Apple’s App Store Adjustments for the EU Market

Apple’s Core Technology Fee: Innovation tax or clever monetization? 

This January 2024 article covers Apple’s initial EU App Store changes following the Digital Markets Act. The fee examples below describe that announcement, not current terms. Apple’s current EU developer guidance describes later changes, including the replacement of the Core Technology Fee. Check the agreement applying to the app before modeling acquisition economics.

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Here’s a breakdown of what’s new about the App Store in the EU

The initial announcement offered alternative business terms and a per-install Core Technology Fee. The following list preserves the 2024 discussion of that proposal. It should not be read as the fee schedule now available to every developer; the relevant territory, transaction type and current agreement matter.

Dissecting the Changes:

• Tiered Commission Model: Apple’s offering developers a bit of a breather with commission rates now pegged at either 10% or 17%, based on certain conditions. This is a significant drop from the erstwhile 30% standard, aimed at giving smaller developers a leg up.
• Payment Processing Choices: For the first time, Apple’s allowing a 3% fee for those sticking with its payment processing system, with the door open for developers to seek alternatives.
• Core Technology Fee: This new fee, set at €0.50 per first annual install after crossing the 1 million downloads mark, is a curveball for developers, especially the ones whose apps have a wide reach. It’s a factor that could recalibrate strategies for app distribution and monetization. Hyper Casual gaming apps will have to invest in rethinking their strategies. Cheap CPIs have just become a lot more expensive!
  

So, what’s the impact of all this?

Some would call Apple’s strategy a chess move, in response to the DMA’s push for a more competitive and innovative digital ecosystem. By tweaking its commission structure and offering payment processing alternatives, Apple is trying to stay attractive to developers amid growing calls for market openness. Yet, the Core Technology Fee is a wild card, potentially reshaping how success is measured and managed in the app world.

It’s not a secret there’s a lot of buzz about whether these changes truly align with the DMA’s vision of an open digital market. The fixed per-install fee, in particular, raises questions about whether it might inadvertently stifle the exploration of alternative app distribution avenues, thereby limiting market diversity.

Now, it’s up to the EU’s team to decide if Apple’s changes are fair or if they’re just a way to keep controlling the market. This isn’t the end of the story. As the EU looks closer at Apple’s moves, we’ll keep an eye out and let you know what happens next. It’s a tricky situation, and figuring out if Apple is playing by the rules isn’t straightforward.

Now, what’s the bottom line of this?

For an app team, the decision is whether a distribution or payment option improves the customer journey and unit economics after applicable costs and operational work. Use current terms and a documented forecast, then test the visitor-to-purchase path. A new marketplace option does not guarantee discoverability, installs or commercial success.