EIt's almost like an unwritten rule in the digital economy: If you want to make money with apps, you can't ignore the platform operators Apple and Google. Google's Android system has a market share of around 80 percent in smartphone sales, while Apple's iPhones account for the rest of the market. According to industry service Sensor Tower, the volume of in-app purchases across all platforms is expected to rise to $182 billion this year and could reach $207 billion by 2025. Apple and Google charge a lot to gain access to this billion-dollar market: both charge up to 30 percent commission on their marketplaces. It is one of many worthwhile digital business models – which are now coming under regulatory pressure, at least in the European Union.
The background is the Digital Markets Act (DMA), with which the EU wants to limit the market power of large tech companies. Six digital companies classified as “gatekeepers” by the EU must meet a series of requirements from March 6th. Among other things, the offers must be interoperable and platforms must no longer give preference to their own products. In addition to Apple, the gatekeepers also include Google parent company Alphabet, Amazon, Microsoft, Meta and the Tiktok operating company Bytedance. In the event of violations, the European Commission can impose penalties of up to 10 percent of annual global turnover. For repeated violations, up to 20 percent is allowed.
The EU Commission has assigned a total of 22 so-called “core platform services” to the gatekeepers, ranging from social media and messaging services to operating systems and search engines. They exceed the threshold of more than 45 million active users in the EU and sales of more than 7.5 billion euros in the last three reporting years. We look at how the gatekeepers want to comply with the new regulations – and what that means for consumers and business models.
Mediation services
This includes the trading marketplaces of Meta, Amazon and Google, the Google map service Maps and the app stores of Google and Apple. At Apple in particular, the DMA initiated a paradigm shift, at least in the EU. Apple announced on Thursday that it would allow alternative app stores on its iPhones in the EU for the first time. In the future, the iPhone company's payment system will no longer be a must for developers who want to sell apps, subscriptions or digital content in their apps. This had been a major point of contention for years and was not least the reason for the legal dispute between Apple and the developer of the popular video game “Fortnite”, Epic Games. Epic had bypassed Apple's payment system with “Fortnite” – the game was then removed from the App Store.
A few hours after the forced opening of the App Store became known, Epic promptly announced that it would be launching its own App Store for Apple devices this year. And the music streaming service Spotify had even announced before the announcement that it wanted to sell subscriptions and audio books on the iPhone to Apple in the EU from March.
The Swedish company has been in a clinch with Apple for a long time. Spotify or Netflix have currently been able to sell subscriptions online outside of the Apple marketplace and still let their customers use the apps on the iPhone and iPad without Apple receiving a levy. Spotify, however, has long complained that Apple does not allow information about external subscription purchases in the app.
So is the DMA already having the desired effect? Oh well. The corks will not have popped in Stockholm. Because if you want to use the alternative marketplaces, you have to switch to a new fee model – and that's quite a challenge. Large app developers will have to pay a new “core technology fee”. For apps with more than one million annual installs, developers pay 50 cents for each additional install above that threshold. And Apple isn't giving up complete control anyway. Apple still has to “certify” third-party app stores and check the apps for malware. Epic boss Tim Sweeney already senses that competition is being undermined. By “authenticating” external app stores, Apple can still block Epic’s or Microsoft’s offerings, for example. It will be interesting to see whether the EU agrees with Apple's approach.
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