In an effort to comply with a somewhat controversial European Union law, Apple will reportedly allow third-party app stores on the iPhone and iPad beginning in 2024. This is something of a jarring revelation, given that Apple has historically managed the App Store with an iron fist and a discerning eye. Apple, in stark contrast to Google, manually approves every app in the App Store. What’s more, Apple in the past has shown no qualms about going to court to prevent third-party app stores from infiltrating its platform.
Apple has to comply with EU regulations
As we detailed earlier this week, Apple’s hand is being forced by the Digital Markets Act (DMA). The DMA, in short, is a sweeping regulation whose overarching goal is to level the playing field in digital markets. Naturally, the companies most impacted by the DMA include Apple, Google, Amazon, and Facebook.
One of the DMA’s pertinent provisions reads in part:
To ensure contestability, the gatekeeper should furthermore allow the third-party software applications or software application stores to prompt the end user to decide whether that service should become the default and enable that change to be carried out easily.
Additionally, penalties for not adhering to the DMA are severe. To this point, if Apple opted to ignore the regulation, it would be subject to a fine “of up to 10% of its total worldwide turnover.” Repeat offenses, meanwhile, would see Apple eligible for a fine of up to 20% of its worldwide turnover.
How the new EU regulation might impact the App Store
There’s no denying that allowing third-party app stores for iPhone and iPad users is a huge move. However, the actual impact on Apple’s bottom line will likely be minimal. For starters, iPhone and iPad users tend to enjoy Apple products precisely because of Apple’s curation. For the most part, users can download and install apps without having to deal with the type of malware that more commonly impacts the Google Play store. In other words, most iOS users likely won’t be tempted, or even intrigued, by third-party app stores.
To this end, a research note from Morgan Stanley (via MacRumors) relays that most iOS users will steer clear of third-party app stores. And even if these new app stores are more popular than anticipated, the ultimate impact on Apple’s bottom line will likely be less than 2%.
The research note reads in part:
Importantly, the proposed changes in the Digital Markets Act (DMA) are regulator-driven, not consumer-driven. From the consumer perspective, we see very little demand for alternatives to the App Store given the unmatched security, ease of use (centralization), and reliability the App Store provides. According to our Fall 2022 Smartphone survey, less than 30% of iPhone owners are extremely likely to purchase a mobile app directly from a developer website vs. the App Store.
Per the DMA, Apple might also have to allow third-party payment options for iOS users. As of now, there hasn’t been any report as to if or when this might happen.
Implementing the framework for third-party support will certainly be resource intensive. However, the overall impact on Apple may ultimately prove to be negligible.