and they don’t get the 1 million install discount like apps do.
Developers can avoid Apple’s steep cuts and restrictive rules, but they have to pay huge fees in return
All of this makes for a potentially expensive proposition. Developers can play it safe, staying inside Apple’s App Store and sticking with the old 30 percent cut and no installation fees if they want. Or they could free themselves from Apple’s hefty revenue cut and restrictive App Store rules, but have to pay hefty fees in return.
Here’s some extremely back-of-the-napkin math: Facebook has 408 million monthly users in Europe across all platforms – web, Android, iOS, etc. iPhones make up about a third of the mobile phone market in Europe. If one-third of those Facebook users have the iPhone app installed, Meta would pay Apple €67.5 million (about $73.4 million) per year just for Facebook. And there will be separate charges for WhatsApp, separate for Instagram, separate for Messenger, etc. That number is also only for active users. Meta will also have to pay for people who installed the app years ago and never opened it but still receive automatic updates.
For a larger company, the price may be worth it. Spotify has been waiting to get out of Apple’s 30 percent cut for years and as such, it hasn’t offered a way to subscribe or make in-app purchases of products like audiobooks in its iOS app. If Spotify were to convert a free user to a paying one through a third-party store without any revenue sharing, it would cost more than 50 euro cents every year. But it’s a gamble: Many users still won’t pay a dime, and Spotify will have to pay for them anyway. The company will need to decide whether the millions of dollars in download fees can be offset by profits from new subscriptions and purchases.
Fees on smaller apps are also particularly hard to hit. An app that goes viral can easily surpass 1 million installs, and since many apps don’t charge users upfront (or never do), they can quickly burn through a lot of cash. This could be a disastrous situation for briefly exploding social apps like Clubhouse or BeReal. They may have paid millions for their skyrocketing popularity – and then continued to pay millions for people sitting on unused phones.
There are two more complications to all this: A company has to launch a third-party app store, and then developers have to move their users over to that store. And Apple doesn’t make it easy for apps to move users from one store to another. The user must first install the new App Store, then uninstall the old version of the app downloaded through Apple’s App Store and finally, reinstall the app through the new App Store.
Developers who care about avoiding Apple’s fees will have to find a way to force users to make this effort. If the only way to download Amazon apps is through the Amazon Appstore (currently Android only), users will eventually find their way to Amazon’s website and figure it out – Amazon is a big draw that makes it worth the time. . But if Amazon remains available through Apple’s store as well, it’s hard to imagine anyone would bother.
This fee is “clearly one of the poison pills” in Apple’s plan
Apple’s fee may prevent competition from occurring altogether. Amazon currently does not give Apple any cut for purchases through its app because it only offers physical goods. Opening an app store would mean subjecting itself to millions of dollars in fees, on the one hand the success of its new store would be only hypothetical. It should come as no surprise that the first big App Store announcement comes from Epic, the company with its biggest titles yet – Fortnite —Completely missing from Apple’s App Store. This means there is no existing install base to migrate.
Critics of Apple’s practices have already begun to complain about the 50 euro cent fee. Epic CEO Tim Sweeney indirectly said Specified them as “junk fees”. Spotify CEO Daniels seemed to be teasing whether it’s worth getting upset about the new plan a post On X (formerly Twitter). “Imagine you have an active base of a hundred million users,” he asked, dangling the results of the thought experiment.
Hay and Basecamp exec David Heinemeier Hansson It has been told The fee is “clearly one of the poison pills” in Apple’s plan. But he thought for a company on Spotify’s scale, it would be worth it. “This is still much more beneficial than a massive 30% cut,” he wrote.
Apple’s justification for this 50 euro cent fee is that the company spends a lot of time and effort building the developer tools to make all this possible, and it’s the big apps that use its tools the most. In earlier eras of technology – with Windows and macOS – platform operators offered these tools for free because they recognized that it was third-party developers and their apps that made their platforms worth using. Today, Apple has realized something else: that developers need its platform more than any one developer. And so, even after the Digital Markets Act (DMA) broke Apple’s platform, we’re still stuck in a world of fees that gets sent back to Apple.
It is not necessary that the conversation is over. The European Commission will review Apple’s new rules after the DMA comes into force in March. If regulators find that something in Apple’s plan violates the law, they could push back. It seems like this fee is already one of the bigger issues that critics will point to.
Still, this is the structure Apple is introducing right now, and the possibilities for iOS developers and the ecosystem at large are huge. But first, one of them has to make the leap — and take on Apple’s multimillion-cent fee structure in the process.