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App store avalanche forecast as Apple bows to EU demands

Apple fined 1 million euros by Paris Commercial Court over app store practices
Apple fined 1 million euros by Paris Commercial Court over app store practices Copyright Thomson Reuters 2022
Copyright Thomson Reuters 2022
By Reuters
Published on Updated
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By Martin Coulter

LONDON - Apple's rivals are positioning themselves as the go-to alternative to its dominant App Store as the iPhone maker prepares to allow others on its devices in the European Union.

The bloc's Digital Markets Act (DMA) will force Apple and fellow tech giant Google to provide space for third-party app stores on their respective iOS and Android devices.

Under the DMA, which comes into effect on a rolling basis over the next two years, third-party alternatives will have an easier route to getting onto iPhones and Android devices.

And as components of the legislation come into effect, rivals from smaller startups to giants like Amazon and Microsoft may try to lure consumers and app developers alike away from Apple and Google.

Ben Wood, CMO of industry analysis firm CCS Insight, said he expects "an avalanche of app stores" in the near future.

"There's an emerging 'coalition of the willing', and all of them have a vested interest in no longer having to pay what they see as a tax to Apple," Wood told Reuters.

Apple and Google did not respond to requests for comment.

Android users can at present install apps from alternative sources, a process known as "sideloading", but this often requires them to switch off certain security settings.

Apple's apparent concessions on sideloading mark a win for industry leaders such as Twitter owner Elon Musk and Spotify CEO Daniel Ek, both of whom have bemoaned the company's 30% surcharge on purchases made via its App Store.

Rivals are plotting to bring frustrated developers over to their stores, promising lower commission fees and the potential for exclusivity deals with popular apps.

"Competition is a good way to improve services," said Paulo Trezentos, CEO of Portugal's Aptoide, which takes a 15% to 25% cut of in-app purchases.

Deals for exclusive content could drive competition in app stores in the same way as it has in the "streaming wars" between Netflix and challengers like Disney+ and Amazon Prime, Trezentos said, adding: "Netflix has content that HBO doesn't have ... App stores can be like that."

Paddle, a payments processor for software companies, has built its own rival to the App Store, which it hopes to launch in Europe once the DMA comes into effect.

"A 30% fee is actually fairly egregious when we look at it in comparison to how much it actually costs to process payments, and what Apple is actually offering," CEO Christian Owens said.

Owens said Paddle's in-app payments system would charge developers between 5% and 10% on transactions.

"The biggest hurdle they are going to need to overcome is the consumer," Wood at CCS Insight said.

(This story has been corrected to fix the spelling of CCS Insight in paragraphs 5 and 16)

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