The iPhone app ecosystem is about to receive the biggest change since the launch of the App Store in 2008. Apple made an announcement regarding how it plans to change the rules for developers releasing software for iOS in the European Union in response to the Digital Markets Act (DMA) arriving in March.
Third-party app stores will finally be allowed on iOS for the very first time, breaking Apple’s longstanding tradition of sole distribution. These changes are set to arrive with iOS 17.4 in March.
Users in the EU and on iOS 17.4 will be able to download third-party marketplaces from that marketplace’s website.
In the past, third-party applications could be sideloaded on Apple devices through the act of jailbreaking. The most famous example of distribution outside of the App Store includes Installous, which would let users pirate applications they would normally have to purchase.
Approval Process Still Exists
Even with the new changes, third-party marketplaces pass through Apple’s approval process. However, once you download one, you need to provide explicit permission to download apps on the device. After this, you can download anything–including apps that normally violate the guidelines of the App Store. What’s more, you can set a non-App Store marketplace as the default on the device.
Meanwhile. developers can choose to use Apple’s payment services or integrate a third-party system without paying Apple additional fees. If the developer desires to remain with Apple’s in-app system, they must pay a 3% processing fee.
Apple is still planning to keep close tabs on the distribution of apps. Every app must be “notarized” by the company, and third-party marketplace distribution will still be managed by Apple’s systems. Developers can only distribute a single version of the app across different stores, and they will still need to abide by basic platform requirements like malware scans.
Commission Rate Changes
In the EU at least, developers might not have to pay commissions to Apple for their software going forward. Apple wants to make changes to its fee structures, but developers will now have the choice to work within the confines of these new business terms or continue distribution through the App Store as usual.
Under these new terms, apps distributed through the App Store using alternative payment systems must now pay a 17% commission (rather than 30%) on digital goods and services. This commission rate falls to 10% for any apps qualified for Apple’s reduced “small business” rate. The additional 3% fee applies for developers choosing to use Apple’s payment processing.
The company is also introducing a new Core Technology Fee that charges developers €0.50 (around 54 cents) per annual app install. Yet, this fee will only apply after 1 million annual installs in the EU. Apple has estimated that over 99% percent of developers will not pay this fee. Rather, it is meant to “reduce or maintain the fees they owe to Apple.”
In addition to opening the floodgates to alternate app stores and payment systems, Apple is also going to support alternative browser engines to WebKit. This means that users can choose alternate browsers to install when they first open Safari in iOS 17.4. The App Store itself will finally allow global game streaming services, which were previously banned. NFC payments in third-party apps will also be supported as announced by the European Commission.
Impact of the DMA
These changes will be taken advantage of by developers who have expressed criticism over Apple’s tight grip on iOS app distribution. Spotify is one of the best examples, but it announced plans to bring in-app purchases back to the iOS app in order to let users purchase audiobooks and upgrade subscriptions in the EU after the DMA effect comes into play. However, it remains unclear if the company will be happy to pay a 17% commission to Apple if it is using an alternative payment processing system.
Back in 2022, the DMA was passed, and represents the EU’s strongest attempt to shatter the anti-competitive practices of Big Tech, referred to by the regulation as “gatekeepers.” The EU designated Apple as a gatekeeper back in September 2023, listing the App Store, iOS operating system, and Safari browser as “core platform services” that need to comply with the DMA’s rules.
Although the regulation is broad, it includes obligations around allowing users to install third-party apps and marketplaces, uninstalling stock apps, and changing default services. It also allows messaging services the power to work interoperably with rivals and bans gatekeepers from ranking their own products higher in app stores than third-party rivals or requiring app devs to use the in-app payment system of gatekeepers.
In addition to designating the App Store, iOS, and Safari as core platform services, the European Commission also opened an investigation into whether to include iMessage.
Under the DMA, the European Commission designated not just Apple, but also Amazon, Meta, Microsoft, ByteDance (the parent company of TikTok), and Alphabet (the parent company of Google) under the DMA. Several Big Tech companies have publicly announced upcoming changes to services as a result of the regulation. In addition to iOS, the Android operating system has been listed as a core platform. However, it will probably need to make fewer changes than iOS seeing as how it already allows third-party app stores and sideloading.
Apple has continued taking its share of the pie when it’s had no choice but to allow third-party payments in the past. For example, when it was ruled in the US that Apple had to allow outside payment links, the company said it would continue charging a 27% commission. It has taken a similar approach in the Netherlands and South Korea.
