January 27, 2023

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App store avalanche forecast as Apple bows to EU demands By Reuters

©Reuters. FILE PHOTO: The Apple Inc logo is seen at the entrance of the Apple Store in Brussels, Belgium November 28, 2022. REUTERS/Yves Herman

By Martin Coulter

LONDON (Reuters) – Apple’s (NASDAQ:) competitors are positioning themselves as an alternative to its dominant app store as the iPhone maker prepares to allow others on its devices in the European Union.

The block’s Digital Markets Act (DMA) will force Apple and tech giant Google (NASDAQ:) to allocate space to third-party app stores on their respective iOS and Android devices.

With the DMA rolling into effect over the next two years, third-party alternatives will have an easier way of getting onto iPhones and Android devices.

And if bits of legislation go into effect, competitors ranging from smaller startups to behemoths like Amazon (NASDAQ:) and Microsoft (NASDAQ:) could try to lure consumers and app developers alike away from Apple and Google.

Ben Wood, CMO of industry analysis firm CCS Insight, said he expects “an avalanche of app stores” in the near future.

“There’s a ‘coalition of the willing’ emerging, and everyone has a vested interest in no longer having to pay what they see as a tax to Apple,” Wood told Reuters.

Apple and Google did not respond to requests for comment.

Android users can currently install apps from alternative sources, a technique known as “sideloading,” but often this requires them to turn off certain security settings.

Apple’s apparent concessions to sideloading are a win for industry leaders like Twitter owner Elon Musk and Spotify (NYSE:) CEO Daniel Ek, both of whom have lamented the company’s 30 percent surcharge on purchases through its App Store.

Competitors plan to bring frustrated developers into their stores, promising lower commission fees and the potential for exclusive deals with popular apps.

“Competition is a good way to improve services,” said Paulo Trezentos, CEO of Aptoide in Portugal, which reduces in-app purchases by 15% to 25%.

Offers for exclusive content could fuel competition in app stores in the same way as the “streaming wars” between Netflix (NASDAQ:) and challengers like Disney+ and Amazon Prime, Trezentos said, adding: “Netflix has content that HBO doesn’t have. t have … app stores can be like that.”

Paddle, a payment processor for software companies, has built its own competitor for the app store, which it plans to launch in Europe once the DMA goes into effect.

“A 30% fee is actually pretty outrageous when we compare it to how much it actually costs to process payments and what Apple actually offers,” said CEO Christian Owens.

Owens said Paddle’s in-app payment system would charge developers between 5% and 10% on transactions.

“The biggest hurdle they have to overcome is the consumer,” said Wood of CCS Insight.

(This story has been corrected to correct the spelling of CCS Insight in paragraphs 5 and 16.)