Third-party app stores are coming to the iPhone in Europe courtesy of the Digital Markets Act (DMA), which forces Apple to open iOS to competitors. But that doesn’t mean apps are going to be any cheaper now that Apple is ready to allow competition to the official iOS App Store.
Epic will be one of the providers of these new app marketplaces, the Epic Games Store (EGS). Epic just confirmed the commission it’ll take from developers that publish apps on the EGS and use Epic’s payment processor. Developers will pay 12%, which sounds better than some of Apple’s commissions. I’ll note that Apple’s fee may also include payment processing, depending on what the developer wants to do in Europe.
That EGS fee might seem like a great deal, but it isn’t as good as it seems. Developers who pay 12% to Epic might also be on the hook for Apple’s CTF fee, which amounts to €0.50 per app installation after 1 million downloads.
As I said before, the DMA won’t make apps cheaper in the EU. It’ll just complicate things. The only point of the EGS is to get Fortnite on the iPhone again.
Epic Games Store fees
Per 9to5Mac, Epic confirmed the Epic Games Store fee structure at the Game Developers Conference. Epic said the EGS will be available on iPhone by the end of the year, using the same commission fee structure from the Windows and macOS platforms:
Finally, we shared more about our plans to bring the Epic Games Store (EGS) to mobile later this year. EGS will become the first ever game-focused, multi-platform store, and will work across Android, iOS, PC, and macOS. Mobile developers will benefit from the same fair terms on EGS for PC: 88/12 revenue share and the same programs you can leverage to keep 100% of revenue using your own payments for in-app purchases, Epic First Run, and Now On Epic.
That 88/12 split applies to app purchases and in-app content only if the developer doesn’t use their payment processor. That’s something a spokesperson further clarified for 9to5Mac:
The Epic Games Store has a 88/12 revenue split for developers who distribute paid-for apps on PC and Mac and that will continue on mobile platforms. Developers do not pay Epic anything to distribute free apps. If developers offer in-app purchases, they can choose to either use our payment processing system with the 88/12 revenue share or use a third-party payment processor and keep 100% of that revenue, just like they do today.
So, one could conclude that the 12% fee that Epic is charging is there to cover the payment processing fee, not costs associated with running the Epic Games Store on iPhone and other devices. And, again, remember that any developer placing apps in the EGS will also pay fees to Apple once the CTF threshold is met. The same goes for Epic and its games, by the way.
Meanwhile, Apple has new commissions in place for developers in the EU who want to get rid of the old deal. Fees range from 10% to 17% (depending on the developer’s size) if the developers use their own payment processor, or 13% and 20% if they use Apple’s. The CTF is also due if their apps pass that 1 million downloads milestone.
Larger companies that no longer benefit from the lowest possible commission (10%) might be enticed by that 12% commission that EGS proposes. Make that no commission if they use their own payment processor. But if they’re inelligible for the App Store Small Business Program that would get them a 10% fee, they’re probably running popular apps already. Those apps might get more than 1 million downloads a year. Hence, they’d have to pay Apple the CTF fee.
It might be better for those developers to stick with the old App Store terms rather than the new ones. Apple provides a fee calculator, which I used a few weeks ago to essentially show that iPhone apps won’t get any cheaper in the EU because of the DMA. The Epic Games Store won’t make it happen either.
Also, let’s not forget that the App Store gives developers access to all the devices in the EU, or the world. Meanwhile, the EGS can’t offer the same exposure. Revenue will be a lot larger for App Store apps than EGS.
It’s all about Fortnite
The only good thing coming out of the Epic Games Store is access to Fortnite from an official source. Since Fortnite is so popular, Epic will pay the CTF for it. And if Epic thinks that paying €0.50 per user to Apple is fair, it means that the company also thinks it can make more money from in-app purchases on the EGS in Europe than it would from the App Store.
Fortnite is banned from Apple’s App Store, and there’s no indication Epic will be able to bring it back.
We’re still in the early days of the DMA, of course. Maybe the EU will decide it doesn’t like the CTF, but I have the popcorn ready. I’m curious to see how the EU will tell Apple that it can’t tax developers for access to the iPhone, the developer tools, and the hundreds of millions of users in Europe that could run their software, or what sort of fee would be fair.
Epic and others certainly don’t like the €0.50 CTF fee. If they have their way, they’d want free access to the iPhone.
One more thing
There is one thing that the EGS might provide access to that the App Store won’t: Apps that Apple bans from the App Store. The same goes for other app marketplaces coming to the iPhone in Europe.
That’s not necessarily a good thing, however. It can open the door to clones and other potentially malicious apps.
