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Apple's Proposed Changes Reject the Goals of the DMA

26/01/2024

For almost five years - 1,782 days - we have been asking the European Commission to take action against Apple. In a world that values competition and innovation, we found it unacceptable to stand by and allow gatekeepers like Apple to go unchecked.

So you can imagine our excitement when the Digital Markets Act (DMA) was created and passed into law to once and for all put an end to this unfair stifling of innovation disguised by Apple as security protections. We were proud of Europe for leading the way and assumed that Apple would have no choice but to comply with the letter and the spirit of the law.

But as Apple has just shown the world, they don't think the rules apply to them.

Apple is nothing if not consistent. While they have behaved badly for years, this takes the level of arrogance to an entirely new place. Under the false pretense of compliance and concessions, they put forward a new plan that is a complete and total farce. Essentially, the old tax was rendered unacceptable under the DMA, so they created a new one masquerading as compliance with the law.

From the beginning, Apple has been clear that they didn't like the idea of abiding by the DMA. So they've formulated an undesirable alternative to the status quo. This is why many of the most popular developers will never be able to choose it. And for the developers who feel like they have no other alternative, it's a path that will punish their success. Let's explore a few elements of Apple's new demands:

A completely new 0.50 cent Euro fee per download, every year, in perpetuity, to Apple for just allowing developers to exist on iOS - This is extortion, plain and simple. If Apple's already charging a commission of 17% (and 10% for recurring payments) on digital goods purchased, why would they also need to charge an annual flat fee for every user? For any developer wondering if this might work for you, you need to have less than a million customers and essentially sign up for not growing in the long run. From our read of Apple's proposal, a developer would have to pay this fee even if a user downloaded the app, never used it and forgot to delete it. This will hurt developers, potential start-ups and those offering free apps most: How will a developer pay Apple back if its free app goes viral - multiple millions of accounts install that free app, and then that developer owes Apple millions? And this would be just the beginning, because Apple changes its rules all the time. There's nothing in the law prohibiting Apple from increasing that 0.50 cent Euro to 1 or 10 Euro over time.

Apple is still charging a 17% rent on developers for existing in the App Store if they offer alternative payment methods or link out to their own website- Apple is making a developer's choice between the status quo and this new program as difficult as possible. Apple is now saying, sure, we'll let you link out or offer your own payment methods but you still owe us a commission for even doing that (plus that new flat 0.50 cent Euro fee).' This combination of fees means that, in most instances, if your app is popular, you would pay the same or even more to Apple than under the prior rules. Apple is making the DMA hurt even more for developers, throwing them an unworkable alternative that will stifle their businesses immediately.

Apple is offering alternative app stores - but are they really? Spotify, like so many other developers, now faces an untenable situation. Under the new terms, if we stay in the App Store and want to offer our own in-app payment, we will pay a 17% commission and a 0.50 cent Euro Core Technology Fee per install and year. This equates for us to being the same or worse as under the old rules. And if we managed to remove our app from the App Store and only existed in the Alternative App Store, that would still not work. With our EU Apple install base in the 100 million user range, this new tax on downloads and updates could skyrocket our customer acquisition costs, potentially increasing them tenfold. This, as we have to pay on every install or update to our free or paid app, even for those who no longer use the service.

The only conclusion is: Apple is forcing developers to stay with the status quo - This alternative that offers no alternative at all completely negates the goal of the DMA. The European Commission designated Apple as a gatekeeper because of their excessive fees and anti-competitive terms. Apple has proposed an unworkable alternative that developers would have to be locked into until the end of their businesses. Essentially, Apple is rendering the DMA's goals of offering more choice and more control to consumers useless.

In the hours since Apple dropped this update, developers have frantically plugged in their businesses' numbers into Apple's online fee calculator' only to see their worst fears confirmed. Apple has the control and they are confident that the European Commission will let them keep it.

Earlier this week, thanks to the clear language in the DMA, we shared how we plan to offer customers in the EU more choice, more control and better experiences. Today, that future is less clear. And it comes down to a fundamental question: Will the European Commission follow through with its intent to right-size Apple's abuse of power? Or will the DMA be nice in theory, but in practice, have no substantive meaning for most developers?

All that is required is enforcing the very law many worked so hard to accomplish. The ball is in your court, European Commissioners, and once and for all you must reject this blatant disregard of the very principles you worked so hard to establish.
LINK: https://newsroom.spotify.com/2024-01-26/apples-proposed-changes-reject...
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