Last Thursday, Apple's Japanese subsidiary announced that, in compliance with Japan's newly enacted Mobile Software Competition Act, it will open its platform to third-party app stores and external payment channels. This marks the second major blow to Apple's dual monopoly—app distribution and payment systems—following similar regulatory pressure in the EU.
**Half of Profits from Services** Japanese iOS users can now install third-party app stores, download apps directly from external websites, and make payments to developers without Apple's intermediation. This raises the question: Is this still the iOS ecosystem we know?
For Apple, this dismantles its once-impenetrable ecosystem—a cornerstone of Steve Jobs' legacy, established in 2008. Unlike Android's open platform, Apple tightly controlled app distribution, sales, payments, and services, creating a walled garden. While CEO Tim Cook hasn’t introduced disruptive new products, this ecosystem has sustained Apple’s stable user base, market dominance, and revenue growth, propelling its market cap to $4 trillion.
In the first three quarters of the current fiscal year, Apple reported $313.8 billion in revenue, with services contributing $79.6 billion (over 25% of total revenue), second only to iPhone sales. Analysts project service revenue will surpass $100 billion this year—more than the total revenue of most Fortune 500 companies.
More critically, services boast a 75% gross margin, dwarfing the iPhone’s 40%, making them Apple’s profit engine. This year, services could account for nearly half of Apple’s profits. While Apple doesn’t disclose exact "app commission" figures, its App Store facilitated $1.29 trillion in sales last year, with 10% ($129 billion) from digital goods and services. At a typical 30% cut, Apple’s take could be around $30 billion.
But this cash cow is now under existential threat. From Europe’s crackdown to Japan’s forced opening and U.S. legal battles, Apple faces its toughest stress test since Jobs built the iOS ecosystem. The pressing question: Will the dominoes keep falling, eroding Apple’s global moat?
**Japan Breaks Apple’s App Store Monopoly** Japan’s 2024 Mobile Software Competition Act mandates that Apple allow third-party app stores and alternative payment systems—stripping Apple of its dual control for the first time since 2008.
Per guidelines from Japan’s Fair Trade Commission (effective December 18), Apple’s iOS 26.2 update now supports third-party stores like AltStore PAL and Epic Games Store in Japan. For developers, this is a watershed moment. Epic Games, which clashed with Apple over its 30% "tax," can now relaunch *Fortnite* on iOS in Japan.
Apple’s revised fee structure in Japan reflects significant concessions: - 10–21% for in-app third-party payments. - 5% "core technology fee" for sideloaded apps or third-party store purchases. - 15–30% for traditional App Store transactions.
Non-compliance risks staggering fines—up to 20% of Apple’s Japanese revenue (30% for repeat violations).
**EU’s Heavy Hand Against U.S. Giants** Japan’s move mirrors the EU’s Digital Markets Act (DMA), which targets tech "gatekeepers" like Apple and Google for anti-competitive practices. The DMA forced Apple to: - Allow sideloading (direct app downloads from websites). - Permit third-party app stores (e.g., Epic Games Store). - Accept alternative payment systems.
In the EU, Apple slashed commissions from 30% to 17% (10% for small developers after Year 1) and allowed external payments at 12% (dropping to 10%). To offset losses, Apple introduced a €0.50 "core technology fee" per annual app install over 1 million—sparking backlash from free-app developers.
The DMA also imposes fines up to 10% of global revenue (20% for repeat violations), plus daily penalties of €50 million. For Apple ($383 billion in revenue), non-compliance could be catastrophic.
**Antitrust Fines Pile Up** In April, the EU fined Apple €500 million and Meta €200 million for DMA violations—the first such penalties under the new law. Apple was penalized for blocking developers from steering users to cheaper payment options, a practice deemed "anti-competitive."
This follows a record €1.84 billion fine in 2023 over Spotify’s complaint about Apple’s music streaming dominance. Apple plans to appeal, arguing the EU unfairly targets U.S. firms and compromises user security.
**U.S. Threatens Retaliation** The EU’s crackdown has angered the U.S. government, which accuses Brussels of "discriminatory harassment." The Trump administration has threatened retaliatory tariffs (10–20% on EU goods) and digital service taxes against firms like SAP and Spotify.
**Epic vs. Apple: The Legal War** Domestically, Apple battles Epic Games in a five-year antitrust saga. In 2021, a U.S. court ruled Apple’s ban on external payment links anti-competitive. Apple responded with a 27% commission on out-of-store payments—later deemed non-compliant.
This April, a judge barred Apple from charging the 27% fee, calling it "blatant defiance." Epic CEO Tim Sweeney declared "the Apple tax is dead," but the Ninth Circuit later allowed "reasonable" fees tied to actual costs (not 27%). The fight continues.
**U.S. DOJ’s Antitrust Case** The Biden DOJ (now under Trump) alleges Apple stifles competition in super apps, cloud gaming, messaging, smartwatches, and payments. A June ruling denied Apple’s motion to dismiss, setting the stage for a protracted legal battle.
**Global Domino Effect** From the UK (£1.5 billion class action) to South Korea (2021 payment law), Turkey, Brazil, and Colombia, regulators are chipping away at Apple’s moat. Each concession sets a precedent: Why allow 30% fees if Japan accepts 5%? Why ban third-party stores if the EU permits them?
Apple’s nightmare isn’t losing individual markets—it’s a global "compliance standard" dismantling Jobs’ walled garden. The dominoes are tipping, and Apple’s empire may never be the same.
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