Apple Changes How the Core Technology Fee Works and Confirms that Its Alternative Business Terms Will Apply to iPad Apps This Fall

One of the most controversial aspects of Apple’s response to the EU’s Digital Markets Act (DMA) was the introduction of a Core Technology Fee (CTF), which must be paid by developers who opt into Apple’s alternative business terms. Today, in a post on its developer website, Apple announced changes to the CTF and regarding the treatment of iPadOS, which was added to Apple’s DMA compliance obligations earlier this week.

The problem was that the CTF as originally conceived applied to all apps, including free apps. If a developer offered a free app and had first annual app installs of over 1 million installations, they would owe the €0.50 per installation fee, regardless of the fact they earned no income from the app. The fee, as proposed, would likewise be a problem for developers with other sources of income that weren’t enough to pay the CTF.

Today, Apple made two changes to the way the CTF works:

First, no CTF is required if a developer has no revenue whatsoever. This includes creating a free app without monetization that is not related to revenue of any kind (physical, digital, advertising, or otherwise). This condition is intended to give students, hobbyists, and other non-commercial developers an opportunity to create a popular app without paying the CTF.

Second, small developers (less than €10 million in global annual business revenue*) that adopt the alternative business terms receive a 3-year free on-ramp to the CTF to help them create innovative apps and rapidly grow their business. Within this 3-year period, if a small developer that hasn’t previously exceeded one million first annual installs crosses the threshold for the first time, they won’t pay the CTF, even if they continue to exceed one million first annual installs during that time. If a small developer grows to earn global revenue between €10 million and €50 million within the 3-year on-ramp period, they’ll start to pay the CTF after one million first annual installs up to a cap of €1 million per year.

The first change should take care of the free app scenario regardless of its popularity. The second change is designed to transition small businesses into paying the CTF. The first time a business with less than €10 million of global annual revenue crosses the CTF threshold, they won’t pay the fee. They will, however, have to start paying the fee up to a €1 million cap if the business’ global annual income grows to between €10 million and €50 million in that 3-year period. If revenue exceeds that range, the cap on the CTF presumably would not apply.

In the same post, Apple confirmed that the same EU rules that apply to iOS will begin to apply to iPadOS this fall and that a download of an app on both iOS and iPadOS will only count as one annual installation for CTF purposes.

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