Apple Tweaks EU Core Technology Fee to Avoid Bankrupting Unexpectedly Viral Apps

[MacRumors]

Apple today announced that it is tweaking the terms of the 0.50 euro Core Technology Fee (CTF) that apps distributed using the new EU business terms must pay, introducing a solution that would keep small apps that go viral from being charged unreasonable fees.

First, independent and small developers who earn no revenue at all will not have to pay the CTF. Students, hobbyists, and freeware app developers who distribute free apps and earn no money will not be charged the fee. Developers will need to declare their non-commercial status on an annual basis, and to maintain this status, developers must have no revenue in or out of the App Store for their app product.

Second, to address fears of the CTF causing outrageous fees for an app that suddenly goes viral, Apple has implemented a three year on-ramping process for small developers. The three year period begins when a developer agrees to the new App Store business terms, and during this time, if an app goes viral and exceeds the one million annual install threshold that triggers the CTF, the CTF won't be charged if the developer earns less than 10 million euros in global business revenue, and the fee is reduced after that.

• Under 10 million euros: No CTF during the three year period.
• Between 10 million and 50 million euros: CTF must be paid, but it is capped at one million euros per year for the three year period.
• Beyond 50 million euros: Benefit is no longer available, and the full CTF has to be paid.
• After three years: Developers will pay for each first annual install after the initial one million first annual installs per year.

Note that this ramp up period is only available to small developers who have not previously exceeded one million first annual installs, and it is calculated based on global business revenue rather than just App Store revenue.

Apple says that 99 percent of developers will not be subject to the CTF to begin with, but the new ramp up period will go further to make sure that small developers who get a breakout hit will have time to scale their businesses before having to pay fees.

Back in March, developer Riley Testut spoke with Apple officials at a workshop on the Digital Markets Act, and he asked what would happen if a young developer had an app go viral and unwittingly racked up millions in fees. Testut asked the question because when he was a high school student, he released GBA4iOS outside of the App Store. It was unexpectedly downloaded more than 10 million times, and that would have bankrupted him had he been subject to the Core Technology Fee.

In response, Apple VP of regulatory law Kyle Andeers said that Apple was working on a solution because the company is not trying to stifle innovation. Apple believes that a free app going viral and being subject to exorbitant fees will be a rare occurrence, but the changes will keep that from happening. The CTF update will also be a welcome change for those who want to release entirely free apps outside of the App Store.

The CTF is only applicable to apps that have opted in to the new App Store business terms in the European Union. Apps in the EU are now able to be distributed through alternative app stores and developer websites without having to rely on the App Store.

Apple has more information about the new changes to the CTF on its updated CTF support page.

Article Link: Apple Tweaks EU Core Technology Fee to Avoid Bankrupting Unexpectedly Viral Apps

 

[sw1tcher]

Apple today announced that it is tweaking the terms of the 0.50 euro Core Technology Fee (CTF) that apps distributed using the new EU business terms must pay, introducing a solution that would keep small apps that go viral from being bankrupt.

My guess is this is Apple trying to get ahead of this problem before the EU steps in and decides the CTF is a load of crap and forces Apple to remove it. But will these changes be enough to placate the EU?

 

[Onexy]

Imagine you’d have to pay Apple money to install an app on your Mac from some website.

 

[deathcab]

Smart and reasonable solutions here.

 

[breenmask]

Great news.

In that Apple has no intention of removing the core technology fee. Shows the EU right.

 

[klasma]

Well, that’s an improvement. But the fact that they didn’t include this from the beginning shows that Apple is either stupefyingly myopic and disconnected from their developer base, or that they just try and see if they get a pass.

 

[wdowell]

Makes sense . And if anything it’ll encourage / foster young, new, developers to continue to develop interesting apps

It’s just such a shame that Apple had to be to dragged to its feet, after being pulled up by its knees like a tantrum child with all of this. It’s just embarrassing

 

[dandy1117]

Imagine you’d have to pay Apple money to install an app on your Mac from some website.

As a consumer, you are not directly paying Apple to install apps on your iOS devices. Instead, developers are paying Apple to engage in commercial business on their platform.

A more analogues set of rhetorical questions are: what if sellers had to pay Amazon to sell products on Amazon.com, or if labels had to pay to distribute their songs on Spotify? These analogies help illustrate the relationship between Apple and app developers.

 

[omihek]

Whoever decided that Apple has to be the middleman for everything that happens on any iDevice is a financial genius

 

[wdowell]

Frankly I think one issue that doesn’t help is Apple VP of regulatory law Kyle Andeers himself. He’s American, steeped at the FDA etc in American law traditions and the agressive approach that works in California or Washington political/legal worlds of antitrust is simply so different to that found the eu.


His CV has nothing from working outside the US. He didn’t even do a year out in Paris or whatever. What does he really about the attitudes and legal approaches of eu law and regulatory affairs ?

 

[sw1tcher]

As a consumer, you are not directly paying Apple to install apps on your iOS devices. Instead, developers are paying Apple to engage in commercial business on their platform.

While the app buyer isn't paying Apple directly, they do pay Apple indirectly as the app developer will likely pass the CTF onto the consumer.

A more analogues set of rhetorical questions are: what if sellers had to pay Amazon to sell products on Amazon.com, or if labels had to pay to distribute their songs on Spotify? These analogies help illustrate the relationship between Apple and app developers.

Those are not good analogies though.

The website(s) the iOS apps are purchased and downloaded from are not operated by Apple, so your analogy of sellers having to pay Amazon to sell on Amazon.com doesn't work.

As for Spotify, the music labels don't pay Spotify for their music; Spotify pays the labels a royalty per stream who in turn pay the artists. So this analogy doesn't work either.

 

[wanha]

Whoever decided that Apple has to be the middleman for everything that happens on any iDevice is a financial genius

It was Steve Jobs.

From a 2011 email from Jobs to Eddy Cue and Phil Shiller:

"I think this is all pretty simple — iBooks is going to be the only bookstore on iOS devices. We need to hold our heads high. One can read books bought elsewhere, just not buy/rent/subscribe from iOS without paying us, which we acknowledge is prohibitive for many things."

 

[Sophisticatednut]

As a consumer, you are not directly paying Apple to install apps on your iOS devices. Instead, developers are paying Apple to engage in commercial business on their platform.

A more analogues set of rhetorical questions are: what if sellers had to pay Amazon to sell products on Amazon.com, or if labels had to pay to distribute their songs on Spotify? These analogies help illustrate the relationship between Apple and app developers.

Imagine that, paying Amazon to purchase a product sold at Walmart if the consumer owns a kindle.

 

[luvmango]

As a consumer, you are not directly paying Apple to install apps on your iOS devices. Instead, developers are paying Apple to engage in commercial business on their platform.

A more analogues set of rhetorical questions are: what if sellers had to pay Amazon to sell products on Amazon.com, or if labels had to pay to distribute their songs on Spotify? These analogies help illustrate the relationship between Apple and app developers.

Developers don't have to pay Microsoft anything to write and distribute their own software for Windows

 

[AlexESP]

Well, that’s an improvement. But the fact that they didn’t include this from the beginning shows that Apple is either stupefyingly myopic and disconnected from their developer base, or that they just try and see if they get a pass.

I bet it’s the second one. I’d say the vast majority of their developer base is against the DMA (obviously not talking about the fee, but about the possibility to install apps outside the App Store).

 

[Rogifan]

This all seems overly complex. And another scheme where a small number of developers are subsidizing all other developers.

 

[dandy1117]

Imagine that, paying Amazon to purchase a product sold at Walmart if the consumer owns a kindle.

I believe that even if a book is self-published and distributed on your website or another vendor, authors still have to pay a fee to Amazon for Kindle books.

 

[mrochester]

While the app buyer isn't paying Apple directly, they do pay Apple indirectly as the app developer will likely pass the CTF onto the consumer.


Those are not good analogies though.

The website(s) the iOS apps are purchased and downloaded from are not operated by Apple, so your analogy of sellers having to pay Amazon to sell on Amazon.com doesn't work.

As for Spotify, the music labels don't pay Spotify for their music; Spotify pays the labels a royalty per stream who in turn pay the artists. So this analogy doesn't work either.

I thought Apple was notarising every app, regardless of where it was installed from?

 

[dandy1117]

Developers don't have to pay Microsoft anything to write and distribute their own software for Windows

It's not uncommon for platforms to have different monetization schemes. I think the fundamental question is whether Apple's approach to monetizing the iOS platform is truly unique or why similar models haven't received the same level of criticism.

 

[mrochester]

This all seems overly complex. And another scheme where a small number of developers are subsidizing all other developers.

Sadly, regulation often has the effect of making things more complex. Red-tape has been introduced into Apple’s processes and procedures.

 

[Sophisticatednut]

I bet it’s the second one. I’d say the vast majority of their developer base is against the DMA (obviously not talking about the fee, but about the possibility to install apps outside the App Store).

Now why would the vast majority of the developer base be against the DMA?

 

[Lyrics23]

I believe that even if a book is self-published and distributed on your website or another vendor, authors still have to pay a fee to Amazon for Kindle books.

This is not true. Amazon only receives a cut for books sold on Amazon itself.

 

[twintin]

Developers don't have to pay Microsoft anything to write and distribute their own software for Windows

What has one business model to do with another ?

Developers are free to choose whatever OS best fits their own business model. If MS is cheaper, why not focus on that OS rather than iOS ?

 

[sw1tcher]

I thought Apple was notarising every app, regardless of where it was installed from?

Apple will notarize iOS apps like how Apple notarizes macOS apps. But Apple doesn't get a CTF from Mac app developers for apps people obtain from outside of the Mac App Store, but Apple wants a CTF for iOS apps on alternative stores/websites. That's the point.

 

[mrochester]

Apple will notarize iOS apps like how Apple notarizes macOS apps. But Apple doesn't get a CTF from Mac app developers for apps people obtain from outside of the Mac App Store. That's the point.

Why does that mean they can’t charge for notarising iOS apps? Curious as to how one thing precludes the other.