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In response to the European Union’s Digital Markets Act (DMA) and the need to comply with regulations while fostering a competitive app market, Apple has made significant adjustments to its Core Technology Fee (CTF) for developers in the EU. These changes aim to address concerns raised by developers regarding potential excessive fees and the impact on small app creators. Let’s delve into the details of Apple’s updated policies and how they are reshaping the app development landscape in the EU.
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Overview of Apple’s Core Technology Fee
Apple’s Core Technology Fee (CTF) is a policy that the company introduced in response to the European Union’s Digital Markets Act (DMA). The CTF is a fee that Apple will charge developers for each user account that downloads their app, even if the developer does not use Apple’s payment services or the App Store.
The CTF is currently 50 euros per user account per year. However, for the first 1 million downloads, accounts are not to pay the fee. This means that developers with apps that have more than 1 million annual installs will have to pay the CTF for any additional installs beyond that threshold.
Apple has stated that the CTF is designed to “allow students, hobbyists and other non-commercial developers to create popular applications” without having to pay the fee. However, developers will be required to undergo an annual audit to ensure they are in “non-commercial status” and qualify for the exemption.
For start-up companies with an annual revenue of less than 10 million euros, Apple has introduced a three-year support process. This means that these developers will not be subject to the CTF for the first three years, even if their apps exceed 1 million installs. After this grace period, Apple will evaluate whether to charge the CTF based on the developer’s scale.
The introduction of the CTF has been met with criticism from some developers, who argue that it goes against the “original intention of the European Union” and could lead to malicious competitors boosting the downloads of their friends’ apps to trigger the fee. However, Apple has stated that the CTF is necessary to comply with the DMA and maintain the security and quality of its platform.
Exemptions and Grace Periods
To mitigate the impact on small developers and non-commercial entities, Apple has implemented exemptions and grace periods within its CTF framework. Developers with no revenue from any global business are now exempt from the CTF, provided they meet specific criteria and certify their non-commercial status annually. Apple stated that if the developer does not have any income (only distributes free apps without in-app purchases and cannot use tricks to bypass Apple’s payment threshold), then there is no need to pay Apple a “core technology fee”. According to Apple, this will allow non-commercial developers to create popular apps. From these apps, they could eventually start to make good revenue.
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Support for Small Developers
For start-up companies generating less than 10 million euros in global annual business revenue, Apple has introduced a three-year support process. This initiative allows small developers a grace period before being subject to the CTF, giving them time to scale their businesses without immediate financial obligations. During this period, developers exceeding one million first installs will not pay the CTF, fostering growth and innovation within the developer community.
Compliance with EU Regulations
Apple’s adjustments to the CTF align with the EU’s DMA requirements, which mandate certain entitlements for developers, such as the ability to sideload apps, use third-party app stores, and offer alternative payment methods. By revising its fee structure and eligibility criteria, Apple aims to strike a balance between regulatory compliance and supporting a diverse ecosystem of app developers.
Developer Feedback and Industry Response
The changes to Apple’s CTF come in response to feedback from developers and industry stakeholders who expressed concerns about the potential financial strain on small developers and the impact on app innovation. By addressing these concerns and providing exemptions for specific developer categories, Apple seeks to create a more inclusive and supportive environment for app development in the EU.
Future Implications and App Store Dynamics
As Apple continues to refine its CTF policies and adapt to evolving regulatory landscapes, the implications for app developers and the broader app market remain significant. The shift towards more flexible fee structures and exemptions for certain developer segments could reshape the dynamics of the App Store and encourage greater diversity in-app offerings.
Conclusion
Apple’s updated Core Technology Fee (CTF) policies in response to the EU’s Digital Markets Act (DMA) demonstrate the company’s efforts to balance regulatory compliance with supporting a thriving app ecosystem, especially for small and non-commercial developers. By exempting developers with no revenue and providing a three-year grace period for small businesses, Apple aims to foster innovation and encourage app creation without the burden of excessive fees. This approach addresses the concerns raised by developers who feared the CTF could stifle creativity and limit opportunities for new entrants.
The adjustments to the CTF, such as the one million first annual installs threshold and the revenue-based criteria, suggest Apple’s willingness to adapt its policies to the needs of the developer community. This flexibility could lead to a more diverse and competitive app market in the EU, as developers feel empowered to take risks and experiment with new ideas without immediate financial constraints. What do you think about the new CTF rule? Is it enough for developers and they shouldn’t push it further? Let us know your thoughts in the comment section below.
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