Tech titan Apple is reluctantly giving up its monopoly on the iOS app store marketplace. According to Bloomberg, Apple will allow third-party app stores on iOS due to the new EU Digital Markets Act (DMA), which targets “digital gatekeepers” and aims to open markets to smaller players.
Apple is notorious for taking a big cut in commissions for an app without alternative marketplace options for developers. Third-party app stores will change the entire app store and iOS business model, and could lead famous apps and companies to leave Apple App Store for better prices.
While third-party app stores will only be available in the EU, this will create a global shake-up as companies worldwide challenge Apple’s digital monopoly.
What is the DMU?
The EU Digital Markets Act (DMU) came into force on November 1, 2022, defining digital gatekeepers and providing clear “do’s and don’ts” that companies must respect. One is to allow third parties to “interoperate” within gatekeeper services. Companies that do not comply face fines of up to 10% of global sales and 20% for repeat violations.
Apple’s decision to allow third-party app stores is pre-emptive; Under the DMU, digital gatekeepers will not be identified until May 1, 2023, and the deadline for implementation is March 6, 2024.
Apple is clearly in violation of many of the do’s and don’ts set out under the DMU. The big tech company notoriously takes a 30% cut on apps and in-app purchases. This drops to 15% after the first year and is always 15% for apps making less than $1 million per year. That’s a huge concession and until now there hasn’t been an alternative for apps on iOS since the Apple App Store monopolized the entire iPhone.
US-based apps are also opposed to Apple’s app store monopoly
The changes will only take place in the EU where the DMU operates. However, this isn’t the first time Apple has been criticized for its high prices and exclusive operating model.
American video game app Epic Games fought Apple in a high-profile app store fee lawsuit. Apple originally removed Epic Games from the App Store after Epic Games allowed Fortnite players to make direct in-app payments without Apple having to take a cut. Epic Games sued Apple for approval of third-party app stores.
Demand for third-party stores will increase globally after companies already unhappy with Apple’s policies see the new operating model in the EU.
Third-party app stores for iOS in the EU
Apple will likely retain as much control as possible. It has a history of charging hefty fees and limiting third-party scrutiny, and only made that change after being charged with threats of hefty fines.
According to Bloomberg reports, Apple can impose certain security requirements and verification standards on external apps and may charge a fee. In this way, Apple maintains control over the apps available on the iPhone. Nonetheless, third-party iOS app stores in the EU will shake up the entire industry. US companies like Epic Games advocate a similar model in the US, and EU legislation has shown that restricting tech giants is possible.