Apple Inc. is preparing to comply with a new European competition law by allowing alternative app stores on its iPhones and iPads in the European Union as soon as late next year, according to Bloomberg News. The announcement could pose a major threat to Apple's fast-growing services business, but rivals first need to convince consumers to leave the security and simplicity of using Apple's own store.
Enforcement of the European Union's Digital Markets Act (DMA) is expected to begin in mid-2024, which entails opening up to competitors in hopes of increasing consumer choice. Companies that refuse to comply are subject to fines of up to 10% of their annual global revenue.
Microsoft Corp., Meta Platforms Inc., Amazon.com Inc., and other companies with app stores could all be given a substantial sales boost as a result of Apple's planned change. Upon implementation, customers will then be able to install apps without exclusively relying on the App Store, although other provisions of the law have yet to be put into place, such as allowing for alternative payment systems to their own.
The introduction of competing app stores would pose a major threat to Apple's services business, as its payment tool could potentially be bypassed. Such a scenario threatens billions of dollars in revenue that the company collects from charging a commission of up to 30% on App Store purchases. Estimates from a mobile analytics company, Sensor Tower, show that about $10 billion worth of transactions flowed through the App Store last year.
Apple has argued that allowing sideloading exposes users to security and privacy dangers, a claim some regulators and critics, like 'Fortnite' maker Epic Games, dispute. Epic CEO Tim Sweeney tweeted Tuesday that U.S. Congress must pass proposed legislation similar to DMA, or it "would leave American developers in serfdom."
Conversely, Alphabet Inc.'s Google has allowed sideloading on phones powered by its Android operating system for years, demonstrating that it is possible to do so securely. However, users must adjust settings and swipe past security warnings, meaning 90% of downloads still come from Google's official app store, Epic alleges.
Stock analyst Angelo Zino at CFRA believes that the impact of Apple permitting alternative app stores could be minimal, expecting under 0.2% of total sales to be affected by the change. He commented that most consumers are creatures of habit and very satisfied with the platform, leading him to believe a majority of consumers will likely keep the status quo.
The European Union's DMA looks to give consumers more choice and break the grip of the tech giants, with Apple's reportedly planned change being just one step in the right direction. With competitors now more able to get their pieces of software out to customers, consumers may be able to have greater access to what apps they choose to use.
