Why does Apple lose its monopoly on the App Store in Europe even though it does not lose much?

So far, CEO Tim Cook has always said that Apple will comply with the regulations of the local markets in which it does business. But this also sometimes leaves Apple with regulations that are detrimental to its business.

According to a report from Bloomberg, Apple has now begun to tweak its software to comply with the new European Union EU regulation that will take effect from 2024. Although nothing is certain yet, Apple is considering allowing it. third-party browser engines, giving e-wallet apps access to the phone’s NFC chip and converting from Lightning to USB-C.

But most notably, Apple allows apps to be installed directly, or “sideload” apps from the web as well as third-party app stores, onto the iPhone. Currently, the App Store is the only place where you can install apps on your iPhone.

This seems to be a blow to Apple’s pocket when it comes to the commission pie for iPhone apps, where Apple charges a 30% fee for each in-app payment transaction. The fee has also become the target of antitrust lawsuits as well as complaints from a number of major software companies about Apple’s policies.

Insignificant damage to Apple

But maybe this does not affect much to Apple as well as application developers, so don’t be too happy about being able to get out of the iPhone maker’s grip.

First, this change is only valid in Europe. Although this is not a small market, Europeans spend much less on apps than Americans. According to estimates by Data.ai, which tracks app downloads and spending data, of the $85 billion Apple App Store has earned through iOS apps so far this year, the European market has only contributed. 6 billion USD. Meanwhile, the US market contributed 29 billion USD.

Therefore, according to Morgan Stanley’s prediction, in the worst case scenario, if third-party app stores in Europe account for all of the App Store’s revenue in this region, Apple’s services segment will only lose about approx. 4%, and for Apple’s total revenue, the loss is only about 1%.

Even so, the US Congress is currently debating a similar bill called the Open App Markets Act.

Apple can still make money from apps

Even if EU regulations force Apple to break its monopoly on distributing its apps through the App Store, the company still has a way of making money on apps even if it’s distributed through another party.

In a lawsuit with Epic last year about App Store policies, Apple representatives argued that the fees being applied were also for intellectual property – the software tools developers use to create apps. iPhone – not just distribution rights. Even web-delivered apps still use Apple’s software interface.

For the sake of user safety, Apple may force developers to register programs in order to gain access to specific software interfaces so that Apple can certify the application as compliant with applicable laws. certain security requirements.

The example in South Korea shows that Apple can still collect money from apps, even if they evade the company’s fee collection system. Earlier this year, a Korean court ruled that Apple must allow applications distributed through the App Store to collect money directly from users, instead of using Apple’s payment system.

But Apple circumvents the law by charging only 26% for apps that accept payments through its system. They do this by asking app developers to list the month’s payment transactions in a spreadsheet form to then receive a commission fee discount.

Apple is able to do this because it still controls the App Store to distribute apps, and developers have to agree to terms of service to be present on iOS. They can therefore force developers to process transactions through Apple’s system – currently South Korea is investigating whether Apple violated its new rule.

In addition, Apple also forces apps that use an external payment system to display a message saying “This app does not support the App Store’s secure and private payment system”.

If Apple adopts a similar tactic in Europe, it could convince users that the App Store is the safest and best place for iPhone apps. Or the developers may conclude that pursuing alternatives is too much of a hassle and continue using Apple’s system.

There is also a team of Apple lawyers, who always know how to erode the will of rivals in legal battles that want to challenge the App Store’s business model. Therefore, it is very likely that Apple will appeal these decisions in the future if it thinks it greatly affects their business.

Refer to CNBC, Bloomberg