Starting in March this year with the release of iOS 17.4, Apple will allow third-party app stores on iOS for the first time. It will also allow developers to opt out of Apple’s in-app payment system. This means that iPhone users won’t be limited to getting apps solely from the Apple App Store, marking a major shift in how apps are distributed on iPhones. Apple has made such a significant change in response to the Digital Markets Act (DMA) in the European Union.
Apple confirms new fee structure for EU developers
Before the implementation of DMA, Apple charged a 30 percent commission rate for most App Store purchases, like app downloads and in-app items. However, smaller developers earning less than $1 million yearly were allowed to pay just 15 percent.
In the EU, Apple is changing the fees for iOS apps. Developers can now choose between a 17 percent commission (plus 3 percent if using Apple’s payment system) or a 10 percent commission (plus 3 percent) for small businesses, a significant cut from the previous 30 percent.
In addition, there is something called the Core Technology Fee (CTF) of €0.50 per annual install for high-volume apps (over one million installs per year). The CTF is charged per customer account for the first install within a year. Most developers won’t pay this fee, as it applies to a small percentage of apps.
Developers can now distribute apps outside the App Store, but the CTF still applies if they reach the volume threshold, regardless of the marketplace. The monopoly on in-app purchases is no longer there, with a 3 percent fee if developers choose to use it. Alternative app marketplaces must also pay the CTF for downloads. In addition, Apple will also have a stand on which app stores can be made available on its App Store.
Nikita Bier, co-founder of social-media start-ups Gas and tbh, said if a developer makes $10 million in sales, Apple’s cut under the new structure would be $6.2 million annually. After accounting for assumed expenses and taxes, the developer’s take-home amount would be $2 million, which is only 20% of their sales.
Bier highlighted that for many apps, especially those making less than $0.57 per user, the new fee structure may result in negative earnings, meaning the developer would owe money to Apple rather than making a profit. This has led Bier to state that, given these conditions, they would refrain from launching an app in Europe.
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