Apple’s New Core Technology Fee Receives Criticism From Microsoft, Epic Games and Spotify

Since Apple introduced iOS 17.4 update and the new core technology fee on developers, Apple has been facing wide criticism. 

For example, Epic Games CEO Tim Sweeney and Spotify CEO Daniel Ek have accused Apple’s core technology fees of being a change in the wrong direction and a mask for another monopoly. For context, Apple’s proposal of their core technology fees for apps that need to function on third-party app stores within the EU requires developers using third-party app stores to pay €0.50 for each yearly app install after 1 million downloads. 

Moreover, Apple will still take a 17% commission from the developers who select to utilise third-party payment processors. Thus, many developers are unhappy about the core technology fees, and Xbox president Sarah Bond came forward today and shared her view on Apple’s decision.

Testimonies Against Apple’s Core Technology Fee

Microsoft

As mentioned above, Bond made her feelings known on X as she wrote: “We believe constructive conversations drive change and progress towards open platforms and greater competition. Apple’s new policy is a step in the wrong direction. We hope they listen to feedback on their proposed plan and work towards a more inclusive future for all.”

We believe constructive conversations drive change and progress towards open platforms and greater competition. Apple's new policy is a step in the wrong direction. We hope they listen to feedback on their proposed plan and work towards a more inclusive future for all. https://t.co/mDRI5KPJf6

— BondSarahBond (@BondSarah_Bond) January 29, 2024

While Microsoft has refrained from offering any more particular info regarding its issues with Apple’s proposed changes, we can safely assume it is regarding Apple’s core technology fee. For context, Microsoft has long been developing an alternative Xbox app store for iPhone users to combat the monopoly of Google and Apple by providing trending games such as Call of Duty: Mobile and Candy Crush Saga.

However, the newly imposed core technology fee spells trouble for a potential Xbox Cloud Gaming app on iOS, as all games available through each service had to be submitted and reviewed as a standalone app, meaning Microsoft has to pay a bigger fee than expected.

Epic Games

Epic Games CEO Tim Sweeney was the first massive figure to criticise Apple’s core technology fee as he labelled it “hot garbage.” In his long rant on X, he said: “Apple’s plan to thwart Europe’s new Digital Markets Act law is a devious new instance of Malicious Compliance. They are forcing developers to choose between App Store exclusivity and the store terms, which will be illegal under DMA.”

Apple's plan to thwart Europe's new Digital Markets Act law is a devious new instance of Malicious Compliance.

They are forcing developers to choose between App Store exclusivity and the store terms, which will be illegal under DMA, or accept a new also-illegal anticompetitive…

— Tim Sweeney (@TimSweeneyEpic) January 25, 2024

Tim Sweeney also shed light on what it could mean to some games from the Epic store. “Apple proposes that it can choose which stores are allowed to compete with their App Store. They could block Epic from launching the Epic Games Store and distributing Fortnite through it, for example, or block Microsoft, Valve, Good Old Games, or new entrants.”

In his final lines, we could see him venting his frustration and disbelief towards Apple’s changes. “Epic has always supported the notion of Apple notarisation and malware scanning for apps. But, we strongly reject Apple’s twisting this process to undermine competition and continue imposing Apple taxes on transactions they’re not involved in. There’s a lot more hot garbage in Apple’s announcement. It will take more time to parse written and unwritten parts of this new horror show, so stay tuned.”

Also Read: Epic Games Emerged Victorious in Its Epic Games v. Google Antitrust Trial

Spotify

Spotify CEO Daniel Ek also heavily criticised Apple’s core technology fee as he published a detailed explanation on Spotify’s website, highlighting Apple’s changes as “a complete and total farce.” For instance, Ek labelled Apple’s annual €0.50% fee as “extortion, plain and simple.” 

After sitting with our legal team to parse through the fine print of Apple's DMA announcement (that took a while), which is, at best vague and misleading, I wanted to share my thoughts. 

While Apple has behaved badly for years, what they did yesterday represents a new low, even…

— Daniel Ek (@eldsjal) January 26, 2024

He explains that Apple is already charging a commission of 17% (and 10% for recurring payments) on digital goods purchased. Thus, an additional 0.50% charge for users downloading the app, even if they never used it and forgot to delete it, is ludicrous. Furthermore, Ek stated that Apple is giving little to no choice to developers to choose whether to remain with the status quo or change to the new program. 

He explained: “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). Therefore, 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.”

Why Is Apple’s Core Technology Fee Hated?

As highlighted by the testimonies above, many developers are unhappy about the tax of the core technology fee. From an initial glance, the new program looks like a better deal as apps pay no cut of sales to Apple if they distribute via a third-party store. In addition, the pay cut from the original 30% to 17% for developers and 15% to 10% for small businesses makes the deal a more viable option than the status quo.

However, the problem lies when the apps become sufficiently famous. Remember, any app that sees more than 1 million instals per year must pay Apple a 50 euro cent fee for every new installation over that first 1 million, with updates also counting as a new installation. As every massive app undergoes updates every few months, it is inevitable for the developer to pay Apple the fee.

To put it into perspective, Facebook has 408 million monthly users in Europe across all platforms, and iPhones make up about 1/3 of the mobile phone market in Europe. Therefore, if 1/3 of those Facebook users have installed the iPhone app, Meta must pay Apple €67.5 million yearly. Moreover, the amount is just for Facebook as Apple will charge another fee for WhatsApp, another for Instagram, another for Messenger, and so on. 

Lastly, as Apple charges based on active users, developers must pay for users who installed the app years ago and never opened it up but still get automatic updates. 

What’s Next for Apple?

With developers filing complaint after complaint, it is only a matter of time before the DFM steps in. When asked about Apple’s core technology fee and their changes to the rules, EU industry chief Thierry Breton responded: “The DMA will open the gates of the internet to competition so that digital markets are fair and open. Change is already happening. As of 7 March, we will assess companies’ proposals with the feedback of third parties. If the proposed solutions are not good enough, we will not hesitate to take strong action.”

Therefore, Apple still has time to adjust its plans as the tech giant could take a leap out of Unity’s business model by changing their initial plan after waves of backlash.

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