WSJ: Apple's App Store faces existential threat from EU

"Failure to comply would carry penalties of up to tens of billions of dollars."

From Sam Schechner and Tim Higgins's "Apple’s Hold on App Store Set to Face Significant Challenge From New European Law" posted Thursday in the Wall Street Journal:

Apple is facing one of the biggest challenges yet to how it controls and profits from the App Store as Europe prepares to complete a new competition law in the coming weeks.

The new European Union legislation—which could be effectively completed as soon as this month—is set to direct Apple to allow software to be downloaded outside its cash-generating App Store and limit how companies impose their own payment systems on apps, according to people involved in the negotiations. Failure to comply would carry penalties of up to tens of billions of dollars.

For the past two years, the iPhone maker has battled lawmakers, regulators and rivals around the world to defend how it serves as the gate keeper to more than one billion users of its devices.

“Apple is playing 5D chess right now,” said Paul Gallant, a policy analyst for Cowen & Co. “It will struggle to explain why government changes will radically change the iPhone when Google already does it and it will struggle to explain why it can’t do it in the United States when it may soon do it in Europe.”...

The [so-called Digital Marketing Act]'s most existential threat to Apple comes with a provision that would allow software makers access to the iPhone—through so-called sideloading—outside of the rules and payment scheme of Apple’s App Store. One recent draft of the DMA, overwhelmingly approved in December by a 642-8 European Parliament vote, included sideloading.

My take: Have I ever mentioned that my mother danced with Albert Camus in Algiers? Long story.

27 Comments

  1. Tommo_UK said:
    My guess: the same people who were in denial this was ever going to happen are the same people who never imagined Putin would actually invade Ukraine despite seeing almost 200,000 troops being amassed on the border for months.

    Not seeing Hitler’s blitzkrieg in the making was unforgivable, thinking Putin was just going on manoeuvres incredulous, and believing the EU and other regulators don’t have it in for Apple unbelievable, as I’ve been yammering on about for ages.

    Net net though is see no long term impact. Side loading will piss off long term Apple ecosystem supporters, but conversely attract diehard Android users who don’t want a walled garden and object, misguided or not, to being “forced” to use the App Store.

    Give a little, gain a little. It’ll all come out in the wash.

    4
    March 17, 2022
    • Gary Morton said:
      Tommy I think your thoughts regarding the impact are right on. Another benefit for Apple could be that the EU regulators spend their time going after that 3rd party stores that allow viruses, malware, scams, etc. Maybe such actions would take Margarethe Vesteger’s attention off Apple a little. Oh, but mighty Margarethe only cares about companies that are making money–the primal sin.

      1
      March 17, 2022
  2. David Emery said:
    A big part of the problem with these legislative initiatives is they place a pretty low premium on actually showing consumer benefits. They assert “could result in lower prices” but it’s not clear how that would happen.

    Now a lot of game app developers might well move to cheaper (to them) 3rd party stores. Some of them might even pass savings onto consumers.

    But for me, I have zero interest in anything from a 3rd party store. But then, I’m not the market for lots of apps, particularly phone games.

    9
    March 17, 2022
  3. Fred Stein said:
    Putin threatens nuclear war.

    And regulators want to give sexual and financial predators free reign in the App Store.

    13
    March 17, 2022
    • Jerry Doyle said:
      @Fred Stein: 🙂 Luv it brother Fred! My chuckle of the day so far. Yes, European regulators do have to get their priorities correct, you know. Sex and financial predators come first. To hell with protecting the consumer.

      2
      March 17, 2022
      • Tommo_UK said:
        Jerry, it’s regulators worldwide, not just the EU. The US will move next. I don’t know why everyone thinks it’s only the EU. There’s a global crusade against what’s perceived as the unfair terms in the contractual relationship between developer and Apple, the curated and walled garden nature of the App Store, and more and more regulators with nothing to do except what they’re paid to do, regulate. From India to the EU to the U.K. to the Asia, Apple is under unrelenting pressure. A cave-in is inevitable but it’s not a European problem – just listen to the noises from the US and elsewhere. Over-regulation is coming, but in the end I predict it will have zero impact rather than pose an “existential threat” to the App Store.

        I would rather buy safe and scam/malware/spyware free apps from the App Store than from some dodgy side loading business. I expect when push comes to shove, most security and privacy conscious iOS users will do the same, and those that don’t will do so at their own risk. You can give someone a driving licence but you can’t force them to wear a seat belt. If they go through the windscreen in an accident though, that’s on them.

        Perhaps regulation is the best way to demonstrate the benefits of a curated App Store as horror stores of spyware ridden apps sold outside of it simply serve to strengthen its reputation.

        Apple need to get ahead of this game and take these steps before regulators push this to the fore though, and regain control of the narrative. I still find TCs inability to articulate a coherent strategy to counter this baffling and concerning.

        1
        March 17, 2022
        • David Emery said:
          It’s also the perspective from so many in government that “profit is immoral, and big profits have to come at the expense of ‘the little guy’ and ‘society.'” That’s an attitude that is really hard to address, because so few are willing to explicitly express it.

          3
          March 17, 2022
  4. Brian Loftus said:
    We will not see it but I would rather than offer a version of Android with side loading and leave iOS alone.

    0
    March 17, 2022
  5. Robert Douglass said:
    @Philip
    I’ll bite… So tell us the Albert Camus story…

    0
    March 17, 2022
    • Steven Philips said:
      Al just LOOKS so existential! Kind of Kerouacy! Ahh Paris in the 50’s! 🙂

      1
      March 17, 2022
    • “I’ll bite… So tell us the Albert Camus story…”

      Since you asked, my mom’s obit:

      Faflick, Simone Leboulanger Long-time resident of Lexington, Mass., died Feb. 18, 2019 at age 96 after a long decline. Her husband of 64 years, Carl Edward Faflick, had passed 10 months earlier. She is survived by three children — Annick Mansfield, Philip Elmer, and Simone Coble — seven grandchildren and three great-grandchildren.

      Madame Faflick, as she was known at Boston University, where she taught French for 23 years, was born in Corbeny, France, the mayor’s daughter in a village destroyed in the First World War. She rode out the Second in Algiers, where her parents ran a school for French and Algerian children. “We watched from an open window the amazing spectacle of German bombers flying over the harbor and the streaks of light of the antiaircraft bullets trying to shoot them down,” she wrote in a self-published autobiography, “My Journey to America.” “One night a hissing object passed between us, hit a dozen eggs and splattered the walls of the living room.”

      It was in Algiers, she liked to tell her students, where she mixed with French resistance fighters and danced with Albert Camus, one of the authors in their assigned reading. It was there, too, in 1943, a second lieutenant in the French Army translating for the British, American and French forces, that she met and married her first husband, Waldo Darwin Elmer, a radio engineer from Seattle who had landed in North Africa as part of the first U.S.-British expedition of the war.

      Transported to America by Liberty Ship and widowed by age 29, with two small children and a half-built house, she was nearly ready to go back to France when her Lexington neighbors — many of them architects — pitched in to finish the house on Moon Hill Road where she would spend the next six decades.

      In 1953 she married Carl Faflick, one of her first husband’s classmates at Harvard, who adopted her two children and gave her a third. The extended family — which included her mother, Eulalie, who had moved to America to help with the children — took regular pilgrimages to the Val Andre, the beach town in Brittany where Simone’s childhood friends still gathered every summer.

      She was a voracious reader, an energetic sportswoman (tennis, skiing, sailing, trout fishing), a witty conversationalist and a warm hostess who never said no. Her home in Lexington — and a summer house on Vinalhaven Island in Maine — soon became popular stops for her husband’s business partners and for generations of French friends and relatives making their own journeys to America.

      8
      March 17, 2022
      • Tommo_UK said:
        Thanks for sharing Philip. A lovely obit and very moving.

        1
        March 17, 2022
      • Robert Stack said:
        PED: Beautiful – what a lucky guy you are to have had a mom like that!

        1
        March 17, 2022
  6. Robert Paul Leitao said:
    I find this odd. In Europe they play a lot of hockey and a lot of soccer (hockey on grass). These regulators really can’t see where the puck (or ball) is going. I remember an old Steve Jobs reference to a quote from Wayne Gretzky. Where Apple is going isn’t where the puck (or ball) is at this time. Where Apple is headed is where the puck (or ball) will be in two year’s time. It’s not Apple that will be negatively impacted in the long-run from these short-sighted decisions. I’ll assign this to the case file titled, “The Law of Unintended Consequences.” I’m going to make some popcorn for the big event.

    3
    March 17, 2022
  7. Daniel Epstein said:
    The parallels in the thought process between this law as it applies to side loading etc and the anti vaccination crowd are quite interesting. Why should I get vaccinated and why should I be restricted in how I get my apps on to my phone have similar thought processes even though they are completely different areas of life. The unintended effects may be huge. However I don’t think Apple and App store is doomed. And as an experiment it may prove the wisdom of Apple’s current approach. I think EU crusade is misplaced and potentially harmful but it may be worse for others beside Apple. Apple can survive very well with a diminished App store but can developers make more money with a different ecosystem? There may be a reason they make more money on the Apple App store that is damaged by the law which will make the payouts look more like Google ‘s app store despite being able to access Apple’s clientele. In that case the developers will suffer in ways the law does not anticipate.

    2
    March 17, 2022
    • Robert Paul Leitao said:
      Daniel: It’s not consumers pushing for so-called sideloading or the allowance of alternate payment systems. It’s a small group of very vocal developers with dollars signs in their eyes. Roughly 68% of App Store revenue is currently sourced from games and a portion from the “less savory” business sectors Fred described above. In my view, that’s not Apple’s future for Services revenue. I believe where Apple is headed is already in plain view. Even if the EU, South Korea and the US require the opportunity for sideloading and alternate payment systems, it may be a pyrrhic victory. Apple is entitled to a distribution fee and the company is already pivoting to a different monetization model and it is a model in which the company is free to maintain necessary controls.

      1
      March 17, 2022
      • Daniel Epstein said:
        Agreed it is not the consumers. The developers and others who called for this are akin to the anti vac crowd in my comment. The politicians who think they gain some advantage by getting involved are another part of problem. Eventually though it may cause the consumer behavior to change.

        0
        March 17, 2022
  8. Kenny Kruger said:
    Why we can’t have have nice things…
    I want closed more secure system. If I want side-loading I can buy ANY other phone in the world!

    1
    March 17, 2022
  9. Steven Philips said:
    How about a “certification” label for apps sold in the App Store? Like some physical equipment MIGHT work perfectly well with a Mac or iPhone but it’s unknown. Many would just pay extra (potentially) for items certified as “Made for iPhone” and sold at Apple Stores rather than generic bought at Best Buy or Amazon. No certification for apps sold outside of the App Store. No guarantee of safety or compatibility.

    2
    March 17, 2022
  10. Robert Douglass said:
    Wow. Thank you, Philip, for sharing your Mom’s story.
    It must have been quite something, hearing her tell of activities past.
    It was so very special to have lived through those times.
    Were you lucky enough to learn French from her?

    0
    March 17, 2022
  11. Neal Guttenberg said:
    Are there going to be regulations about how secure a side loading App Store should be? Will Apple be able to try to help “regulate” these other App Stores or will they leave that to the “regulators”? Right now I think Apple should not put out any regulations for these other stores because that acts almost like an endorsement but I am open to other arguments on this.

    One other question is on my mind at the moment. Will someone be able to use a side loaded App to help infect other iPhones besides the ones that the side loaded App is on? I won’t use any side loaded App Store and I think that will make me safer but will I need protection from a side loaded App that someone decides to use? And if that happens on a large scale, will these “regulators” pony up the money to help us recover any damages from these intrusions into our privacy?

    0
    March 18, 2022

Leave a Reply