Developers in the European Union who decide to participate in Apple’s new system will have to pay a €0.50 “Core Technology Fee” (CTF) for each app that passes the one million installs mark, a cost that could discourage freemium app developers.
Apple does not charge for the first million “first installs of the year” on an iOS account annually, beyond that, developers start incurring the fee. A free or freemium app that experiences an explosive surge in downloads, surpassing the one million mark, could face exorbitant fees, as illustrated in an estimate shared by developer Steve Troughton-Smith.
Under Apple’s new business model, a free or freemium app that garners over two million “first installs” in a year would be liable to pay $45,290 monthly as per Apple’s calculation, amounting to over half a million annually, if not more. This strays from the typical model of free software, and freemium software may need to generate at least €0.50 per user to break even. A freemium app with a large user base of non-paying users might rack up more costs than revenue. Developers may need to calculate upfront to ensure their apps generate sufficient revenue to cover the CTF, as offering a free app with the potential to exceed one million downloads carries a degree of risk. Nevertheless, developers of free and freemium apps have the option to stick with the existing Apple App Store model instead of adopting the new terms. In that scenario, nothing will change, and software developers will continue paying Apple a 15 to 30 percent fee. The €0.50 CTF applies to apps distributed through the App Store and other app stores if developers opt for the new business model. Through the App Store, developers are charged a €0.50 fee and must pay Apple a commission of 10 to 17 percent. It’s no different for other app stores. Fees can be estimated for both existing and new models through a dedicated calculator provided by Apple for developers. Here’s an overview of the options: Current App Store Agreement – Developers pay Apple 15 to 30 percent. It’s 15 percent for under $1 million through the App Store Small Business Program, and 30 percent for over $1 million. Registering demands a 30 percent commission for the first year, and a 15 percent commission for the second year and beyond. New App Store model – The commission has been reduced to 17 percent from 30 percent, and 10 percent from 15 percent. There is an additional 3 percent fee when using Apple’s payment method, so the total service fee would range from 13 to 20 percent for developers opting for the new rules and utilizing in-app purchases. The 3 percent fee is not applicable to developers using alternative payment methods. In addition to this, developers also have to pay €0.50 per app install per user annually after surpassing 1 million app installs. In the new App Store distribution model, there is no work, but developers have to pay €0.50 for each installed app per user annually after reaching 1 million installs. According to Apple, the CTF is applicable to the first install of the year, which marks the first instance of the app being installed with an account in the EU within 12 months. Subsequent installations with the same account within the following 12 months do not incur a fee. Apple offers waivers for non-profit organizations, accredited educational institutions, and government agencies that are eligible for fee exemptions. Apple’s Core Technology Fee would also be manageable for apps such as Spotify, which have millions of users. An app generating $10 million in sales through the App Store and amassing 10 million “first installs” (at a rate of 0.99) would need to pay Apple over $500k per month. Under the new European App Store fee, if you make $10 million in sales, Apple’s share is $6.2 million annually. Assuming there are no additional sources of income, your net income would be: $2 million after taxes – or 20% of your sales, and I wouldn’t launch a program in Europe. pic.twitter.com/MUCxVHcHOo — Nikita Bier (@nikitabier) January 25, 2024
The EU’s universal software update is integrated within iOS 17.4, and developers opting for Apple’s new operating system will commence fee payments starting in March when the update is rolled out to the public.
