Are you a founder, indie developer, or business developer responsible for navigating the complexities of app distribution and payment processing? If so, understanding the evolving landscape of Apple’s App Store policies is crucial for your success. In recent years, these policies have faced increasing scrutiny from regulatory bodies around the world, leading to significant changes. These developments reflect a growing effort to challenge Apple’s dominance in app distribution and payment processing. Here’s an overview of how various laws and rulings are transforming the App Store landscape:

Ongoing Regulation Against App Store Policies

  • The Netherlands: On January 14, 2022, the Netherlands Authority for Consumers and Markets (ACM) mandated Apple to address what it considered unreasonable conditions for dating app providers. This directive aimed to create a fairer environment for developers in the Netherlands by mitigating excessive fees and restrictive practices.
  • South Korea: In mid-2022, South Korea enacted significant changes under the Telecommunications Business Act. This regulation requires major app stores, including Apple’s, to permit alternative payment methods. The goal is to reduce Apple’s control over in-app transactions and encourage more competition.
  • United States: On January 16, 2024, the U.S. Supreme Court made a landmark ruling in the ongoing legal battle between Epic Games and Apple. The decision underscored the need for more competitive practices in the app marketplace, challenging Apple’s tight control over app distribution and payment processing.
  • European Union: Earlier this year, the European Union intensified its scrutiny of Apple’s practices. The European Commission imposed fines exceeding €1.8 billion on Apple, primarily concerning its App Store rules for music streaming providers. This action highlights broader issues under the Digital Markets Act (DMA), aimed at curbing anti-competitive behavior and fostering a fairer digital marketplace.
App Store

Photo by James Yarema on Unsplash

Breaking the Monopoly: New Distribution and Payment Options

In response to these regulatory pressures, Apple is adjusting its policies, particularly in the DMA in EU, where developer can access to alternatives options by agreeing to the new Alternative Terms Addendum in App Store Connect. Here’s a look at the new policies:

App Distribution

  • Direct Distribution: Developers can now distribute apps directly from their websites. They to need meet specific notarization requirements to maintain platform security.
  • Alternative App Marketplaces**: Developers can distribute apps through alternative marketplaces.

Alternative Payment Methods

  • Payment Service Providers (PSPs): Developers can integrate alternative payment processors within their apps, allowing users to complete transactions without using Apple’s payment system.
  • Linking Out for Purchases: Developers can direct users to external webpages to complete purchases. These link-outs can include promotions and discounts, especially for EU users.

New Terms for Developers

To utilize these alternative payment options, developers must adhere to several requirements:

  • StoreKit Entitlements: Developers need to use StoreKit External Purchase Entitlement or StoreKit External Purchase Link Entitlement.
  • Fee Structure:
    • Reduced Commission: Developers will pay a reduced commission of 10% (for most developers and subscriptions after the first year) or 17% on digital goods and services.
    • Payment Processing Fee: Using Apple’s payment processing incurs an additional 3% fee. Alternative PSPs or link-outs do not incur extra fees from Apple.
    •  Core Technology Fee (CTF): For apps with over 1 million new installs in a year, a €0.50 fee per additional install applies.
Frustrated indie app developer
Generated with AI ∙ 22 August 2024 at 10:49 am

While indie developers and those with lower transaction volumes might be drawn to alternative payment options due to reduced commissions, these options can introduce additional complexities. As a result, many indie developers may prefer the simplicity of In-App Purchases (IAP). On the other hand, larger developers with the resources to manage payment operations might be less inclined to switch. The higher overall costs associated with Apple’s fees might outweigh the potential savings from reduced commissions with an alternative payment provider.

Ongoing Regulatory Pressure

On June 24, the European Commission published a preliminary view that Apple’s App Store rules breach the Digital Markets Act. This emphasizes the need for reform and highlights concerns that Apple’s fees and policies are excessively burdensome for facilitating transactions.

The global regulatory push against Apple’s App Store policies signifies a major shift in the mobile app industry. As governments and regulatory bodies continue to challenge Apple’s practices, the industry may see a more competitive and developer-friendly environment emerge.

I’ll keep you informed about this topic in the coming months as the landscape continues to evolve.

Gustavo Rubio

Senior Product Manager – App
Me

With over 7 years of experience as a Product Manager in the mobile app industry, I have worked across various verticals, including utilities, social media, gaming, and mental health. I enjoy working with data, user research, APIs, and UX design to build amazing apps that delight users.

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