Apple today announced changes to its business terms for apps in the European Union, following close collaboration with the European Commission. These changes resolve Apple’s disagreements with the Commission over business terms and alternative distribution. They also reduce complexity by moving every developer that distributes apps in the EU to a single set of business terms. Developers can sign the new terms today, and changes will go into effect on October 1. [...] Under the new terms:
For App Store apps using Apple In-App Purchase, the commission will be 26 percent. For the vast majority of developers, including those in the App Store Small Business Program, Mini Apps Partner Program, or Video Partner Program, and for auto-renewing subscriptions after their first year, it will be 15 percent.
For App Store apps using alternative payment processing, the commission will be 20 percent. Developers in the programs mentioned above will pay a reduced rate of 10 percent.
For App Store apps that link out of the app to complete purchases, the commission will be 15 percent. Developers in the programs mentioned above will pay a reduced rate of 10 percent.
For apps distributed via alternative app marketplaces or the web, Apple will charge a 5 percent Core Technology Commission.
This is a near-total victory for Apple. The only real concession is that for apps in the App Store using Apple’s own payment system (the default), the main commission drops from 30 percent to 26 percent in the EU. That’s the deal the EU squeezed out of Apple for EU developers: going from 30 to 26 percent for purchases and the first year of subscriptions.
All apps have to pay at least the 5 percent Core Technology Commission, even if they’re distributed outside the App Store. I could collect a lot of claim chowder from people who told me that Apple’s CTC was never going to pass muster. Maybe it wouldn’t have under the old EC regime of the crusading hypocrite Margrethe Vestager and the buffoonish Thierry Breton, but the European Commission is under new, more temperate leadership.
Ben Thompson, in a subscriber-only Stratechery update, works out the implied values from these fees:
- The implied value of Apple’s APIs is 5% of an app’s revenue
- The implied value of App Store distribution is 10% of an app’s revenue
- The implied value of in-app payment APIs is 5% of an app’s revenue
- The implied value of in-app purchase using Apple’s payment processing is 6% of an app’s revenue
Now take these numbers with a grain of salt — given the fact the European Commission appears to have blessed these figures, they were almost certainly a matter of negotiation — but they do seem directionally correct: being in the App Store is the most valuable (thus 10%), and then 5% was ascribed to Apple’s APIs in their various forms; of these, the “Core Technology Commission” is obviously more valuable than the APIs used for in-app payment processing by third parties, but you can see how they landed at the same spot.
The interesting number is the implied 6% for Apple’s payment processing. The fully loaded cost for credit card fees — which have both a swipe fee and a percentage fee — refunds, disputes, etc. is pretty close to 6%; in other words, it appears that the European Commission has decided that Apple shouldn’t make anything for actually charging money. And again, I can see how they got there: anyone can charge money, but Apple did actually make the various APIs developers use, along with the App Store.
The 6 percent no-profit fee for payment processing is where the difference between the global 30% and the new EU 26% falls. Given its druthers, it seems clear Apple would charge 10%, not 6%, for payment processing, and give itself some margin on payment processing.
Don’t take my word that this agreement is a sweeping victory for Apple — with the company conceding only the reduction from 30 to 26 percent for App Store payments — and a capitulation by the EC. Here’s Epic Games, posting on Twitter/X:
Apple announced new junk fees in the EU that do nothing to open up the mobile app ecosystem to competition, as required by Digital Market Act. [sic] [...]
The law makes it clear that Apple must allow developers to offer link outs to the web for purchases “free of charge” and has to allow “effective use” of competing stores. Apple’s terms deliberately violate the Digital Markets Act. If the Commission accepts the terms and drops their ongoing enforcement actions, the law will become meaningless and consumers and developers will not experience the benefits it was designed to provide.
I don’t think Epic understands that the Commission has accepted these terms, and they’re a result of negotiations. It’s over.
Another way to see how clearly this is a win for Apple is to go back and imagine an entirely different DMA. Consider if the DMA had simply stated that 30 percent is too high a commission for app stores on “gatekeeping” platforms, and the one and only purpose of the DMA was to set a new, more reasonable maximum commission rate. If that had been the case, there’s no way the rate would have been 26 percent. It almost certainly would have been 20 percent at the most, perhaps something more like 15 percent. Thanks to the DMA’s sprawling scope, complexity, and overreach, Apple came out of this conceding only 4 percent of the App Store’s 30 percent commission, and no reduction at all to the 15 percent for subscriptions after the first year.
The very funniest thing Apple could do now would be to drop the baseline commission everywhere else in the world from 30 to 25 percent.