When iOS 17.4 is released in March, the version of the update for eligible iPhones in the EU will bring major changes to iOS, Safari, and the App Store. Some of these changes could potentially cost Apple a lot of money. For example, Apple will allow third-party app stores and third-party in-app payment platforms to be available on the
iPhone after years of fighting for its walled gardens. And the “Apple tax” Apple collects from developers will have a lower range of 10-17% compared to the current 15-30%.
At first glance, it would appear that Apple's Services unit, Apple's second-largest business segment after the iPhone, would suffer a decline in revenue. But that may not be the case after all. First, the EU is only responsible for 6% of global App Store revenue, and Apple is creating new fees that will make up for cutting others. For example, in addition to the 10-17% commission Apple will collect from developers using its in-app payment platform, Apple will charge a 3% in-app purchase billing fee. If a developer chooses to use a third-party payment platform in the app, Apple does not collect any commissions and does not collect the 3% fee.
Apple's core tech fees in the EU will change the dynamics of the App Store for
Apple will also collect a “core technology” fee of 50 euros (0.54 cents) for each time an app is installed more than 1 million times from the App Store, third-party stores, web or the TestFlight testing service. According to
Bloomberg's Mark GurmanApple estimates that 99% of developers affected by the changes in the EU will see the amount they pay to Apple stay the same or decrease.
Spotify CEO Eks Slams Apple on X
But thanks to the “core technology” fee, Apple will actually collect revenue from apps that it never received a cent from before. Gurman uses Instagram as an example. If Meta gets 50 million installs per year in the EU, Meta will have to pay Apple $2.2 million per month, a check it has never had to write to Apple before. And that
upset Spotify CEO Daniel Ek, who wrote in a tweet“Spotify itself faces an untenable situation.”
The executive added: “With our Apple install base in the EU in the region of 100 million, this new tax on downloads and updates could send our customer acquisition costs skyrocketing, potentially multiplying them by ten. This is because we have to pay for each installation or update of our free service. or a paid application, even for those who no longer use the service. So where does this leave us? Under the new terms, we cannot afford these fees if we want to be a profitable business, so our only option is to stick with the status quo. This is precisely what we have been fighting against for five years.
“Basic technology fees” will negatively impact free or freemium app developers
Ek, who has been fighting the Apple tax for years, sums up Apple's actions by writing: “By inventing a new tax system to replace the old one, Apple is mocking the spirit of the law and the lawmakers who implemented it. have written. The EU recognizes exactly this for what it is and
stands firm, and does not let its work over the years be in vain. The world is watching.”
But the new “core technology” fees will hurt small developers the most. Developer Steven Troughton-Smith notes that a free app that gets 2 million installs will have to pay Apple $500,000 each year, leading him to write on Mastodan: “I don't think a developer of applications with free or freemium applications in its portfolio can accept Apple's new commercial conditions without risk of bankruptcy. And therefore, this makes this specific implementation of core technology fees infeasible.
A developer who achieved a few hundred thousand installs last year told Gurman To light up newsletter that with the new fees, there is no incentive to create an app for the iPhone. However, developers may decide to stick to the current 15-30% “Apple Tax” range if they promise not to use third-party payment platforms or be listed in third-party app stores . We're pretty sure Spotify's Ek thinks the more things change, the more they stay the same, or get worse.
