Apple has introduced a Unity-style download fee for developers. Why did this happen and who does it concern?

Let's start with history, with the law.

What is the law?

We are talking about the Digital Markets Act (Digital Market Act or DMA).

It was adopted in the European Union in November 2022, and entered into force in May 2023. From the point of view of European officials, he should improve the situation in the digital platform market and make it more competitive.

"The law is being adopted so that we, the users, have a wide range of safe products and services online, as well as so that those companies that operate in Europe can, as well as offline, count on free and fair competition," explained Margrethe Vestager, head of the EU Antimonopoly Authority) back in 2020, when DMA was just introduced.

The law focuses on software giants, whose digital platforms can influence which applications and services are present on the market, as well as determine the rules of their operation. The authors of the law called such companies "gatekeepers".

Which companies fall under the DMA?

Initially, there were no specific criteria for who should be classified as "gatekeepers" (at least in the public field). It was only stipulated that the gatekeeper company is recognized as the one that:

• It is economically strong and has a significant impact on the internal market of the European Union;
• She is strong as an intermediary, connects a large number of businesses with a wide audience;
• It has firmly established itself in the market (in this case, it meets the two criteria mentioned above for three consecutive years).

However, in September 2023, after the law came into force, details appeared. Based on them, the gatekeepers began to record those companies whose:

• three—year turnover is more than 7.5 billion euros within the European Economic Area (or whose market capitalization is at least 75 billion euros);
• whose pool of customers over the past year has amounted to more than 10 thousand companies, and MAU is more than 45 million Europeans.

Along with specific criteria, the names of companies that fall under the law became known:

• Alphabet (Google Search, Google Maps, Google Play, Google Shopping, Google Ads, Chrome, Android, YouTube);
• Amazon (Amazon Marketplace, Amazon Product Advertising);
• Apple (App Store, Safari, iOS);
• Bytedance (TikTok);
• Meta (Facebook, Instagram, Facebook Marketplace, WhatsApp, Messenger);
• Microsoft (LinkedIn, Microsoft Windows).

What obligations did the DMA impose on the "gatekeepers"?

The FAQ available on the website of the European Commission (the highest executive authority of the European Union) indicates ten provisions that companies are required to comply with. However, it also stipulates that this is only part of the list.

So, according to the DMA, "gatekeepers" should:

• allow end users to easily uninstall pre-installed applications. Or end users should be able to change the default settings in operating systems that lead to Gatekeeper products and services. Plus, there should be a selection screen when it comes to using key services.;
• Allow end users to install third-party applications or app stores that use or interact with the Gatekeeper operating system;
• allowing end users to unsubscribe from the main services of the Gatekeeper platform is as easy as subscribing to them;
• allow third-party companies to interact with gatekeepers' services;
• to provide advertising companies with access to analytical tools and information necessary to conduct an independent review of advertisements placed by Gatekeeper;
• to provide companies with the opportunity to promote their offers and conclude contracts with customers outside the platform owned by Gatekeeper;
• provide companies with access to data obtained as a result of their activities on the platform;
• stop using company data after they leave the gatekeeper platform;
• stop ranking your own products and services in a more favorable light relative to the products and services of third-party companies;
• stop obliging application developers to use their own solutions (including payment services and identification tools) to place the Gatekeeper in app stores;
• stop tracking the actions of end users outside the main gatekeeper platform for the purpose of advertising targeting without obtaining actual consent from the end user.

Since the publication of the list of "gatekeeper" companies, they have been given six months - until March 2024 — to implement the requirements. In case of violation of the DMA, the European Commission has assumed the right to impose a fine on the "gatekeeper" — up to 10% of the annual turnover of the company. The repeated fine is even higher — up to 20% of the annual turnover.

Actually, Apple, in order to avoid a fine, has made a number of innovations.

By the way, even before the adoption of the final version of the law, she opposed the DMA. The company stated that the EU's desire to ensure diversity in the market would have the opposite effect. That is, the law will hit user safety and product diversity.

What innovations has Apple announced?

In total, the Apple company announced more than 600 API innovations related to iOS, Safari and the App Store due to the need to satisfy the European regulator. Let's focus on the key ones:

• Users will be able to download apps from alternative app stores within iOS;
• alternative stores can be downloaded and installed from the websites of their developers;
• alternative app stores will be given access to data about the app catalog, purchases and user subscriptions;
• developers will be able to use alternative payment systems and post links leading to an external web page with the store (however, it will not be possible to immediately offer both Apple's in-game payment solution and a third-party solution/link within the same showcase).

Important: the new features apply only to those applications that are available and operated in Europe.

By Europe, Apple means those 27 countries that are officially part of the European Union today. That is, from Germany and Luxembourg, which became part of it in 1957, to Croatia, which joined it in 2013.

So what's the caveat?

Apple says that the things that DMA requires create additional risks for users and developers. The company believes that they have become more vulnerable to malware and various scams.

In this regard, the company introduced, firstly, a pool of preventive measures, which includes:

• shortcuts in the App Store informing you that an application uses alternative payments;
• alerts inside applications that notify users that the transaction will be made not by Apple, but by a third-party service;
• a new approach to application review, the task of which is to check how correctly developers communicate information about transfers through third—party payment systems to users.

Secondly, Apple has taken real measures to protect users. Among them:

• introduction of a review for any iOS applications, regardless of the distribution channel (partially automated process, partially occurring in manual mode);
• monitoring applications during installation from third—party sites (the purpose of checks is to identify whether it is hacked and whether installation is taking place from an authorized web browser);
• authorization of app stores;
• monitoring applications after installation (if an iOS application contains malicious code, it will be blocked).

And what does the collection have to do with it?

This is another, but in this case already a fundamental nuance that should be taken into account by all teams that turned out to be interested in Apple's innovations.

As part of the announcement, Apple has new commercial terms. This is not an update of the old ones, but an additional option. It works like this:

• if the developer is satisfied with the previous experience with Apple and he is not going to publish applications outside the App Store and its payment system, then he retains the same conditions and nothing changes for him;
• if a developer working in the European market wants to distribute his iOS game on alternative platforms and/or monetize it using alternative payment services, then he must accept the new conditions.

The new conditions include:

• reduced commission of 10% for iOS apps and for subscriptions after the first year, as well as 17% for digital goods and services;
• A 3% payment processing fee for iOS apps downloaded from the App Store (developers may not use the option using third-party payment methods);
• The so—called CTF (Core Technology Fee) is a fee for key technology amounting to €0.50 per download exceeding the limit of one million installations per year.

For Apple, it does not matter whether the developer who signed the new terms uses third-party stores/payment systems or not. He can still distribute games exclusively through the App Store. But at the same time, he will be obliged to pay Apple half a euro for each installation above the specified limit.

Important: Only the first app download is counted per year. Updating it, reinstalling it to another device, installing it from another app store are not taken into account. However, in the next reporting period, the first such action will be regarded as an installation, and then again — until the third year, it will be skipped.

To calculate the amount of the fee, Apple has published a calculator.

The company also estimated that the transition to new commercial terms will allow 99% of developers to reduce costs. CTR will be paid by less than 1% of developers working in Europe.

Apple explains the introduction of new conditions with the desire to demonstrate the importance of the company's efforts that it invests in the development of tools, technologies and services that "allow developers to create and share innovative solutions with people around the world."

Simply put, Apple wants to convey to European officials that it is the closeness of the platform and the 30% fee that made it possible to create a comfortable ecosystem, without which it would not be possible to create products that are significant for the market.

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Developers can test new features as early as January 25 as part of the beta version of iOS 17.4. The changes announced by Apple will directly take effect in March this year after the official release of the new version of iOS.