The ``core technology fee'' of approximately 80 yen per install that Apple imposes on iOS apps may bankrupt developers of free apps and freemium apps

On January 26, 2024, Apple

announced that it will allow third-party app stores in order to comply with the European Union's (EU) Digital Markets Act (DMA). At the same time, Apple has also announced a system called `` Core Technology Fee (CTF)'' to charge fees to third-party (external) app stores. Apple-related media MacRumors points out that with the advent of this CTF, app developers that adopt the freemium model may go bankrupt.

Apple's EU Core Technology Fee Could Bankrupt Freemium App Developers - MacRumors

The CTF mandates that iOS apps distributed through third-party app stores must pay 0.5 euros (approximately 80 yen) for each install after the first 1 million installs. Apple explains that the number of app developers subject to CTF is ``less than 1% of the total, so the impact is limited.''

However, when app developer Steve Troughton-Smith usedApple's official CTF calculation tool , he found that if an app that is completely free has 2 million installs per year, it would cost Apple $500,000 per year. It is reported that you will have to pay a fee of about 74 million yen.

MacRumors says, ``This is an unsustainable model for free apps, and in order for freemium apps to break even with the CTF, they would need to generate at least 0.5 euros in revenue per user. For freemium apps that get installed thousands of times, your CTF could end up far outweighing your sales and leave you in debt.If your app has more than 1 million downloads, it's best to offer it for free. Because of the risk, developers need to carefully consider whether their apps will generate enough sales to pay the CTF,' he said. Pointed out that it is difficult.

However, app developers can choose to maintain their traditional business model with Apple or pay a CTF in exchange for distributing their app on a third-party app store. .

To maintain the traditional business model, developers of free and freemium apps must pay Apple a commission of 15-30% of their app sales. This fee is ``15 to 30% of the app's sales,'' so no matter how many installs there are, if it is a free app, there is no need to pay a fee.

On the other hand, if you choose to pay a CTF instead of distributing your app on a third-party app store, you will receive a CTF of €0.5 for your app, regardless of whether your app is distributed on the App Store or a third-party app store. will be applied. In addition to this, 10% to 17% of sales from apps distributed on the App Store are collected as a fee, but sales from third-party app stores are not collected as a fee.

The available options for the new App Store contract are as follows.

・Continue with current App Store contract
Developers pay Apple a commission of 15-30% of the app's sales. If sales are less than $1 million (approximately 148 million yen), 15% of sales will be collected as a fee through the App Store's small business program, and if sales exceed $1 million, 30% of sales will be collected as a fee. will be done. Subscriptions are subject to a 30% fee in the first year of release and a 15% fee in subsequent years.

・Select new App Store contract
The commission charged on app sales will be reduced from 30% to 17% and from 15% to 10%. There is an additional 3% fee when using Apple's payment system, so developers who choose the new agreement and use in-app purchases will see a 13-20% fee on app sales. . If you use a third-party payment system, the additional 3% fee does not apply. Developers will also have to pay a fee of 0.5 euro per install each year once their app reaches 1 million installs.

・Distribute apps on third-party app stores under new App Store agreement
There are no commissions on app sales. Instead, you will have to pay a fee of 0.5 euro per install each year once your app has more than 1 million installs.

Apple waives fees for some nonprofit organizations, accredited educational institutions, and government agencies.

Apple's CTF can be prohibitive for an app like Spotify with millions of users. With the new App Store agreement, if your app has $10 million in annual revenue and 10 million installs per year, you will have to pay Apple $6.2 million in annual fees. Therefore, app developer Nikita Bier posted, ``We will never release the app in Europe.''

App Store changes are included in iOS 17.4, and developers who opt into the new agreement will need to start paying the new fees starting in March 2024.

The changes to the App Store announced by Apple to support DMA, including CTF, are summarized in the article below.

Apple allows sideloading and payments outside the App Store in the EU in response to the Digital Markets Act, but strict conditions and new fees will be added - GIGAZINE

In addition, it has been pointed out that Apple's changes may conflict with the DMA's anti-avoidance clause, so there is a possibility that EU regulators may file a lawsuit against Apple.

in Mobile,   Software, Posted by logu_ii