Apple's New Fees Will Kill Free Apps

Summary

The video examines Apple's monopoly over iPhone apps, which requires developers to pay fees and give Apple a 30% cut of sales. It covers the US court ruling against Apple in the Epic lawsuit, allowing alternate payment links, and the EU's Digital Markets Act forcing Apple to allow third-party app stores. However, Apple is maliciously complying by making alternate payment links cumbersome and charging exorbitant fees for third-party app installs that could bankrupt developers. The video argues Apple is maintaining its monopoly against the spirit of the rulings.

Takeaways

• 😡 Apple has a monopoly on iOS app distribution and in-app purchases through the App Store.
• 💸 Apple charges a 30% commission on digital goods purchased through iOS apps.
• ❌ Apple imposes strict rules on what kinds of apps can be distributed through the App Store.
• 📱 The only way to install apps on an iPhone is through the App Store.
• 👎 Apple blocked game streaming services like Xbox and Nvidia from the App Store.
• 💥 Epic Games challenged Apple's monopoly and commission structure through lawsuits.
• 🇺🇸 A US court ruled Apple can no longer block external payment links in apps.
• 🇪🇺 The EU Digital Markets Act aims to open up iOS app distribution and payments.
• 😠 Apple is using 'malicious compliance' to undermine the impact of these rulings.
• 💸 Apple's new EU terms include fees that could bankrupt free apps that go viral.

Q & A

What is Apple's monopoly related to?

Apple's monopoly is related to the apps and services available on iPhones, specifically the requirement that all apps must be distributed through their App Store where they take a 30% cut of sales.

How did Apple respond to the US court ruling on allowing external payment links?

Apple responded by only allowing one external link, opened in Safari, with a warning popup, and charging a 27% fee on purchases, making it worse than just using in-app purchase.

What new terms did Apple introduce for the EU market?

For the EU market, Apple introduced a reduced 17% commission but with fees of €0.50 per install after the first 1 million, and requirements for large credit lines, which make it unfeasible for most developers.

How could the new EU terms be exploited maliciously?

The per install fee structure means a malicious actor could easily bankrupt a developer by installing their app millions of times from different devices.

Why can't services like Xbox Cloud Gaming release on iOS?

Apple bans game streaming services because they consider interactive games to be apps, so game streaming violates their rule against app streaming services.

What happened when Epic Games added direct payments to Fortnite?

When Epic added direct payments to Fortnite, it was banned from the iOS App Store, and Epic employees were even locked out of their Apple devices.

How much does Apple make from App Store fees?

Apple makes billions in revenue from its 30% cut of App Store sales and mandatory in-app purchase commissions.

Why can't you create a Netflix account in the Netflix iOS app?

Due to Apple's rules, you can't sign up for a Netflix account in the iOS app, to avoid paying Apple's commission. Users have to sign up on the web instead.

What are some examples of Apple's App Store restrictions?

Apple restricts apps from offering gaming streaming, alternate app stores, alternate browser engines, and more. They also restrict communications and payments.

How did the EU Digital Markets Act attempt to address these issues?

The EU Digital Markets Act designated Apple as a 'gatekeeper' and attempted to prohibit restrictions on third-party apps and payment processing to promote competition.

Outlines

00:00

😲 Apple's App Store Monopoly

This paragraph provides background on Apple's monopoly over iPhone apps through the App Store. It explains how Apple requires apps to pass review, charges a fee, and takes a 30% cut of purchases. This allows Apple to control what apps iPhone users can install. Examples are provided of restrictions Apple imposes, such as not allowing other app stores, streaming game services, alternate browsers, etc.

05:02

😡 Pushback in the US and EU

This paragraph covers legal challenges to Apple's monopoly in the US and EU. A court ruling in the US Epic case said Apple can't block external purchase methods. However, Apple found a loophole by focusing on the word "or". The EU Digital Markets Act prohibits gatekeepers like Apple from restricting app store access. But Apple made alternate terms so bad no one would use them.

10:02

🤯 Apple's Malicious Compliance

This paragraph examines how Apple is maliciously complying with the court rulings and laws. In the US, Apple only allows one external link for payment in a hidden view with warnings, and charges a higher fee. For the EU, Apple made opt-in terms with per-install fees that would bankrupt developers. Apple intends to block apps even if third party stores are allowed. Their goal is maintaining their monopoly.

15:03

😞 The Potential Damage

This paragraph considers the potential damage from Apple's actions. Few will use the bad faith EU terms, but if they go viral they'll go bankrupt from per-install fees. Malicious actors could bankrupt apps by repeatedly installing them. Apple's monopoly prevents innovation and consumer choice. But they intend to maintain it through malicious compliance.

Keywords

💡App Store Monopoly

Apple has a monopoly over app distribution on iPhones through its App Store. Developers must comply with strict rules and pay 30% commission to release apps. This stifles innovation and consumer choice. Examples from script - "The rules they enforce through these reviews are brutal", "You literally can't create a Netflix account in the Netflix app".

💡Compliance

Apple is being forced to change App Store policies to comply with court rulings and regulations. But they are finding loopholes and making token changes without addressing core issues, referred to as "malicious compliance". Examples - Interpreting "or" to avoid allowing payment options.

💡Payment processing fees

Apple is introducing additional fees for payments processed outside the App Store to disincentivize it. This maintains their commission at the cost of developers and user experience. Example - 27% fee on external payments.

💡Install fees

Apple's new terms charge developers a fee per app install, which can bankrupt free apps that go viral. Enables abuse and lacks protections. Example - "every two installs costs you a Euro".

💡Third-party app stores

Rules forcing Apple to allow alternative app stores could enable more competition and choice. But fees and restrictions effectively prevent viable stores. Example - Epic plans store but faces huge losses.

💡Consumer choice

Lack of choice on iPhones due to monopoly prevents access to apps with innovative models like game streaming. Example - Microsoft xCloud still banned.

💡Chilling effects

Harsh rules and inconsistent enforcement creates climate of fear among developers, preventing innovation. Examples - "employees locked out after payment dispute".

💡Legal challenges

Companies like Epic are legally challenging Apple's monopoly through lawsuits in multiple jurisdictions. But real change remains unlikely without structural shifts. Examples - US court ruling, EU Digital Markets Act.

💡Gatekeepers

Term used in EU Digital Markets Act referring to companies with entrenched dominant position in digital markets, often abusing their power. Clearly refers to Apple.

💡Threats

Apple threatens security, privacy and quality as reasons for rules but critics argue it enables rent seeking and protects their monopolistic position. Example - Initial strict review process.

Highlights

Apple's monopoly is not about which phone you buy, it's about what you buy on your phone

The only way to install apps on an iPhone is through the App Store

Apple requires a 30% cut of all digital purchases made in iPhone apps

Genuine innovation in the market is being blocked by Apple's interpretations of their own monopolistic rules

If a digital good or service is purchased in an iPhone app it has to go through Apple Pay or you will be banned

Apple will now charge a 27% fee on purchases made through external payment links due to a court ruling intended to allow more payment options

The EU Digital Markets Act will prohibit gatekeepers like Apple from restricting third party software access and payment options

Apple is using malicious compliance tactics to work around regulations by making external payment options extremely unappealing

Apple's EU compliance terms include a fee per app install that could bankrupt developers of free apps that go viral

Even with required third party app store support, Apple can still block apps and enforce their own review policies

Apple wants everyone to keep using their old monopolistic terms because the new compliant options are so bad

The new terms create massive financial and security liability risks that discourage adoption

The changes might actually hurt consumers if companies stop supporting Europe to avoid the extremely high costs

Apple is using technical compliance as a facade while trying to maintain their monopolistic status quo

In the end consumer choice is important - users should be able to choose what apps they install

Transcripts

at this point it kind of feels like

Apple's trolling us if you want to

release a free app today it cost you

$100 a year to do such policy Apple

published today would force some devs to

pay millions Instead This would

fundamentally change the App Store

destroying tens of thousands of free

apps in the process I'm a software Dev

and an apple Fanboy but that doesn't

mean this video is only for devs and

Fanboys everyone should understand

what's happening here I'm going to do my

best to explain it to youall this VD

will be broken into three separate parts

Apple's Monopoly the US EU push back and

most importantly the potential damage

from Apple's malicious compliance so

without further Ado let's start with

chapter one Apple's Monopoly hopefully I

don't have to convince you that a lot of

people have iPhones in the US 58% of

smartphones are iPhones and over 87% of

teenagers have an iPhone to be very

clear having a certain percentage of the

market doesn't inherently make you a

monopoly it's also worth noting that

Apple's global market share is only

around 30% of the smartphone market

their Monopoly isn't about which phone

you buy it's about what you buy on your

phone when the iPhone launched there was

no app store there was just Safari which

Apple pushed is the future of

applications they learned their mistake

quickly and a year later the App Store

was created crazy enough it only had 500

apps at the time we're going to be

talking a lot about the App Store so

let's break down some important things

about it first you should know the only

way to install apps on an iPhone is

through the App Store there are some

works it's a Dev but it's generally fair

to say apps come from the App Store

Apple also charges that $100 a year

license fee to all devs that make iPhone

apps I mentioned earlier they require

all apps past their strict review

process they require a 30% cut of All

Digital purchases made in those apps and

you also can't tell users about other

payment methods outside of your app so

if you're let's say Spotify there's no

option to tell users hey go sign up on

the website and then sign in here

they're strict about that I want to

focus on those first three points though

because if Apple doesn't like you or

your software then no iPhone user will

ever be able to install it the rules

they enforce through these reviews are

brutal no credit cards only Apple pay no

streaming games only only movies and

music no SMS messages only

internet-based messaging apps no browser

engines only Safari this has had real

impact on both companies and users Xbox

and Nvidia were blocked from Shipping

their game streaming apps Chrome and

Firefox are just skins on top of safari

Apple's goal was to build a software

Marketplace you could trust when the App

Store launched most software was still

installed by buying discs at stores or

downloading sketchy exe's from random

websites the App Store started a giant

leap in the software quality we expect

today but that do make these rules okay

look at the Xbox streaming app for

example obviously you can stream media

on your phone like Netflix Spotify

whatever you want for the most part

almost it's interactive according to

Apple game streaming is a workaround

since they consider games to be apps

therefore game streaming is app

streaming therefore Xbox is banned based

on their no thirdparty app store

rules what this is insanity genuine

innovation in the market is being

blocked by Apple's own weird

interpretations of their own weird

monopolistic rules if you use your

iPhone to order order an Uber or door

Dash Apple doesn't take a cut that's a

service if you use your iPhone to trade

stocks or open a new bank account Apple

doesn't take a cut from that either

however if you use your iPhone to buy a

game for $5 Apple takes a 30% cut Indie

big Studio doesn't matter and this is

insane theoretically you could just have

a user enter their credit card number

and process payments through a company

like stripe they only take 2.9% and 30

cents on top regardless massive 10x

difference in cost sadly in reality

Apple will ban you from the app store if

you try and do that if a digital good or

service is purchased in an iPhone app it

has to go through Apple pay or you will

be banned they are very very strict

about that if you ship an app with no

payment methods and tell a user to go

sign up on your website so that they can

pay there instead you'll be banned for

that as well Netflix and Spotify both

have challenged apple on this and both

sadly lost you literally can't create a

Netflix account in the Netflix app on

your

iPhone this hasn't stopped other

companies from trying though epic games

the creators of fortnite added an option

to use a credit card instead of Apple

pay they got banned so hard that epic

employees got locked out of their

MacBooks for a while thankfully epic's

pretty based and they spent the last

three years challenging Apple in court

and that's where we enter chapter 2 the

US and EU fight back I published a video

about the Epic case two days ago so I

won't go too deep here Link in the

description if you want to catch up on

that the US courts ruled that Apple

could no longer block devs from

promoting external payment methods their

specific words are important so I'll

share them here Apple are hereby

permanently restrained and enjoined from

prohibiting developers from including

their apps and their metadata buttons

external links or other calls to action

that direct customers to purchasing

mechanisms in addition to inapp

purchases this seems pretty definitive

right now you can just put a button that

links to your checkout

page sadly Apple's interpretation of

this ruling is it's strange they've

chosen to focus on one word from this

statement using it to work around pretty

much all the rules can you guess which

word in this statement is letting them

work around things keep thinking on that

for a bit we'll be revisiting it in

chapter 3 no spoilers for now because

first we have to talk about the European

Union the 's been cracking down on Apple

lately the USBC stuff was big enough to

honestly deserve a video of its own

we're not here to talk about ports we're

here to talk about the digital markets

act this act opens by defining the term

gatekeeper it defines that as a large

digital platform providing so-called

core platform services such as online

search engines app stores Andor

messenger services I've spent way too

much time trying to turn this 65 pages

of EU legal ease into something

understandable I gave up so I'm just

going to break down the core important

points here there's a bunch of rules

addressing the monopolistic stuff I

brought up earlier game streaming would

be allowed external links to payment

options are now protected legally and

they even had a whole section dedicated

to browser engines really cool stuff

that said there's one key point we need

to focus on now if you want to read this

whole thing then pause the video because

I can't be bothered at this point the

tldr is that Gatekeepers restricted

access to third part party software in

stores which has been determined to hurt

users so now it's prohibited in just

over a month these rules will be

enforced for all countries within the EU

and Apple is very much not happy about

this and here's where we enter chapter 3

malicious compliance let's go back to

that ruling from the US courts in the

Epic versus Apple case to figure out

which word was the one I was talking

about the one that Apple use to work

around everything I'll remove some of

the words that don't matter to see if

that helps you figure it out any

guesses I'll spoil it for you it's the

word or apple interpreted the use of or

here to mean that they only have to

support one of those listed options when

I read this I thought it was pretty

clear the Court's intent was that third

parties could pick from the options not

that Apple could choose the one they

want to support and boy did they find

some cringe ways to support it there are

enough details here that I actually

already made a video covering it so if

you want to hear all of the crazy things

going on there go check out my last

video about Apple and epic but a quick

TDR is that Apple only allows external

links no buttons no other checkout Flows

In fact you can only have one link and

it has to be in a separate view from the

existing inap purchase flows so you

can't just put a link at the bottom of

your checkout the link also has to open

in safari with no direct attachments to

that link so you have to sign in again

on the website once you open it in

Safari clicking those links will pop up

a giant bold text warning when you do it

but most importantly Apple now has a new

27% tax on all purchases made through

this web method so you're not even

escaping their 30% I guess not 27 but

now you're paying another 3% to whatever

payment provider you're

using

God honestly I was impressed when I

heard this they took a definitive ruling

about external payment options and

somehow managed to make it significantly

worse than dealing with their existing

not great options you think that's

malicious just wait till you hear about

their plans for compliance with the Dig

digital markets

act chapter 3.1 EU

compliance I could paraphrase Apple's

changes but for once they actually did a

pretty good job describing things

themselves they even made a fancy

website and calculator to help describe

all these things I'll be sure to leave

this link in the description if you want

to dig through it yourself because

honestly some of this is unbelievable

and if I just saw it in a video I would

have assumed it was fake in fact when I

saw this particular tweet this morning I

assumed it was fake too and I had to go

confirm the numbers myself due to the

the level of insanity here Apple's not

stated whether or not they intend to

make these new terms the only option for

EU developers in the future for now you

have to opt into them which hopefully

will be enough for them to comply

because they kill these old terms a lot

of apps will die with them today's terms

are everything I described earlier the

30% cut the requirement that you only

distribute your app through the App

Store the requirement that all purchases

are done through in app purchases the

usual Apple stuff however they've

introduced this new Option the new

capabilities and terms for apps in the

EU developers have additional

distribution and payment processing

options available Apple will also apply

a reduced commission I believe it's 177%

instead of the usual 30 however there's

an optional payment processing fee and a

fee for first annual installs above 1

million in the last 12 months if you're

in the gaming world at all this might

sound familiar it's very similar to the

crap that Unity tried to pull last year

and crazy enough it's actually worse

here once we dig into the details so uh

let's do that one quick detail before we

go to the calculator is that your first

1 million annual installs are free so

that 50 Euro I don't know what the

equivalent of a cent is in Euros but

like this 0.5 fee only applies once

you've broken a million but that fee

applies for every install so every two

installs costs you a Euro that's insane

let's see just how insane these numbers

get do you sell digital Goods in your

IOS app or game Let's assume the answer

is no here that this is a free app no

how many installs do we expect to get

well say our app just went viral and we

got I don't know 5 million

installs I know crazy thought but it's

not that insane I've had a Chrome

extension that I released when I was in

college that got like 15 20 million

installs this is a totally reasonable

number when something goes

viral we'll use today's terms and

capabilities for now and look at that

it's a$0 fee for those Europeans that

are in my audience I'll show you that 0

converts pretty nicely to Z as well but

again we're not here to talk about the

existing capabilities in terms CU these

are although not super Fair they're

somewhat reasonable I want to talk about

these new capabilities in terms so let's

take a

look oh that's $181,000

fee that's

$181,000 monthly

fee now I'm not great at math so I'm

going to pull up my calculator quick

that's a $2 million a year bill because

your free app went

viral that is actual insanity this

basically means if you're agreeing to

these new terms and you make a free app

that goes somewhat viral you are now

bankrupt you are now out of business you

now have to pull the app from the app

store because you have no money that's

crazy that's absurd this is just the

side of developers releasing their apps

in Europe so if they accidentally agree

to these new terms they go viral they're

screwed hopefully the addition of these

new app stores is going to help with

this right no absolutely not because

this fee doesn't only apply to Apple's

App Store this applies to all of the

alternative app stores that they're now

being forced to support epic has already

publicly confirmed that they intend to

make a new app store for the iPhone just

to allow for European customers to have

fortnite access again so yes if you're

in the EU and have an iPhone and you use

their new app store you can get it

however every two times users install

this app it costs them a Euro so if they

can't make more than a Euro every two

players they are done for this is going

to be a huge huge catastrophic Financial

loss for them to take we're just talking

about the install fee there's so many

other costs that still exist there's the

inap transaction percentages there's the

cost of paying the developers to make

all of this there's this really weird

rule where you to take out a million

doll Plus credit line with Apple so that

if things go wrong they have a way to

bill you so they can do whatever they

want to do when they sue you if you

don't follow the rules Apple's found a

wild balance here where both the

liability and the implementation cost

gets put on the third parties which

again massively disincentivizes them

from using this you may have started to

notice a theme here when Apple's forced

to comply they provide a new option that

is compliant but it sucks so badly that

you basically can't use it epic's going

to eat a ton of costs sitting here and

doing it just to demonstrate what it

looks like so obviously epic's taking a

huge cost on here in order to make a

third party app store but at least they

can finally release the apps they want

to right right

right here's where one of the most fun

Apple decisions comes in despite support

for third party app stores apple does

not seem interested in thirdparty app

reviews they will still require all

iPhone apps go through Apple's review

even if they're being distributed on

different stores so crazy enough Apple

might still choose to block fortnite

even if they allow the Epic game store

because they're legally required to have

the store they'll just block the apps

instead what like it's so sad because

this legislation really should have

changed a lot of things for the better

and instead either nothing will change

or things get exponentially worse

because if these rules become the

default for customers in Europe most

companies are just going to stop

supporting Europe because if you can't

make back your euro per install you're

screwed

you're just screwed and we're not even

talking about the malicious actor angle

here when I first tweeted about this

first off I thought that the fee here

was monthly not yearly so I was off by

12x but more importantly pirate software

applied if youall don't know him he's a

very talented opack guys he's on a ton

of security stuff help work a blizzard

in a bunch of other places check him out

if you haven't great dude he replied

obviously calling out the unity thing

but this is where things get interesting

this malicious example let's say I'm a

rival business and created a clone of

your game I want to shut you down I set

up a few servers that randomize Hardware

information and download your game

millions of times now you're out of

business I no longer am a

clone and since every device is uniquely

identified they should be able to

prevent this some amount but if someone

sets up a farm of old iPhones to just

install apps when they want to destroy

them this works great and that's

terrifying the fact that any malicious

actor can kind of just destroy your free

app because they feel like it and you

happen to have selected this new deal in

the

EU this doesn't work and if anyone

accepts this new policy there's a high

chance they get screwed but since it

technically complies with the eu's rules

they're going to get away with it

doesn't matter how much worse these new

terms are and how much more risk there

is to developers who accept them because

Apple actually intend for anyone of

meaning to use these terms they want

everyone to go use the old ones because

they don't want to change they want to

maintain the exact state of their

Monopoly as is I don't want to present

my opinions unchallenged so I'm going to

link in the description of video by John

prer that I really like about how the EU

changes in rules might actually hurt

Apple going forward and in the end hurt

users as a result in the end I think

consumer choice is important users

should be able to choose what devices

they use and also what apps they install

as such I can't honestly support the way

Apple has chosen to lock down the iPhone

and I do genuinely hope we see a future

where these third party app stores

aren't implemented in such a malicious

way and users can install the apps they

need for the things that they're

doing that's all I have to say peace

nerds