The EU to Receive €500 Million from Apple: Understanding the Impact on Technology

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The following week, there was another clash between Apple and European regulators. According to the Financial Times, the company could face a huge fine for alleged anti-competitive conduct in its music streaming business. from that story:

The fine, estimated at around 500 million euros, is expected to be announced early next month and will be exclusive to the European Commission, which is investigating whether Apple used its own platform to favor its own services over those of competitors. This will be the culmination of research into prohibition laws.

The investigation is looking into whether Apple blocked apps from informing iPhone users of cheaper alternatives to access music subscriptions outside the App Store.

The process dates back to a complaint filed by Spotify in 2019. From what we said at the time:

Apple’s app the Store is a key distribution platform for Spotify. However, Apple receives a 30% commission on all sales made through this site. Spotify and many other third-party app developers have long complained that the store (which includes music streaming subscriptions) is an unfair “tax.”

“Apple requires Spotify and other digital services to pay a 30% tax on purchases made through Apple’s payment system, including upgrades from free to premium services.” Said Daniel Ekco-founder of Spotify, chief executive officer in a blog post.

“If we pay this tax, we will be forced to artificially inflate the price of premium membership far above the regular price.” Apple Music. And keeping prices competitive for our customers is beyond our control. ”

For more information on the fine itself, Dan Milmo explains.

In the years since then, complaints have diminished somewhat. Apple declined to respond directly to the FT’s report, saying it does not comment on speculation, but pointed to the European Commission’s decision last year to exclude the “tax” aspect from an investigation launched by Spotify. ‘s complaint. The revised counter statement states that the main harm is no longer the 30% fee levied by apps that use in-app purchases or the requirement to offer them in the first place, but simply the fact that other payment options exist for users. It was forbidden to communicate.

“We are pleased that the European Commission has narrowed the issue and no longer challenges Apple’s right to collect fees on digital goods and require the use of in-app payment systems that users trust,” Apple said in a statement. Ta. time.

These so-called “anti-steering” rules have been tested by regulators around the world, and various jurisdictions have placed formal limits on Apple’s ability to impose them. But these restrictions rarely go as far as competitors like Spotify would like. Because Apple is letting out a sharp gasp. If forced to do so, companies could direct users to alternative payment methods and still charge fees. In some cases, that new fee accounted for 27% of costs, and his 3% reduction in in-app purchase fees was justified on the basis that it reflected the fact that Apple was not paying directly for credit card processing. I am.

“We are currently negotiating the price.”

Assuming the fine is imposed as expected, Apple is unlikely to be too disappointed. The Digital Markets Act, which Apple and other “tech gatekeepers” must comply with by March 6, has already forced changes to the App Store that will put Apple Music in unfair competition with Spotify. The Competition Commission’s concerns will almost certainly be corrected. As for the cash itself, “500 million isn’t a laughable amount, even for a company as big as Apple, but it’s a fraction of the maximum potential, and it’s a fraction of the company’s total.” An even smaller amount’ of annual profit.

In fact, it’s possible that Apple will avoid fines with dignity. The company hammers home one of its core points every time it is hit by regulatory action that leaves room for compromises, such as imposing a 27% fee on outside purchases. That is, the real criticism is not about the lofty points. Basically, it’s a simple haggling over fees. If complaints about Apple’s control of the App Store boil down to “I want to pay less,” that would be an easier fight than one that would force Apple to actually relinquish control of the platform.

Some critics make deeper claims. Spotify, for example, has long complained about more detailed aspects of Apple’s platform, from the fact that Apple Music is installed by default on its devices to the way platform owners break their own rules about free. I’ve been holding you. Trials (Apple can independently offer trials that end the moment they are canceled; all third parties must provide access until just before the first billing deadline).

For others, the gist of the principle is poor in reality. Epic Games famously introduced a unique payment process for Fortnite, which resulted in Apple pulling the game from the App Store. The company already pays hefty cuts to operate its gaming consoles and operates its own app store for PCs. Issues with Apple have always been viewed through the lens of how much Apple pays.

Perhaps this is why Epic is also the longtime Apple critic most eager to enter the world of an EU-mandated alternative App Store. You may remember the debate over whether the company’s proposals amounted to “garbage” or meaningful concessions. Well, three weeks have passed,
Epic Games announces the launch of Epic Games Store for iOS.

This is a bold move. The company will immediately pay him 0.50 euros for every download on the store, and an additional 0.50 euros for every download of Fortnite via the store after his first 1 million. But compared to keeping it on the App Store, per user he should be able to get that amount back in one “Battle Pass” purchase. And to the company’s credit, it clearly believes the principles exist. At risk.

Cash is also constantly flushed in case it takes longer to break even. The company, which is run by founder and CEO Tim Sweeney and has a 40% minority stake held by China’s Tencent, announced earlier this month that it will become the world’s leading company in the world of gaming and entertainment. The collaboration required a $1.5 billion investment from Disney. Disney is a long-time ally of Apple, and its CEO was on Apple’s board of directors until 2019, but competition between Apple TV+ and Disney+ made that unsustainable. . We haven’t seen the beginnings of a messy breakup yet, but perhaps even the House of Mouse will want to pay a smaller share of the world’s most valuable company.

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