Who should make the switch?
With the Digital Markets Act (DMA), the European Union has passed a law that is intended to ensure fair and open digital markets and to which the App Store must also adhere in future. In response, Apple has announced a series of changes for iOS, Safari and the App Store in order to comply with the new regulations.
One important change is the new terms and conditions, which are accompanied by reduced commission regulations. App providers have the choice of continuing their business in the EU under the previous terms and conditions, in which case nothing will change for them in the EU. Or they can switch to the new terms and conditions. In this article, you can find out which changes are involved and for whom the change is worthwhile.
In future, app providers who opt for the new terms and conditions will also be allowed to sell their apps via alternative marketplaces and websites under certain conditions (more on this in my post).
The key question for most app providers is likely to be whether the new terms and conditions are financially worthwhile. Apple is introducing three things with the new terms and conditions in the EU:
Reduced commission rates
Apple is reducing the commission for in-app sales from 30% and 15% to 17% and 10% when switching to the new terms and conditions. A detailed overview can be found below.
Payment processing fee
Those who switch to the new terms can continue to use payment processing (in-app purchase) via the App Store, but will then pay a fee of 3% per payment processing. Alternatively, other payment processors can be integrated or linked to external payment methods, for example via a website. In this case, no commission is charged.
Core Technology Fee (CTF)
In future, app providers with over one million initial downloads per year will pay a so-called Core Technology Fee (CTF) of €0.50 per initial installation, regardless of whether the app is distributed via the App Store or alternative marketplaces. This is likely to affect less than 1% of all app providers in the EU.
Here you can see a comparison of the old and new terms:
Whether the old or the new terms are more financially advantageous for you essentially depends on your business model and volume. Where do you fit in?
Free apps
If you do not offer in-app purchases or subscriptions, i.e. you are distributing a free app, you should stick to the old terms. Because no matter how many downloads you generate, you will not have to pay a core technology fee. However, it will then not be possible for you to offer apps via alternative marketplaces or websites.
Freemium or paid apps with less than 1 million downloads per year
If you generate less than 1 million downloads in the EU, the new terms are financially advantageous for you, as the commission is reduced. This also applies if you process your payment via Apple (+3% fee). If you switch, you may also distribute your apps via alternative marketplaces and websites.
Freemium and paid apps with over 1 million downloads per year
If you are one of the few providers who are above the 1 million download threshold in the EU, it may be worth switching to the new terms if the savings from the lower commission exceed the additional costs for the core technology fee per download.
Where exactly this tipping point lies depends on your total downloads and your ARPU (average revenue per user). Generally speaking, the higher your ARPU, the more likely you are to benefit from the new model. Or vice versa, the lower your ARPU, the longer it pays to stay with the old terms, as there is no technology fee. Apple offers a fee calculator, which you can use to calculate various scenarios for yourself.
What else is there to consider?
When you change the terms, they apply to all apps in your developer account. You are therefore not making a decision per app, but per account.
If you are in the 'bucket' of less than 1 million downloads, one of your apps suddenly goes viral and you want to switch back, this is also possible once (after an adjustment by Apple). However, this is only possible if you have not previously sold your apps via alternative marketplaces and have not offered alternative payment methods.
My conclusion.
The new terms make economic sense for the vast majority of developers in the EU who offer paid apps up to a threshold of 1M downloads. This is because with the new terms they pay a lower commission and no additional fees.
Paid apps with very high download and sales volumes need to calculate more precisely when it is worth switching to the new terms.
Providers of free apps should stick to the old terms, regardless of how many downloads they generate. The only drawback is that they are then not allowed to distribute their app via alternative marketplaces or websites.
Finally, I would like to point out once again that the new terms only apply to apps that are downloaded in the EU. For apps downloaded outside the EU, the old terms and commissions continue to apply.
I hope I have been able to provide you with some transparency and make it easier for you to make a decision. You are also welcome to download my overview of the old and new terms here:
I will continue to monitor any changes and keep you up to date in my blog.
All content in this post has been researched and compiled from public sources. If any errors have crept in, please let me know so that I can correct them.