The iPhone manufacturer wants to give up its goalkeeper function on the iPhone next year and also allow other app stores, reports “Bloomberg”. However, the changes are limited to customers in the EU – for now.
Apple has agreed to massive changes to its operating system for iPhones and iPads for EU citizens.
Starting next year, Apple will for the first time allow third-party companies to bring applications to iPhones and iPads via their own app stores. That reports the news agency «Bloomberg» on Tuesday, citing sources inside the company. The technology giant is thus bowing to new EU legislation that will take full effect from 2024: The “Digital Market Act” forces companies with a turnover of at least 75 billion euros and more than 45 million monthly active users in the EU to publish their give up their market-dominating gatekeeper role and allow other, smaller providers access to their systems. This is intended to improve competition and interoperability between the operating systems. In the event of violations, the corporations face fines of up to 20 percent of their global turnover. At Apple, that would be a whopping $80 billion.
According to “Bloomberg”, Apple is currently using a “significant amount of resources” to change its software accordingly. The adjustments are expected to come with the iOS 17 software update next year. However, only Apple users based in Europe will benefit from this, because the “Digital Market Act” is limited to the European legal area. But in the US, too, Congress is working on bills designed to break Apple’s dominance in the App Store. And the company will find it harder to lobby against them if it already follows the relevant laws in Europe.
Threatened fines seem to be a deterrent
For Apple, the App Store has been like a customs house through which the company determines which programs are allowed to run on its iPhones and iPads. It is the place where users can find and download programs from other companies. In the past, Apple has described so-called sideloading – i.e. installing apps without using the in-house app store – as a risk to security and privacy and has banned it. The company argued that it was about protecting users from third-party malware. Therefore, each program is strictly checked by Apple before it is made available to users in the App Store. For this check, Apple, as a “customs officer”, demands a hefty sum of 15 to 30 percent of the sales that the third-party company makes on the device. The companies are grudgingly paying for this, because up to now it has been the only way for them to bring their products to iPhone and iPad users.
For the first time, Apple will now have to allow other companies to offer such a “customs house” on the devices – and probably demand lower commissions. In recent years, several companies have sued Apple’s App Store practices. The game manufacturer Epic Games, for example, had brought Apple to court, but ultimately lost there. Most recently, Elon Musk, the new owner of the microblogging platform Twitter, also publicly announced Apple criticized for its practices in the app store.
Apple had previously resisted any changes, but was too wholehearted in some countries like Japan willing to make slight concessions. But the fine threatened by the EU as part of the “Digital Market Act” is apparently too high even for the most valuable technology group in the world. In addition, Europe is Apple’s second largest market worldwide. In the last fiscal year, the company generated sales of 95 billion dollars there.
Apple also wants to protect users from malware from apps in the future and is therefore considering, according to “Bloomberg”, demanding certain security requirements for apps that are distributed outside of its own app store. Apple could then insist on checking whether these requirements have been met – and charge itself a fee again for doing so.
Because even if Apple likes to argue with the protection of its users, the app store is an important and lucrative source of income for the group. How much he earns exactly with the App Store is not clear. But court documents suggest sothat it is up to 20 percent of the profit. Apple has said that number is too high in the past, but didn’t specify it either. Fewer commissions in the App Store could mean billions in losses for Apple.
Further changes demanded by the EU
Apple has not yet commented on other demands associated with the “Digital Market Act”. For example, the iPhone group would also have to open up the camera technology and its payment system to third-party companies. To date, third-party companies have had to process all in-app purchases via Apple’s payment portal, for which the group also claims a commission. As the The Wall Street Journal reports, the music streaming platform Spotify and the company Match Group, which owns numerous online dating platforms, had lobbied in Brussels for Apple to allow developers to offer other forms of payment in the future as part of the “Digital Market Act”. According to the “Bloomberg” report, Apple has “not yet made a final decision” as to whether it will also follow EU legislation here. Likewise, the new law requires Apple to open up its text messaging platform, which is end-to-end encrypted, to third-parties.
A few months ago, Apple admitted to another dispute with the EU: From 2023, iPhones sold in the EU will no longer be able to be charged with the company’s own Lightning cable, but with a USB-C cable, which corresponds to the industry standard. In this way, the EU wants to reduce the amount of electronic waste and make things easier for customers.