Spotify, Epic decry Apple terms under EU compliance

Big business bemoans the practices of bigger business.
5 March 2024

“Rotten Apples” by stephen.butler is licensed under CC BY-NC 2.0.

  • Spotify among companies complaining about Apple EU developer terms & conditions.
  • Anti-competitive practices make sideloading more expensive.
  • Software companies likely to keep working under existing Apple terms & conditions.

With iOS 17.4 due to be released in the coming week, 30 companies have penned an open letter to the European Commission, media groups, and lobby organizations, stating their concerns about Apple’s terms and conditions, which they claim will still leave the company in contravention of the EU’s Digital Markets Act.

To comply with the DMA, Apple is now allowing third-party app stores and the sideloading of applications downloaded independently. Developers will be given a choice between signing up to Apple’s new terms or sticking with the existing T&Cs, which the group claims is a “false choice.” The new terms, the signatories claim, will “hamper fair competition with potential alternative payment providers.”

Rotten apple terms and conditions illustrative image.

“Rotten apples” by fotologic is licensed under CC BY 2.0.

To aid developers in their choice, Apple provides a handy calculator to guide them through the myriad available options. Users in the EU select whether they will qualify for the App Store Small Business Program, what App Store fees they would pay, and the value of in-app purchases they predict users will pay – under new and old terms.

What will surprise absolutely no one is that developers will end up paying more money to Apple if they choose to allow their apps to be sideloaded than they currently pay under existing terms. They will also have the cost of running an app store, a customer support function, and a payment processor. For developers, keeping business as usual under Apple’s existing terms results in greater revenue. The only way to preserve income under Apple’s new terms with apps served from a third-party store is to raise the price that consumers pay.

This puts some of the more hyperbolic language of the open letter to the European Commission into context. It claims that “Apple is rendering the DMA‘s goals of offering more choice and more control to consumers useless.” Consumers will rarely have a choice to sideload an app or download it from a third-party store because no application developers will opt to make less money.

The letter states:

“New app stores are critical to driving competition and choice both for app developers and consumers. Sideloading will give app developers a real choice between the Apple App Store or their own distribution channel and technology. Apple’s new terms do not allow for sideloading and make the installation and use of new app stores difficult, risky and financially unattractive for developers. Rather than creating healthy competition and new choices, Apple’s new terms will erect new barriers and reinforce Apple’s stronghold over the iPhone ecosystem.”

Apple’s new terms do “allow for sideloading” – in this, the letter is incorrect – but its terms are deliberately anti-competitive. The company is indeed “[making] a mockery of the DMA and the considerable efforts by the European Commission and EU institutions to make digital markets competitive.”

Apple terms and conditions illustrative imagery.

Something rotten in the state of Apple? Suuuurely not? “rotten apple” by johnwayne2006 is licensed under CC BY-NC-SA 2.0.

It would be naive to believe that the signatories of the letter are beating a drum for consumers’ right to choose where they source their apps from. The motives of Epic Games, Spotify, Uptodown, et al. are as mercenary and cynical as Apple’s. They expected to make more money thanks to the DMA‘s imposition but have been thwarted, at least for now. The ‘Apple Tax’ payed by companies with apps on the App Store is a thorn in the side to shareholders dependent on Apple’s App Store.

For the next few years, European taxpayers will fund the inevitable legal battle they will wage on behalf of the likes of Spotify (2023 Q4 revenue €3.7 billion, €68 million in adjusted operating profits) and Epic Games (valued at $31.5 billion in 2023), so justice can be granted to these stalwart defenders of consumer choice.

Under the Digital Markets Act, violators may be fined up to 10% of worldwide global turnover, which would amount to approximately $38 billion plus change. Likely for Apple, it won’t come to that, but as ever, Cupertino can afford its lawyers’ salaries for a few years until it can find ways to recoup the costs of operating in a competitive market – at least, in the EU. Developers and consumers in the US, UK, and elsewhere can look forward to business as usual.

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