Apple is losing ground in its battle to protect the App Store in Europe
On Tuesday, Apple announced a significant change in its efforts to maintain control over its App Store on iPhones and other devices in Europe. The company stated that developers will now have the freedom to distribute their apps directly to consumers.
Apple announced the changes to comply with the European Union’s Digital Markets Act (DMA), which came into effect last week. The changes could undermine the high profit margins and steady revenue stream that Apple has come to rely on from its App Store, where it charges developers fees of up to 30 percent.
The changes, which apply only to the European Union, come amid ongoing criticism from competitors that Apple’s compliance efforts have failed.
Starting this spring, software developers operating in Europe will be able to distribute applications to EU customers directly from their own websites instead of the App Store.
“While the App Store can’t be milked as freely, it’s likely to remain a significant cash cow for some time because of the conditions attached to Apple’s peace offer,” said Susannah Streeter, CFO. Hargreaves in Lansdowne.
Developers must still meet the conditions set by Apple and be authorized developers. Apple has also implemented a “core technology fee” of 50 cents per user account annually, even if developers choose not to use Apple’s App Store or payment system.
The goal of the DMA is to curb the activities of Apple, Amazon, TikTok owner ByteDance, Meta Platforms, Alphabet’s Google and Microsoft and create a level playing field for smaller competitors and ultimately more competition for Europeans.
“To accommodate the DMA changes, EU users can install apps from alternative app marketplaces in iOS 17.4 and later. Users can download the alternative marketplace app from the marketplace developer’s website,” Apple said on its website. iOS refers to the software platform that powers Apple’s iPhone and iPad devices.
The opening of Apple’s ecosystem in Europe, which the company has long guarded as a highly profitable “walled garden,” comes at a sensitive time for the tech giant.
The iPhone maker is struggling with shrinking revenue and weak demand for its smartphones in China. In January, Microsoft overtook Apple as the world’s most valuable company, and investors saw Apple trailing its Big Tech rivals in the race to dominate artificial intelligence technology.
Apple shares were up 0.6% on Tuesday afternoon, cutting the 2024 loss to 10%.
The changes, announced Tuesday, include allowing developers to set up alternative app stores to offer a catalog made up solely of the developer’s own apps, effective immediately.
Developers can choose how to design in-app offers, discounts, and other offers when they direct users to complete a transaction on their website instead of using Apple’s model.
Under pressure from regulators and the DMA, Apple last week took a step back from its dispute with Epic Games, allowing it to offer its own game store for iPhones and iPads in Europe. DMA violations can cost companies up to 10% of their global turnover.
Apple has also said it will appeal a 1.84 billion euro ($2.01 billion) EU antitrust fine imposed on it last week for restricting competition from Spotify and other music streaming rivals through restrictions on the App Store.
