How Europe is fighting Apple's money-printing machine

By some estimates, the iPhone is the most successful consumer product of all time. Despite only having been around since 2007, today there are an estimated 1.4 billion in active use—so that’s not even including older iPhones that are stuffed in the back drawers, or are sitting at the bottom of electronic waste bins. It means that right now, roughly 20 per cent of everyone on Earth has an iPhone in their pocket.

And unsurprisingly, it is because of this that Apple is one of the most wildly successful companies in history, raking in billions of dollars of profits every quarter, and routinely topping the list of the world’s largest companies.

However—the company’s success isn’t entirely due to the number of iPhones it sells.

Arguably the real genius is in the control that Apple has when we’re using our iPhones. To the point where the company has essentially created a money-printing machine by handing itself a virtual monopoly over some aspects of how we use our devices.

For example, if you buy an app from the iPhone App Store, Apple will typically take a 30 per cent cut of the sale price. Meaning that if you pay £2 for an addictive game to play on the bus—Apple is getting 60 pence of it for doing, well, almost nothing.

This 30 per cent “Apple tax” (as detractors call it) even applies to in-app transactions if you’re buying digital goods. Say, for example, if you want to buy some extra lives in your game, or if you’re in a video app and want to buy a film to watch, Apple will similarly get a piece of the action, simply for facilitating the purchase.

The same even applies in the "real world" too. If you use Apple Pay to make a payment in a shop by tapping your phone instead of your card, Apple will get a small cut of the money—just like your credit card company does.

The genius from Apple’s perspective is that this machine simply prints money for the company—because Apple gets to decide what is allowed on the iPhone, so it has granted itself the exclusive right to decide where you can download apps from and how you pay for them.

At least… this is how the machine is supposed to work, but recently someone threw a wrench into it.

After years of grumbling from the likes of Spotify, Epic Games (which makes Fortnite, the most popular video game in the world), and Match Group, which owns all of the major dating apps, at the end of last year, the European Union decided to do something about Apple’s virtual monopoly.

It passed a new law to regulate the Big Tech firms called the Digital Markets Act (DMA), which essentially is designed to force Apple to open up the iPhone to make it more accessible to outside competition, removing Apple’s ability to take a slice of every transaction.

And over the next few weeks, European users will start to see these changes put into practice, as Apple is rolling out a big software update that will make it harder for Apple to print money.

For example, under the new rules, Apple will have to allow other companies to run their own app stores on iPhone if they want to—Amazon already has its own alternative app store on Android phones, and the expectation is that it will do something similar on iPhone. And similarly, Apple is being forced to open up the wireless payment technology that lets you tap your iPhone to pay—meaning that soon your banking app could bypass Apple’s payment system entirely.

Whether this will finally switch off the money-printing machine remains to be seen—but it seems likely to at least slow it down. That’s why Apple has been complying with the new rules in the sulkiest way possible—by promising to display scary-looking security warnings to users who use alternative app stores, and even charging the most popular apps additional fees per download, to attempt to continue to take a slice of app revenues.

And Apple is also being very careful in how narrowly it is interpreting the new law. In fact, British users won’t see anything different—because it’s an EU-only law, the new rules will not apply to us. At least until we pass similar laws—which is expected in the not too distant future.

But it is an important moment in tech. As for over a decade now, Apple’s money-printing machine has been in overdrive, and has kept Apple’s shareholders handsomely rewarded. But now the tide may be turning and Apple may have to compete a little harder for our cash—so perhaps this could be the moment that Apple’s overwhelming dominance of the mobile industry began to falter.