In the latest set of tweaks to bring itself into compliance with a new European Union law, Apple has confirmed significant changes to the deal originally offered to developers in the EU. Not only will it open up the iPad in the same way as it is opening up the iPhone in Europe, but it is making significant changes to its Core Technology Fee that should benefit smaller developers.
Europe’s iPads will be opened up this fall
iPadOS will be opened up in Europe starting this fall, the company said in a statement on its developer website. “This week, the European Commission designated iPadOS a gatekeeper platform under the Digital Markets Act,” Apple said. “Apple will bring our recent iOS changes for apps in the European Union (EU) to iPadOS later this fall, as required. Developers can choose to adopt the Alternative Business Terms for Apps in the EU that will include these additional capabilities and options on iPadOS or stay on Apple’s existing terms.”
Of course, once developers do choose to adopt Apple’s alternative terms, they can become liable to pay the company a Core Technology Fee (CTF).
Improvement to the CTF
The fee is designed to compensate Apple for the value it provides developers in terms of tools, tech, and services. There is good news for developers here in that Apple won’t double charge for this, which means users who install the same app on both iOS and iPadOS within a 12-month period will only generate one first annual install for that app.
While company critics continue to castigate this so-called “Apple Tax”, the company points out that under current data over 99% of developers in the EU will not be liable to any kind of CTF fee. Which rather implies that the 1% of developers who do pay the fee are able to make the most noise because they can afford the best marketing.
But let’s not dwell on that. Instead, let’s look at two additional changes the company has made to its approach. The first change is quite significant.
Helping sudden success
When Apple’s teams appeared in front of what seemed to be an EU kangaroo court to explain how it was approaching the DMA, one question from one developer rang true. That person spoke about how an app they made had become hugely successful overnight and explained that under Apple’s originally proposed CTF deal he would have been bankrupted by the fees at that time. Apple responded pretty quickly with a range of tweaks.
At first, it introduced a new loophole developers in that situation could use to return to the original terms of business, which I saw as a kind of lifeboat. Today, it introduced a new tweak I think serve to blunt the pain of unexpected success:
As of now, small developers generating under €10 million in global annual business revenue that adopt the alternative business terms receive a three-year free on-ramp to the CTF to help them create innovative apps and rapidly grow business.
What that means is that within those three years, if a developer who has not previously exceeded one million first annual installs crosses the threshold for the first time, they won’t pay the CTF — even if they continue to exceed one million first annual installs during that time. “If a small developer grows to earn global revenue between €10 million and €50 million within the 3-year on-ramp period, they’ll start to pay the CTF after one million first annual installs up to a cap of €1 million per year.”
This sounds incredibly complicated, but basically means that if you are a small developer and happen to introduce an app that generates millions of installs they will not need to pay a fee until they scale their business so they can afford to do so.
No revenue? No fee
Obviously, this doesn’t apply to those wealthy developers whose business has already scaled in that way — rightly, they still need to shoulder the burden to help nurture new dev talent. The one big caveat is that the developer must declare their revenue before their first app surpasses one million first annual installs in order to receive these benefits. Leave it too late and you’ll have missed the chance.
The other improvement is that developers who create free apps won’t suddenly be bankrupted because millions download the app. Apple explains:
“No CTF is required if a developer has no revenue whatsoever. This includes creating a free app without monetization that is not related to revenue of any kind (physical, digital, advertising, or otherwise). This condition is intended to give students, hobbyists, and other non-commercial developers an opportunity to create a popular app without paying the CTF.”
It is also important to point out something else. Only developers who achieve over one million first annual installs per year in the EU need to pay Apple’s Core Technology Fee. Not only that, but non-profit organizations, government entitles, and educational institutions approved for a fee waiver don’t pay it at all.
While Apple’s well-resourced critics will continue to attack the company’s approach, it’s hard to avoid the feeling that the company is making it crystal clear that it is not now (and probably never was) the small developers who propped up App Store profits, but the large developers now making the loudest complaints.
And that seems to me to be food for thought. I doubt those larger entities have any plans to give their apps away for free. Why should Apple be made to do so?
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Apple, iOS, iPad, Mobile, Mobile Apps
