Two days ago, in reaction to a €500 EU DMA fine from April, Apple updated their rules for external payments in EU App Store storefronts, among other changes.

The reason for the fine

But why were they fined in the first place? Quoting from the fine announcement, this is what they should have allowed, in a nutshell:

Under the DMA, app developers distributing their apps via Apple's App Store should be able to inform customers, free of charge, of alternative offers outside the App Store, steer them to those offers and allow them to make purchases.

The problem; in January last year, Apple introduced their first set of changes to supposedly comply with the EU DMA regulation. The changes "allowed" external payments providers, but extra fees of 10-27% and reporting requirements made them barely financially interesting for developers. Additionally, they enforced scary-looking intermediate screens and restrictions that made external payment systems look unappealing to end-users.

Finally, they also lowered the (artificially high) prices of their own integrated payment flows in EU storefronts in order to out-compete the new external payment options before they were even established.

Needless to say, the EU did not like it.

The recent changes

Did Apple solve the problem two days ago, and does it now comply with the spirit of the DMA? I don't think so.

They made an already complex situation even more hideously complicated.

There are some improvements for developers, but they carry sizable grains of salt:

• If you're OK with tanking your app's discoverability potential in the App Store, and with disabling automatic app updates for users, you may save some of Apple's fees, thanks to a new and degraded "Store Services Tier 1" option with lower costs.
• It looks like you can now communicate about alternative payment options for free everywhere in-app, as long they are not "actionable" links. (I’m not entirely sure about this, I’m taking this conclusion from the exclusion from fees for non-actionable links in the “StoreKit External Purchase Link Entitlement (EU) Addendum”).
• If you're not a small business who is exempt from these fees anyway, and you have users who have long-running subscriptions, or who make payments after 6 months, you may save 2% "Initial acquisition fee" after 6 month's of a user's usage.
• Strict design and reporting restriction on outbound links URLs got lifted.
• The warning screens for linking out look considerably less scary, to the point of almost being neutral (see below).

However, the large picture remains the same:

1. Apple keeps charging significant fees of 10-20% and asks for complex procedures to integrate external payment flows, which combined with the fees of external payment providers, makes the option barely competitive with Apple's own offering.
2. Apple keeps its petulant attitude towards EU regulation. They clearly don’t want to engage in good faith to create a level playing field for app distribution & monetization. They propose hideously complex schemes and degraded experiences as a countermeasure to losing the profits stemming from their ecosystem power.

Meanwhile in the US

Just one month ago, developers of apps for the US storefront got a much better and simpler deal last month thanks to a judge's angered reaction to Apple's non-compliant behavior after a ruling in the Epic Games v. Apple lawsuit. Today, in the US, linking out to other payment providers, with clickable & actionable links, is simply allowed, without extra fees or restrictions. Spotify immediately made grateful use of this new provision.

My take on all this

I’ve been following the related interactions between Apple and regulators in the last years, and as you might have noticed, I fall in the camp that supports the intent of the DMA and equivalent ideas around the world.

Apple and Google, but mostly Apple, have too much power over all aspects of their respective ecosystems. They hold de facto monopolies over the huge markets established by their mobile operating systems. Markets which were perhaps niche and innovative 15 years ago have today become essential to the service industry globally.

I understand that they are owed some fee for providing their services and platforms, but until now, they have been able to charge whatever they want, raking in enormous profits. They charge fees on all sides: large markups on their devices (or Google Service licenses in the case of Android), one-time fees for developers, and commissions on all transactions related to apps. They have also established strong ecosystem lock-in effects which makes it nearly impossible for other marketplaces, operating systems, and payment service providers to enter the market. The result: less innovation from third-party developers and higher costs for consumers.

Regulatory force is warranted to open up these ecosystems for the public good.

Ethically, I’d compare it to the concept of a patent. A patent allows a company to profit exclusively from an innovation for a limited period of time (20 years or so), but after that, it is opened up so the world can freely build upon the innovation. Apple and Google should be given credit for having established these markets, and they have received plenty. Now, they need to give space for new ideas to flourish.

In this fight with the EU regulation, they seem to be testing boundaries, decreasing their defenses against profit loss just enough to hopefully be deemed compliant on paper, but not actually caring to help establish a competitive market for apps & app services.

The right direction?

In a competitive marketplace, sideloading apps and using alternative payment providers should be allowed to be as easy, convenient and affordable as using the default ones, or better. The fees and procedures that Apple continues to impose still don’t make this a reality. Therefore, I’m not convinced Apple will avoid another fine this time around.

Whatever the final outcome though, we can state that the process is painful.

At WTMG, we’ve been planning to build a new mobile app. I’d personally like to support the intent of the DMA by making use of the alternative options it has helped create, but this is not an easy decision. Apple tries its utter best to make alternative options look as unappealing as possible for all parties involved. Moreover, the rules are a moving target due to the legal back & forth, which does not help to make a go-to-market plan, especially for a super small team like us.

Small steps were taken in the right direction however. On the alternative marketplaces side, promising changes seem to be coming early next year, which will make them easier to use. I hope that with more dialogue (and perhaps fines), Apple will eventually concede to its responsibilities.