When journalists or analysts ask Apple CEO Tim Cook on the thorny, controversial foreign issue facing the iPhone maker often says that Apple complies with the law in every country where it does business.
Now Apple is reportedly working to comply with a law that might force major changes to the iPhone and disrupt Apple’s lucrative app distribution model.
Apple is developing software that meets the latest requirements of the European Union, that are to come into force in 2024, according to Bloomberg news. Nothing is final, but Apple is considering changes, including allowing third-party browser engines, giving wallet apps access to the phone’s NFC chip, and switching the charging port to USB-C from the company’s proprietary Lightning connector, according to the report.
These changes would address long-running consumer complaints and would give third-party apps – including mobile wallets – a lift PayPal‘s Venmo and mobile browsers like Google Chrome – Greater likelihood to compete with Apple’s built-in apps. Switching to a USB-C charger would mean most individuals could pack one charger for his or her phone and laptop.
But the biggest reported change is that Apple is working on allowing direct downloads or “sideloading” of apps from the web, including potentially third-party app stores, to iPhones.
Currently, the App Store for iPhone is the only way to download software for iPhones.
At first glance, this appears to be the answer to the biggest antitrust grievance Apple has faced in the last decade. Apple is making huge profits from its app store, where up to 30% of digital sales made through any app it distributes.
Many firms, including Coin baseepic games, Game, goal, Microsoft, Spotify and Twitter, complained about Apple’s fees and the undeniable fact that Apple may delay updates or remove apps due to violating App Store policies. Match and Spotify shares jumped after Tuesday’s report.
But developers could have to wait to check the positive print in the official announcement before celebrating.
According to Bloomberg News, for starters, the changes could only come into force in Europe.
It is not a small market, but Europeans spend less on iPhone apps than Americans. Of the estimated $85 billion the Apple App Store has earned to date this yr, spending on iOS apps in the EU has been around $6 billion, according to estimates by Data.ai, an organization that tracks app downloads and spending. By the same estimate, the American store was answerable for about $29 billion.
In a impossible worst-case scenario for Apple, if alternative app stores in Europe resulted in a complete lack of App Store sales in the region, it might only reduce Apple’s services business by about 4% and its total revenue by about 1%. and earnings per share up 2.5%, according to Morgan Stanley estimates published on Wednesday.
Apple reported total sales of $394 billion, of which $78 billion got here from services in the 2022 fiscal yr that resulted in September.
The US has proposed similar laws, the Open App Markets Act, which is currently being debated in Congress.
How Apple can still become profitable from apps
Even when EU law forces Apple to sever its control over App Store distribution, the company should discover a way to charge for apps distributed otherwise.
In last yr’s App Store policy lawsuit with Epic Games, Apple officials argued that App Store fees pay for mental property – development tools utilized by developers to construct iPhone apps – and never only for distribution. Applications distributed over the Web would likely proceed to use Apple’s programming interfaces.
Apple also argued that the App Store is vital for customer security, as software that Apple has not reviewed could steal personal or payment information. So if Apple opens the iPhone to third-party apps or app stores, developer security requirements are likely to apply.
For instance, Apple may require developers who want to distribute apps outside of the App Store to apply for programs to access specific programming interfaces that enable this, or to certify that they meet certain security requirements. It may additionally require app developers to display a warning pop-up if their apps should not distributed by Apple.
Apple CEO Tim Cook speaks at the annual Apple Worldwide Developers Conference in San Jose, California, June 6, 2022.
Peter Dasilva | Reuters
Apple’s actions in South Korea are an instructive example. Earlier this yr, a legal ruling forced Apple to allow apps distributed through the App Store to bill customers directly, reasonably than using Apple’s own payment system.
Apple did this by requiring app developers to provide a spreadsheet-format report detailing every in-app transaction over the course of a month, then taking a cut from those purchases. Apple reserved the right to audit developer books.
Apple was able to implement its system since it still controlled App Store distribution, and developers had to agree to the terms of service to get any distribution in any respect. On this case, app developers had to submit a request to Apple for “powersto enable your personal payment processing and consent to Apple’s spreadsheet and billing system. (South Korea is explores Apple to see if his system violated the latest law).
Apple also required that apps using this policy display the message “This app doesn’t support the App Store’s private and secure payment system.”
If Apple uses similar tactics in Europe, it could lead on European consumers to consider that the App Store is the safest and best place to buy iPhone software. Or developers may find it’s too much trouble to search for alternatives.
“Apple customers have long prioritized the security, centralization and convenience that the App Store provides,” Morgan Stanley’s Erik Woodring wrote in a memo on Wednesday.
The main points of how Apple ultimately implements these changes will depend upon how its lawyers interpret the Digital Markets Act. Apple also typically exhausts all available legal remedies when it comes to difficult the App Store model, including appeals, according to a Morgan Stanley memo.
Apple declined to comment.