No serious business wilfully surrenders a big chunk of revenue without a fight, least of all Apple.
This week, Bloomberg reported that Apple engineers are working on a way to allow alternative app stores and even sideloading on iPhones and iPads. This would only apply to European customers, and is intended to satisfy the EU’s digital markets act, which companies must comply with by 2024.
While it’s tempting to believe that Apple has – for once – read the room and realised that it should cede some control, that’s not what’s happening here. Nations like Japan, the Netherlands and South Korea have already introduced laws designed to force Apple into opening up its stores, and the UK’s regulatory body recently launched its own investigation into the Apple-Google “duopoly”.
With the EU legislation coming up first, it appears Apple is just getting ahead of the game before other nations follow suit. So let’s skip ahead and assume that the EU legislation is here, and the same net is closing in from other governments. What does Apple do?
There’s already precedent for this in South Korea. In response to a law that required platforms to offer alternative payment providers, Apple’s guidelines, which you can read here, state that developers must follow a new set of rules. (Thanks to analyst Talia Shmuel for the heads-up).
Developers must first submit an entitlement request form for permission to use an alternative payment provider. Then they must submit a new Korea-only binary that contains that functionality using one of four pre-approved payment providers. Using your own payment system requires separate approval.
Then, when someone does want to use those systems, developers must warn customers – using scary, Apple-mandated language – that they are about to make a transaction not processed or secured by Apple, and refunds may not be possible.
And then, the punchline: Apple will charge a 26% commission anyway. Oh, and developers must also submit an additional sales report every month, so that Apple can account for every penny spent using alternative payments.
It was the same with dating apps in the Netherlands earlier this year. The details are all right here. (Apple superfan Tim Sweeney described all of this rather memorably: “Apple knows their actions are a sham. The world knows their actions are a sham. Apple knows the world knows their actions are a sham. Yet Apple continues the sham.”)
Now, let’s be a little more charitable for a moment and acknowledge that the problem with the Netherlands and South Korean examples could simply be weak, easily bendable legislation.
But really Apple’s interpretation of these laws tells you everything you need to know: when it is forced to allow alternative app stores, it’ll make those third party stores jump through all kinds of weird hoops, and after that it will find a way to charge a commission anyway.
It’s right there in Bloomberg’s report, too: “Apple is discussing the idea of mandating certain security requirements even if software is distributed outside its store. Such apps also may need to be verified by Apple — a process that could carry a fee,” it reads.
Could carry a fee, you say? Let’s assume it’ll be around 30%, then.
On top of all this chicanery, there’s deeply ingrained customer behaviour to change if alternative app stores are to really change the landscape. Dedicated, high-spending players could jump ship to get IAPs at a reduced rate – as we’re seeing with the rise of web shops run by companies like Xsolla. But really, most typical customers will stick to what they know and trust, and that’s the App Store.
So let’s not break out the bunting just yet. The App Store won’t undergo some great liberation overnight; Apple will fight this stuff every step of the way.