Apple will minimize app retailer commissions for small app makers by half to 15%
Tim Cook, Apple CEO, speaks at Apple's Worldwide Developer Conference (WWDC) at the San Jose Convention Center in San Jose, California on Monday, June 4, 2018.
Josh Edelson | AFP | Getty Images
Apple announced on Wednesday that it would reduce its commission for the App Store for software developers with annual net sales of less than $ 1 million on its platform to 15%.
Apple currently receives a commission of 30% of the total price for paid apps and in-app purchases in the App Store. For some small app makers, the new policy could cut the amount they pay Apple in half.
According to Apple, the App Store Small Business program begins January 1, and developers who qualify will receive reduced App Store fees for paid app and in-app purchases. New developers who have not yet published in the App Store also receive the lower commission of 15%.
The move is an olive branch from Apple as lawmakers around the world increasingly focus on its business practices for the App Store. This is the only way for most people to install software on an iPhone or iPad. A report published in October by the House Justice Subcommittee on Antitrust Law stated that Apple was making "above average profits" in the App Store.
The new program is aimed at small developers who earn less than $ 1 million per year with all of their apps in the Apple App Store after Apple charges. Once developers cross that threshold, they will be billed at the standard 30% rate, Apple said. If they later achieve less than $ 1 million in revenue for a calendar year, the lower commission can be restored. Apple announced that more details on the terms of the reduced commissions will be announced next month.
Wednesday's announcement is independent of Apple's lower 15% fee for the second year of subscriptions billed through the App Store. This also applies to large companies and was implemented in 2016.
Apple said in an annual filing with the SEC last month that a reduction in the App Store commission rate could adversely affect the company's financial results. App Store revenue is an integral part of Apple's services business, which generated $ 14.55 billion for the quarter ended September and represented 22% of the company's revenue for the period.
However, Apple continues to charge a 30% in-app purchase fee for the highest-earning apps, which means the impact on Apple's finances can be minimal. Additionally, the maximum discount for each publisher is capped as the post-sale commission drops to 30% after Apple's fees exceed $ 1 million.
According to Apple, the App Store has around 1.8 million apps, but apps are a winning-take-most business. According to an estimate by the app analysis company Sensor Tower from 2019, the top 1% of app publishers generate 93% of sales in the Google App Store and Play Store.
The change will help small businesses offer virtual courses or sessions through an app that have a fixed cost like teacher's time and that have become more prominent during the Covid-19 pandemic. In a separate post on its website, Apple highlighted a swim coach app, a coding app for kids, and an indie game as companies that could benefit from the policy change.
Apple does not charge any commission on physical goods purchased through apps, such as booking a personal class or an Uber. However, other classes or events held online, such as a virtual yoga session, are considered a digital commodity and are subject to the commission fee. After a loud public dispute with Facebook, these charges were suspended until the end of the year.
The changes are unlikely to reassure Facebook or Fortnite maker Epic Games, which is embroiled in a lawsuit with Apple over the company's 30% fee and related practices. An estimate from August found that Epic Games has grossed over $ 1.2 billion on the App Store to date, so it is not eligible for the reduced commission.
Spotify, which has also challenged Apple's App Store fees, responded to the change on Tuesday.
"Apple's anti-competitive behavior threatens all developers on iOS, and this latest move further shows that their App Store policies are arbitrary and capricious," said Spotify.
"While we find their fees are too high and discriminatory, Apple's tie-in of its own payment system to the App Store and the communication restrictions that penalize developers who choose not to use it have put apps like Spotify at a severe disadvantage Ensuring the market remains competitive is an important task. We hope regulators will ignore Apple's "window dressing" and take urgent action to protect consumer choice, ensure fair competition and level the playing field for all. "