Setapp is leading the charge into the EU's brave new world on iPhone

MacPaw Setapp
(Image credit: MacPaw)

Apple recently released a swathe of massive changes to the way it distributes apps on iPhone in the EU. As part of its plan to comply with the new Digital Markets Act, Apple has introduced new ways to distribute and download apps on iPhone through alternative app marketplaces. 

To discuss the new changes, how Apple is handling them, and what they might mean to developers, I recently sat down with MacPaw, the development team behind the popular macOS subscription service Setapp, which lets users subscribe to a library of Mac apps for a monthly fee. In its most rudimentary form, it is an alternative app marketplace for macOS, the kind Apple must now allow on iPhone. So who better to discuss these changes with than developers at the forefront of this service?

Following the announcement of alternative app marketplaces on iPhone, MacPaw quickly confirmed that Setapp for iPhone would be coming later this year. For 60 minutes I spoke with Mykola Savin, Director of Product Management at MacPaw,  discussing in depth Apple’s changes to its iOS business model. Less than 60 seconds after our chat ended (and characteristic of the constantly shifting sands currently redefining Apple’s app business in the EU) Apple published a major update to its new terms for iOS app distribution that will allow users to download apps directly from the web — the exact changes that Savin and the Setapp team had really been hoping to see all this time. 

Following on from our initial conversation, Savin says that “Apple's announcement (regarding web distribution) is certainly an intriguing development that aligns with the vision MacPaw had when we announced the beta version of Setapp Mobile. 

“It appears Apple is reaching a turning point and adjusting its approach, either as a planned move or in response to the feedback it's been receiving.”

Sideloading success 

Apex Legends Mobile on an iPhone 14 Pro

(Image credit: Future)

As Apple continues to grapple with the Digital Markets App and complying with changes without surrendering its entire iOS business model to the EU, the company most recently announced its changes will include a form of sideloading, downloading apps directly from the web, as well as alternative app marketplaces that can feature solely the apps from that developers. 

Savin says that Apple’s “move towards sideloading” is “great,” and a surprising measure that “many, including us, previously considered highly unlikely.” He believes this change “enables more freedom and opens up new opportunities for software vendors, though there are still some questions around the business model that need clarification.” 

"There are still some questions around the business model that need clarification.”

“The fact that developers can now create marketplaces solely with their own apps is a very big change,” Savin continues. 

“This means companies like Epic Games can launch marketplaces with just their own games. And that's huge because it means that this story with the core technology fee can take a different route.” 

The changes could open up more profitable distribution for app vendors, who will still have to pay Apple’s Core Technology fee of 50 cents per download over 1 million downloads, but “they'll be able to keep their entire profit margin, meaning no 20-30% cut for Apple.” Savin estimates this could herald the emergence of big stores from the likes of Microsoft, Adobe, and Steam, as well as the return of major players like NVIDIA’s GeForce Now on iOS.

The fall of the walled garden 

Xbox Cloud Gaming

(Image credit: Future)

Savin says Apple’s “current openness to the industry is notable” and that the company appears to be “actively seeking to find a middle ground, aiming to balance external demands with their business objectives.” He also praised the influence of Epic Games, without which “these changes likely wouldn't have happened.” While Savin believes it's hard to say how much Epic swayed the European Commission, he believes it “clearly acted as a catalyst” for the changes. But what of Apple’s changes in general up to this point?

“In general, first and foremost, we are happy,” Savin tells me. He says that ever since Setapp launched on macOS, users have been clamoring for a similar offering on iPhone. However, the tremendous differences between the regulations on macOS and iPhone (until very recently) have precluded MacPaw from bringing Setapp to the iPhone. Savin describes the frustration of explaining “year after year” to its persistent users, many of whom might not have understood why it was so hard (or really impossible) to deliver Setapp to iPhone users. 

"Apple on the one hand is obviously making efforts to make this process transparent, smooth, and viable for developers"

“We are absolutely happy that we can finally deliver,” Savin tells me, but it hasn’t all been plain sailing. Since the Epic Games App Store lawsuit, first filed in 2020, MacPaw has been aware that changes might be afoot, but legal back and forth has dragged out those proceedings for years. Ultimately Epic Games managed to extract barely any concessions to the benefit of iPhone developers. Instead, it was the EU that delivered the first real changes with its Digital Markets Act, in force since early March, 2024. Savin says that MacPaw’s team was hyped to start building Setapp for iPhone, but before Apple’s public announcement just a few weeks ago “it was really hard to assume what was going to actually happen.” 

“Our team was hyped,” he reveals, “and said ‘let’s start building’, but at the same time we’re like ‘building what exactly?’As soon as Apple started to implement things, everything started to work rather quickly and smoothly.” 

While Apple’s announcement that it would open the floodgates in the EU provided some clarity to developers like MacPaw, Savin says that Apple is also reacting promptly to feedback, pointing to several addendums Apple has made since it first announced the changes. 

“Apple on the one hand is obviously making efforts to make this process transparent, smooth, and viable for developers,” Savin says, but he also highlights “the elephant in the room” of Apple’s new business model. Apple has fought the EU’s changes at every turn and continues to warn users that there are greater risks that come with installing apps via alternative marketplaces. 

Satisfying Spotify and entertaining Epic 

iPhone close up showing Spotify

(Image credit: Spotify)

Before Apple’s announcement regarding web distribution, Savin said that while the change would be “a great opportunity and an interesting change” for some developers, others simply wouldn’t accept the new business terms. Indeed, companies like Epic Games and Spotify have called out Apple for malicious compliance. One independent developer likened Apple to The Godfather, charging a Core Technology fee as if it was protection money. With great foreboding, Savin told me just an hour before Apple’s web distribution change that the refusal of some companies to adopt the new changes could lead to a further loosening up of Apple’s iOS business model. He noted under the initial terms that Apple “still has quite a lot of power” to control the ecosystem, requiring developers to have a developer ID that could be canceled by the company, jeopardy Epic Games fell foul of briefly a few weeks ago. 

Savin points to the history of Microsoft as a great example of how tech regulation can boost competition. He says that when Microsoft was forced to open up Windows to alternative browsers, it lost the battle to Chrome. “But what happened since then? Microsoft was basically forced to evolve and introduce Microsoft Edge,” which is a much more capable and adequate browser than Internet Explorer ever was. 

"I think anyone at any company in the world if someone came and tried to force you to open up more competition in the core of your business, you would be trying to protect it as much as possible"

Before any other changes, Savin highlights that Apple has reduced its commissions, echoing Apple’s declaration that 99% of developers will pay less to Apple under its new guidelines. “Even without joining any alternative app stores, you are dropping your commission from 30 or 20% to 15%... this can save a lot of revenue for vendors.” 

As mentioned, not everyone is happy with Apple's new rules, but Savin appreciates Apple’s difficult position. 

“I think they are trying to strike a balance,” he says, “they are trying to make sure that they're as protected as possible.” Savin notes one stark contrast with his aforementioned Microsoft example, that “in no shape or form was Microsoft threatened in its core by the requirements of opening up the browser market because they were still selling software,” whereas these new EU rules cut to the heart of one of Apple’s most lucrative business channels. 

“So basically the DMA attacks the core of Apple’s business right now, yes they still have hardware… but services and commissions are extremely important."

“So are they malicious? I think anyone at any company in the world if someone came and tried to force you to open up more competition in the core of your business, you would be trying to protect it as much as possible, so I think that’s not fair to say that Apple should just give it up and say ‘This is an open platform.’” 

Savin even thinks it is possible that if Apple sees success with its changes in the EU it could be opened up further afield, provided Apple can still obtain revenue from the App Store and realizes the changes haven’t destroyed Apple’s core business model.

A glass ceiling for developers? 

iPhone 14 with the App Store

(Image credit: Future)

One continued sticking point, even in the wake of Apple’s new web distribution changes, is the very high bar Apple has set for developers who want to get involved. Developers will need to have been in Apple’s developer program and in good standing with it for two years (something Epic Games surely doesn’t qualify for). Others will need a standby letter of credit for a million euros. What does Savin make of these criteria? 

“I think it's a bit too high,” he says of the entry requirements Apple has set. While he says the measures are understandable, they’re a big barrier to individual developers and emerging startups. 

“As the developer of Setapp, we are more than happy,” he says, but that it would be fairer to give every developer a chance to sell their apps directly, just like they can on Mac. Savin highlights that pricing for Mac software is often more straightforward, with developers selling lifetime licenses for Mac, alternative pricing beyond the App Store, and more. “In this regard, I am pro-choice,” he tells me. “We are all adults and it's important for us to be able to make a choice.” 

Despite being a self-professed Apple advocate who isn’t thrilled by government tech regulation, even I have to admit that one measure in Apple’s DMA plan stands out as overbearing, the Core Technology Fee (CTF). Developers using the alternative app marketplace model will be required to pay Apple a flat 50-cent fee for each first annual install of an app once they’ve crossed a one million install threshold. For instance, if Spotify’s app is downloaded 10 million times in the EU, it would owe Apple 5 million euros. This also includes updates, and reinstalls, meaning it’s a recurring fee, renewing every 12 months. 

“I do not personally like it, as a tool,” Savin tells me, but says it’s not without merits. Savin says the CTF precludes certain types of business models because it’s not commission-based — for instance it will deter developers from adopting freemium business models because they need their apps to make money to cover this fee. It also means “it’s not in our best interest to distribute as wide as possible,” because having users who just download an app to check it out and then leave will cost the company money. “It forces us kind of to make some additional barriers to make sure that only people who are actually kind of interested [are installing an app].” Savin says that if you have a very popular freemium app, with millions of installs, but only a fraction of the users are paying, then the CTF fee would destroy your business model. 

Another objection he highlights that I’d never considered is that it robs app developers of some control. If you push out an update to a user who no longer uses your app, but hasn’t uninstalled it, they’ll be counted as a user even if they’re not making a developer money, creating a dangerous scenario for developers who can’t say “I want all these users who are not paying me not to get any updates.” While Savin says this is unfair on Apple’s part, he doesn’t think it was intentional. Apple has added an option to revert back to its old App Store rules, in the case where a viral app could see an emerging developer financially ruined, but as recently as March 18, Apple told the EU it was still reconsidering the implementation of its Core Technology Fee. Savin posits a highly likely, and potentially damaging scenario for devs. “Say you have tried mobile Setapp and have said ‘you know what it’s not for me’ and you are not deleting it, and you keep it for four years… we are basically going to pay two euros for this user for four years… It’s not the most elegant realization of what Apple was trying to do.” 

What alternative app stores will mean for you 

Setapp icon on an iPhone

(Image credit: Setapp)

Savin and I then moved on to discuss the types of content users can expect to see on alternative app marketplaces. Apple has repeatedly warned that users may encounter apps that encourage illicit activity, pornography, and more, but Savin says that, looking at the example of the existing openness of macOS, the safety and security of Apple’s own desktop operating system undermines this argument. 

"We preselect, we test, we talk to vendors, we really pay attention to reviews"

“I think the easiest way for me to address it is to just ask you how worried you are regarding content of such type on your Mac or the internet in general?” Savin says protecting children from harmful content is another discussion that doesn’t end with the iPhone, but that a good portion of us are adults, and that even if there are some marketplaces where there is content intended exclusively for adults then accessing these is “up to the choice of the user… Just seeing what's happening on Macs, I do not have any concerns here.”

So how will users benefit from a marketplace like SetApp, in terms of what we’ve seen it offer on Mac? Savin says there are two main benefits. Firstly, he says that users will gain from MacPaw’s staunch curation of quality apps. With around 200 on its Mac services, it’s a much smaller and less unwieldy beast than Apple’s iOS App Store. 

"You're not worrying about anything, you're just improving your product, getting feedback, and getting paid"

“We preselect, we test, we talk to vendors, we really pay attention to reviews, you know, we have introduced this rating system, only users who actually use the app are able to rate,” Savin says of the Setapp curation process. The company even has a guideline system to help developers if their ratings fall below a certain level, allowing them to improve, before removing apps that ultimately fall short of its quality standards. It’s a far cry from the App Store, which has millions of apps, including poor-quality offerings and outright scams designed to steal cash and cryptocurrency. 

Savin says Setapp is also one of the best ways for developers to get installs quickly, because of how discoverable its apps are. “As soon as an app joins Setapp, you get the majority of your audience within the first week.” For users who like to go between different apps, Setapp cuts out surfing and making purchase decisions. There are no commercials or ad sales, you pay one subscription service fee and can trust that every app on the marketplace is high-quality. Savin even likens it to Apple’s own Apple Arcade offering for gamers on iPhone. The Setapp business model also helps developers retain their users — while it’s hard to justify holding on to lots of different app subscriptions, by subscribing to Setapp, those apps are always available and you only have one subscription to manage. For developers, Savin says that Setapp might deliver less money than direct subscriptions, but there are no customer acquisition costs and “you'll get all your users almost instantaneously.” 

“You're not worrying about anything, you're just improving your product, getting feedback, and getting paid.”  

A glimpse at Setapp for iPhone 

setapp on iPhone

(Image credit: MacPaw)

So how will Setapp on iPhone work? Well, you’ll download the alternative app marketplace, and then you’ll be able to download apps directly from that to your iPhone. For iPhone-specific apps, that will be straightforward. For existing Setapp subscribers and cross-platform apps, things get a bit more tricky. Savin says iOS-only apps will be much like the experience on macOS, but admits that when it comes to multi-platform apps “we are not completely sure what's the best way to do this.” Currently, Setapp uses QR codes — one to offer an app download and another to activate the app, and Setapp is planning to keep this offering going forward. Some multi-platform apps might have direct downloads from the Setapp store, but this doesn’t help iPad users who aren’t covered by the new EU laws. 

“Even within the European Union, we cannot offer a seamless experience for users,” he tells me. As it stands, Setapp might offer an app on iPhone, iPad, and macOS, and within the EU there are now three separate sets of regulations governing their distribution and three sets of rules from Apple. 

According to Savin, some multi-platform developers might not take their apps to Setapp’s alternative app marketplace because they don’t want to create a messy experience for users, or because their apps are used more by iPad users than on iPhone. 

Overall, however, the company seems very optimistic about the changes. Savin anticipates the move will be a nice way to broaden Setapp’s audience, but notes that while the EU is a really important market, it’s not the biggest one it operates in. Savin laments that these changes are only EU-specific. As such, there don’t seem to be any big changes to the Setapp experience beyond the EU for the time being. 

"I know what has to be done to make this experience better, but we just cannot and it's out of our hands."

“Obviously having a separate marketplace like Setapp mobile as a separate app for every user globally would create a much more consistent kind of and transparent user experience, and this is something that you know hurts me badly because I know what has to be done to make this experience better, but we just cannot and it's out of our hands.”

As to when we can expect Setapp’s alternative app marketplace on iPhone? Savin tells me it’s the company’s main priority and they’re hoping to have it out by Spring. Setapp plans to launch a closed beta, and then an open beta before its public release. 

Alternative app marketplaces like Setapp might not be the end of the story, however. Savin tells me that as MacPaw gets familiar with the rules, the company is already developing some fresh ideas that could materialize as early as this year. He says the company is thinking about “how we expand our model and what new experiences for you, both users and vendors, can be introduced, taking into account this new ecosystem.”

“I'm absolutely sure that a lot of companies right now are going to study and see… and I’m absolutely sure that we will have a positive impact on the market because more companies will figure out better user experiences by the end of the day. It always works this way.”

Stephen Warwick
News Editor

Stephen Warwick has written about Apple for five years at iMore and previously elsewhere. He covers all of iMore's latest breaking news regarding all of Apple's products and services, both hardware and software. Stephen has interviewed industry experts in a range of fields including finance, litigation, security, and more. He also specializes in curating and reviewing audio hardware and has experience beyond journalism in sound engineering, production, and design.

Before becoming a writer Stephen studied Ancient History at University and also worked at Apple for more than two years. Stephen is also a host on the iMore show, a weekly podcast recorded live that discusses the latest in breaking Apple news, as well as featuring fun trivia about all things Apple. Follow him on Twitter @stephenwarwick9