Unpacking Apple's Latest App Store Policy Changes: What You Need to Know

EU App Store reforms introduce alternative platforms and payment methods, reducing Apple's control. On the other hand, US discussions, driven by legal actions, advocate for lower commissions and more payment options.

A Glimpse into App Store Adjustments

Legal and regulatory shifts across various regions have compelled Apple to make noteworthy modifications to its App Store policies. These adjustments are designed to:

• Expand payment processing options for developers.
• Adjust Apple's commission rates in response to new legislation and market dynamics.

How Do the New App Store Changes Affect Your Revenue Model? ??

Global Overview ??

1. Standard Commission: For developers not part of the Small Business Program, the standard commission remains at 30% on digital goods and services, with a reduction to 15% for subscription services after the first year.
2. Small Business Program: This Program continues to support smaller developers by lowering Apple’s commission to 15% for those whose annual revenue from all apps is under $1 million, fostering growth and increasing net revenue.

Until now, Apple mandated that all in-app purchases of digital goods use Apple Pay, ensuring a commission for Apple but limiting options for developers. This policy, central to Apple's control over iOS transactions, has been challenged, leading to significant policy shifts in the EU and discussions in the US. Below are the regional changes:

Regional Differences: US vs. EU ????????

Developers who distribute apps in the US:

External purchase link is allowed such as third-party payment links, the commission might be subjected to either a 12% or 27% commission by Apple, depending on specific criteria:

• For Small Business Program Participants: In the US, Small Business Program participants can choose to use third-party payment links and pay a reduced commission of 12% instead of the standard 15%.
• For Non-Participants: Developers who exceed the Small Business Program's revenue threshold are subject to a 27% commission rate for transactions made via third-party payment links.

Developers who distribute apps in the EU:

Apple has introduced a new commission structure and fee system for the App Store, reflecting significant changes aimed at complying with the Digital Markets Act. Here’s how it breaks down:

1. Reduced Commission Rates: Developers now pay a commission of 17% on app sales, dropping from up to 30%. After the first year, this further declines to 10%. Small Business Program participants enjoy a 10% commission as well.
2. New Fee Structure: In addition to the commission rates, Apple has introduced two new charges:

• A 3% charge for in-app purchases made through Apple’s system.
• Core Technology Fee (CTF): A €0.50 fee per app install for apps with over 1 million downloads in 12 months.

3. Sideloading and Alternative Payment Options: With the new regulations, developers have more flexibility in distributing their apps and choosing payment systems. They can now opt for sideloading and use alternative payment options without being bound to Apple’s In-App Purchase system.

4. Notarization: Apple has introduced a "Notarization" process for apps that don't come through its store, focusing on platform integrity and protecting users from security risks like malware. However, Apple notes that it has less ability to address other risks associated with these apps, including scams and fraudulent activities.

Purchase Journey for Users ?

Let's explore how the purchase experience could vary across different scenarios.

EU users purchase in App Store:

When EU users purchase a digital good or service for In-App Purchase (IAP), they have three options for payments:

1. Using Apple’s Payment System (Apple Pay):

?? Users who opt for an In-App Purchase (IAP) via Apple's system are subjected to a commission rate of 17% that the developer pays.

?? An additional 3% fee is incurred for using Apple's payment processing.

?? For developers enrolled in the small business program, the commission is reduced to 10%, with the 3% payment processing fee still applicable.

2. Using other payment methods within the app (Third-Party):

?? Users choosing an IAP can select a third-party payment option integrated via mobile SDK (transaction made within the app).

?? The commission from third-party providers can vary from 2%-4% for each transaction.

?? This selection enables users to complete the purchase within the app, avoiding Apple's additional In-App Purchase fees.

?? Both purchases through Apple Pay and through third-party payment (mobile SDK) are completed within the app. The difference is that Apple Pay only requires a double-click, while third-party payment (mobile SDK) requires entering the card number.

3. Using the Redirect Link (Outside of Apps):

?? Users selecting an IAP are redirected to an external website via a link.

?? The commission from third-party providers can vary from 2%-4% for each transaction.

?? There is no additional Apple fee for this method since it bypasses Apple's payment system.

4. Transaction completed

EU users purchase in Alternative Store

When purchases are made through an alternative app store within the EU, the commission structure may vary, dependent on the agreements between the app developer and the alternative store provider.

Importantly, if apps leverage Apple's services or infrastructure, a Core Technology Fee is applicable. This ensures that apps contributing significantly to the volume of downloads bear a portion of the infrastructure costs.

US users purchase in App Store:

When US users purchase a digital good or service for In-App Purchase (IAP), they have two choices for payments:

1. Using Apple’s Payment System (Apple Pay):

?? A commission rate of 30% is applied, with a reduced rate to 15% for eligible small businesses under the Small Business Program.

2. Using an External Purchase Link (Third Party):

?? Directs users to the developer's website for purchases, subject to a 27% commission by Apple for transactions made through this method, plus the commission from third-party providers vary from 2%-4% for each transaction.

3. Transaction completed

Why This Matters: The Big Picture ??

The Digital Markets Act in the EU, aiming to open up digital markets to fair competition by regulating large tech firms labeled as "gatekeepers." In the US, Epic Games , Spotify , and Netflix have spotlighted the need for similar reforms, challenging restrictive practices like Apple's commission fees. This push in the US, alongside the EU's legislation, hints at a broader global movement toward a more open app ecosystem that balances developer freedom with security.

Your Take? ??

How do these adjustments resonate with your strategy and bottom line? Are you seeing them as hurdles, or do they open new doors for your app's monetization and user engagement strategies? Share your thoughts and experiences below!

#AppStoreChanges #DigitalMarketsAct #TechPolicy #InAppPurchases #MobileAppDevelopment #GameMonetization