Apple's EU Core Technology Fee Could Bankrupt Freemium App Developers

App developers in the European Union who choose to opt in to Apple's new
business terms must pay a 1/2 Euro "Core Technology Fee" or CTF for every
app install over one million installs, a model that has the potential to
bankrupt free or freemium app developers.

Apple does not charge for the first one million "first annual installs" per
iOS account each year, but after that, developers will begin racking up
charges. A free or freemium app that goes "viral" and is downloaded more
than one million times could be forced to pay astronomical fees, as
demonstrated in estimates shared by developer Steve Troughton-Smith.

Under Apple's new business terms, a free or freemium app that gets two
million annual "first installs" would need to pay an estimated $45,290 in
fees per month according to Apple's fee calculator, or more than half a
million dollars per year, even if no money is earned.

That's an unsustainable model for free apps, and freemium apps would need
to be earning at least 1/2 Euro per user to break even with the fee.

A freemium app with thousands of installs from non-paying users could end
up owing far more than is made.

Developers will likely need to charge up front to ensure their apps make
enough money to pay the CTF, as offering a free-to-download app could be
risky if downloads exceed 1 million.

Free and freemium app developers can, however, choose to stick with Apple's
current App Store business terms instead of opting for the new terms. In
that situation, nothing would change, and app developers would continue to
pay a 15 to 30 percent commission to Apple.

The 1/2 Euro CTF applies to apps distributed both through the App Store and
through alternative app stores if developers choose the new business terms.
With the App Store, developers are charged the 1/2 Euro fee and must pay a
10 to 17 percent commission to Apple. With an alternative app store, there
is no commission. Fees can be estimated for the existing terms and the new
terms through a dedicated calculator that Apple has provided to developers.

Here's a breakdown of the available options:

Current App Store Agreement - Developers pay Apple a 15 to 30 percent
commission. Under one million in revenue is a 15 percent commission through
the App Store Small Business Program, over $1 million results in a 30
percent commission. Subscriptions require a 30 percent commission for the
first year, and a 15 percent commission for the second year and beyond.

New terms, App Store distribution - Commission drops to 17 percent from 30
percent, and 10 percent from 15 percent. There is an additional fee of 3
percent for using Apple's payment system, so the commission would be
between 13 and 20 percent for a developer that opts for the new rules and
uses in-app purchases. The 3 percent fee does not apply for developers who
use alternative payment systems. Developers must also pay 1/2 Euro per app
install per user each year after 1 million app installs.

New terms, alternative app store distribution - No commission, but
developers must pay 1/2 Euro per app install per user annually after 1
million app installs.

According to Apple, the CTF is applied for the first annual install, which
is the first time an app is installed by an account in the EU in a 12-month
period. After the first annual install, the app can be installed any number
of times by the same account for the next 12 months with no charge.

Apple is waiving the fee for nonprofit organizations, accredited
educational institutions, and government entities that are approved for a
fee waiver.

Apple's Core Technology Fee could also be prohibitively expensive for apps
like Spotify that have millions of users. An app that makes $10 million in
sales through the App Store with 10 million "first installs" (aka, a 0.99
price) will need to pay Apple over $500k per month.

https://www.macrumors.com/2024/01/25/apple-eu-fees-could-bankrupt-app-developers/

On 1/25/2024 10:04 PM, Oscar Mayer wrote:
> Apple's EU Core Technology Fee Could Bankrupt Freemium App Developers

TL;DR

Then sit down, STFU and stop rocking the GD boat. No one is putting a
gun to your head and saying "Make apps for iOS or else.."

Feel free to be Android Only. See how much money you make then.
Ooops, that's right. Phone app developers make 80% of their money from
iOS.

Regardless of what whining companies say - Hello Epic - Apple is NOT a
"monopoly". Its impossible to be a "monopoly" with 30% of the market.
Period. End of discussion.

If you don't like Apple's terms then fuck off. If enough developers
actually DO fuck off, then Apple will change their rules. But the
developers will also go broke, because there is no money to be made
writing for Android.

So, if you want to hitch your wagon to Apple and make lots of money by
selling apps for iPhones, then agree to Apple's rules.

Simple.

Trying to get governments to declare Apple a "monopoly" is not going to
work. Which is why the U.S. Supreme Court just rejected the entire Epic
case.

On 25/1/2024, Nick Charles wrote:

> Its impossible to be a "monopoly" with 30% of the market.

16%

And dropping.

For exactly this reason.