Apple App Store head to resign as Apple continues to face global regulatory pressure
2024-08-24
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Apple's App Store business has been under regulatory pressure recently. The latest news is that Matt Fischer, head of Apple's App Store business, will leave in October, and the Apple App Store will be split into two teams: one responsible for supervising Apple's own App Store and the other responsible for distributing other applications. As of press time, Apple's relevant person in charge has not responded to reporters on whether this news is accurate.
Matt Fischer has been in charge of the App Store business for more than ten years. From the perspective of business adjustments, Apple has split off a team responsible for the distribution of other applications. The background is that users in some regions can download or use applications on Apple devices without going through the App Store. Behind this, Apple has been under regulatory pressure from the European Union and other places. Under regulatory requirements, Apple, which originally had a relatively closed ecosystem, has gradually opened up options other than the App Store and Apple Pay to developers or users.
In the European Union, Apple is under particularly great regulatory pressure, and has undergone several adjustments to its terms, covering commissions, whether software can be downloaded outside the App Store, and other regulations.
Last year, according to the Digital Markets Act, the EU designated six companies, Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft, as "gatekeepers" to focus on supervising these companies. The Act officially came into effect in March this year. In January this year, Apple announced major updates to iOS and App Store in the EU, allowing users to download software outside the App Store and providing new business terms. The new terms include reducing handling fees, stipulating payment processing usage fees and core technology usage fees.
This is not the only adjustment Apple has made this year in response to EU regulation. In June, the European Commission announced that, after a preliminary ruling, Apple's App Store rules prevented App developers from guiding consumers to use purchase methods outside the App Store and guiding users to choose these offers, which violated the Digital Markets Act. Apple allows developers to add external links in the App, but external links are subject to some restrictions. If the charges against Apple are finally ruled, Apple may face a fine of 10% of its global annual revenue.
In response to the European Commission's announcement in June, Apple announced earlier this month that it would make adjustments. Apple plans to update the regulations this fall to allow developers to communicate with customers, promote and guide customers to the purchase channels of their choice outside the App Store, and developers can design promotions related to offers in the app, including subscription prices or other offers available for the app.
As Apple adjusts the relevant regulations of the App Store, EU users are able to bypass the Apple App Store to download and use some software, and developers are able to guide users to other purchasing channels. Some external app stores have recently begun to appear on Apple devices in the EU. As early as 2020, Epic Games' game "Fortnite" was removed from Apple's shelves for bypassing in-app purchases and opening third-party payments. Recently, Epic Games launched the Epic Games Store on EU iOS devices, which offers games such as "Fortnite" under Epic Game. Third-party application stores such as AltStore PAL have also been available on EU iOS devices this year.
Apple has adjusted its App Store terms under regulatory pressure, which may have a potential impact on its revenue. The commission that Apple charges for digital content consumption on apps on the App Store is often referred to as the "Apple tax." If an app bypasses in-app purchases and opens third-party payments, the "Apple tax" will be difficult to collect. In addition, the proportion of the "Apple tax" itself is also under pressure to be lowered. In China, Apple charges a commission of 30% for "standard businesses" (15% for small businesses). In January this year, Apple stated that the new business terms to be provided in the European Union include reducing related fees. The handling fee paid by iOS apps distributed through the App Store for digital goods and services transactions will be reduced to 10% (applicable to the vast majority of developers and subscriptions after the first year) or 17%.
The "Apple tax" revenue is reflected in Apple's service business revenue. According to the latest quarterly report, in the quarter ending June 29 this year, Apple's service business sales, including the App Store, increased by 14.1% to US$24.2 billion, while Apple's hardware product sales revenue, including the iPhone, was US$61.564 billion. These two items constitute Apple's main source of income.
In its annual report ending at the end of September 2023, Apple mentioned the impact of changes in App Store rules on revenue. Apple said that the impact on the App Store business includes legislation, litigation, and investigations. Litigation and investigations have led to changes in business terms and may change further. Future changes may affect the relevant fees Apple charges developers. In addition, if the commission rate is reduced, it will have an impact on the company's business and operating performance.
Outside the EU, the collection of "Apple tax" may also face antitrust pressure. In March this year, Apple was sued by the US government for antitrust violations. The relevant indictment mentioned the 30% commission that Apple collected from many application developers. There are precedents for reducing the "Apple tax" in other parts of the world. South Korea passed an amendment to the Telecommunications Business Act in 2021, and Apple subsequently reduced its commission rate in South Korea to 26%.
Apple may need to find more revenue in the future. Recently, there are reports that Apple is increasing pressure on Tencent and ByteDance, requiring the two companies to cooperate in plugging payment loopholes in WeChat and Douyin to prevent developers from using similar loopholes to guide users to external payment systems and avoid Apple's commission.
Tencent management recently clarified in a conference call that "it has not commercialized small games on iOS through in-app purchases (bypassing payment)" and said that Tencent is negotiating with Apple. If the discussion makes progress, it will bring incremental revenue to Tencent, game developers and possibly Apple. However, Tencent management also said about the commission of the App Store that there is a natural tension between the game industry and the App Store, the root cause is that the App Store charges about 30% commission. Over time, whether for regulatory reasons or commercial reasons, the trend is that the commission rate of the App Store will change or decrease.
(This article comes from China Business Network)
