Apple makes concessions in the European Union! Lower fees, allow downloads outside the App Store, changes in browsers and payment systems.

Apple is undergoing a series of historic reforms to its Apple, Safari, and App Store products in the European Union (EU) in an effort to appease EU antitrust regulators. According to Apple's announcement on Thursday, these reforms will allow customers to download software from sources other than Apple for the first time. People will also have the option to use alternative payment systems and easily choose a new default web browser.

As part of the reforms, developers will be able to create click-to-pay apps using Apple's payment chip, as well as browsers with third-party engines and a wide range of game streaming services. They will also have the ability to request deeper access to Apple's hardware and software functionalities. Overall, by allowing developers more freedom to create payment apps, develop browsers using different web engines, and provide comprehensive game streaming services, Apple is responding to regulatory pressure and moving towards a more open ecosystem in the EU.

The new reforms do away with the maximum 30% commission that Apple has been charging developers since its launch in 2008. Now, they will only need to pay Apple a 17% commission on app sales, which will decrease to 10% after one year for most developers and subscribers. Apple has not modified its commission structure outside of the EU.

However, it is important to note that while fees are being reduced, Apple is introducing two additional charges. The first is a 3% payment processing fee for apps using Apple's in-app purchase system, and the second is a €0.50 installation fee for software with over 1 million installations, regardless of whether it is installed through the Apple Store or third-party sources. This means that apps sold outside of Apple will not incur additional commissions, only the €0.50 fee.

Apple states that in the EU, over 99% of developers will see a reduction in the fees they pay to Apple, while less than 1% of developers will be subject to additional app installation fees.

Clearly, Apple's fee reductions will impact the company's service revenue, which has become a key growth area for Apple in recent years.

Apple executives warned on Thursday that the aforementioned changes could indeed weaken the user security that the company has long emphasized:

Apple must create technology to allow one app to install other apps, which in itself poses risks. This could be a major threat to device privacy, security, and integrity. Therefore, Apple is implementing technology and policies to minimize this risk. Downloading apps from third-party app stores may introduce new risks to users, as these places do not adhere to Apple's security standards. Apple will not extend its content-related guidelines to third-party markets. Apple's bold reforms address common complaints from developers and legislators. These comprehensive changes will be part of Apple's iOS 17.4 operating system, set to launch in March this year.

Apple's reforms are a direct response to the EU's new Digital Markets Act. Despite making these changes, Apple is still appealing these regulations through the EU court.

The Digital Markets Act imposes strict restrictions on the largest tech companies and strengthens the power of the European Commission as the region's antitrust enforcer. For EU authorities, the Apple case is a major test of whether regulation can force meaningful reforms in the operations of the world's largest tech company.

On Thursday, after news of Apple's significant reforms in the EU, the company's stock price quickly declined, hitting a daily low of $193.11, down from an intraday high of $196.27. Apple ultimately closed down 0.17% at $194.17.