Apple cuts App Store commission to 15% for developers paid less than $1M per year
Apple is launching a new program that will cut App Store commissions to 15% per year, for developers and businesses paid less than $1 million a year by Apple.
Apple's App Store
The App Store Small Business Program, which will launch on Jan. 1, 2021, will only require developers to come in below $1 million per year paid out from Apple to qualify for a lower 15% rate. The lower rate also applies to the first year of subscription sales, making that cut 15% versus the existing 30% for first-year subscribers, if the earnings criteria is met.
If a developer passes $1 million in a year, the standard 30% cut will kick in for the remainder of the year.
"We're launching this program to help small business owners write the next chapter of creativity and prosperity on the App Store, and to build the kind of quality apps our customers love," said Apple CEO Tim Cook.
Apple also says that the new program is coming at a crucial time, and will allow small businesses and independent developers to "innovate and thrive during a period of unprecedented global economic challenge" during the coronavirus pandemic.
"This is a big opportunity for the indie gaming spirit to become truly mobile," said indie developer Phillip Stollenmayer, known for Apple Design Award winner Song of Bloom.
Samantha John, co-founder of iPad coding app Hopscotch, says that the new program will allow her team to "take some risk" in offering the app for free.
"Specifically around our subscription, ... I think it is a good strategy in terms of making money, but it also limits the audience of the app. And we've been wanting to walk back that paywall and let people do more for free in the hopes that farther down the line we will have even more loyal subscribers to Hopscotch," she added.
The iPhone maker said that more details about the program and its eligibility requirements would be released in December.
Apple's 30% cut of in-app purchases has come under scrutiny in recent years, with many developers rallying against the commission and the company's alleged stranglehold on the App Store.
Facebook and Microsoft have criticized the 30% fee, and in September, a coalition of developers launched a group to battle both App Store policies and commissions.
Apple is also still embroiled in a legal battle with "Fortnite" developer Epic Games after it attempted to skirt the commission by implementing a direct payment method in violation of App Store guidelines.
That cut of in-app purchases has also come under fire from antitrust regulators and government officials. Ahead of Cook testifying before the U.S. House Antitrust Subcommittee, the chairman of the committee likened the fee to "highway robbery." Apple is also the focus of ongoing antitrust investigations in Europe and other countries.
Previously, Apple has highlighted an independent study conducted by the Analysis Group that found that the 30% fee is "similar magnitude to the commission rates charged by many other app stores and digital content marketplaces." The Google Play Store also charges a 30% fee on in-app purchases.
In October, Apple also rebutted a U.S. House Judiciary report that claimed it enjoyed monopoly powers on the App Store. In its response, the company maintained that developers were still the "primary beneficiaries" of the app marketplace.
In the most recent Form 10-K that Apple submitted to the Securities and Exchange Commission, the company admitted that any changes to its App Store commission would hurt its bottom line.
The new small business program announced on Wednesday comes a few months after Apple made it easier to developers to challenge specific App Store policies.
Apple's App Store
The App Store Small Business Program, which will launch on Jan. 1, 2021, will only require developers to come in below $1 million per year paid out from Apple to qualify for a lower 15% rate. The lower rate also applies to the first year of subscription sales, making that cut 15% versus the existing 30% for first-year subscribers, if the earnings criteria is met.
If a developer passes $1 million in a year, the standard 30% cut will kick in for the remainder of the year.
"We're launching this program to help small business owners write the next chapter of creativity and prosperity on the App Store, and to build the kind of quality apps our customers love," said Apple CEO Tim Cook.
Apple also says that the new program is coming at a crucial time, and will allow small businesses and independent developers to "innovate and thrive during a period of unprecedented global economic challenge" during the coronavirus pandemic.
"This is a big opportunity for the indie gaming spirit to become truly mobile," said indie developer Phillip Stollenmayer, known for Apple Design Award winner Song of Bloom.
Samantha John, co-founder of iPad coding app Hopscotch, says that the new program will allow her team to "take some risk" in offering the app for free.
"Specifically around our subscription, ... I think it is a good strategy in terms of making money, but it also limits the audience of the app. And we've been wanting to walk back that paywall and let people do more for free in the hopes that farther down the line we will have even more loyal subscribers to Hopscotch," she added.
The iPhone maker said that more details about the program and its eligibility requirements would be released in December.
Apple's 30% cut of in-app purchases has come under scrutiny in recent years, with many developers rallying against the commission and the company's alleged stranglehold on the App Store.
Facebook and Microsoft have criticized the 30% fee, and in September, a coalition of developers launched a group to battle both App Store policies and commissions.
Apple is also still embroiled in a legal battle with "Fortnite" developer Epic Games after it attempted to skirt the commission by implementing a direct payment method in violation of App Store guidelines.
That cut of in-app purchases has also come under fire from antitrust regulators and government officials. Ahead of Cook testifying before the U.S. House Antitrust Subcommittee, the chairman of the committee likened the fee to "highway robbery." Apple is also the focus of ongoing antitrust investigations in Europe and other countries.
Previously, Apple has highlighted an independent study conducted by the Analysis Group that found that the 30% fee is "similar magnitude to the commission rates charged by many other app stores and digital content marketplaces." The Google Play Store also charges a 30% fee on in-app purchases.
In October, Apple also rebutted a U.S. House Judiciary report that claimed it enjoyed monopoly powers on the App Store. In its response, the company maintained that developers were still the "primary beneficiaries" of the app marketplace.
In the most recent Form 10-K that Apple submitted to the Securities and Exchange Commission, the company admitted that any changes to its App Store commission would hurt its bottom line.
The new small business program announced on Wednesday comes a few months after Apple made it easier to developers to challenge specific App Store policies.
Comments
I wonder if other platforms owner will follow. It is easy to criticize Apple. But when it hurts their bottomline. They will give a million excuses not to do it.
Apple can legitimately charge whatever it wants but that isn't, and has never been, the root issue.
I think Apple feels good news won't result from the different investigations and this reduction is a move to leave them in slightly better light when final rulings are delivered.
Why would you be cheering for the massive corporation to become even more massive? I doubt it would be an incentive for them to be more consumer responsive.
That is to be determined. As things stand I feel the EU could rule against Apple but it's still up in the air. One possible outcome could be for Apple to be required to make customers aware (before purchase and in simple terms) that purchasing iOS devices with the App Store, requires tacit acceptance that Apple will have sole control of App Store management and fees.
Not dissimilar to the cookie situation in the EU.
Shareholder expect the management to generate profits. Since Apple owns the store, they do not have to let anyone else in their store which exist to generate profit from their platform. Just because they are better at generating “ginormous” amounts of cash, that by itself does not give anyone the “RIGHT” to be in their store.
The current 15 to 30 per cent is a bargain to what should be a higher rate for using Apple “privately owned” platform and gaining access to the platform customers. The last time I checked I do not think Macy’s has ever given Nordstrom equal access to its stores, customers or products. Nor has either one of them let someone display or sell a product in their stores for just 15 to 30 percent or for FREE!
If you don't think there's profit built into the 15% - 30% you're crazy and you really have no idea how much money some of these apps really make...Candy Crush alone could support all of Apple's costs and more than likely still make them a profit.
I noticed you cut out the last sentence I wrote, which is partly your answer. Why did you edit out the key point? I said "I would be somewhat happy if Apple lost in court." That is an explicit admission that I wouldn't be entirely happy. And the reason for that is that I don't actually want our privileges for writing and purchasing software removed. I'm just pointing out to the idiots out there that removing these privileges is not in their interest. I'm trying to show the negative consequences of their line of thought.
And in any case, what's evil about cheering for a big corporation to become bigger if I was doing that? Are corporations evil in your opinion? Why do you object to growing profits for Apple or any corporation? I know nothing about you, other than you have 22k posts. Are you opposed to capitalism?
I have said previously it would be very sensible for them to capitulate voluntarily before they are forced to do something that might be very damaging to their business. Losing 15% on sales under $1m is nothing compared to being forced to reduce the cut for all, or being forced to allow third party stores (though this may still happen imo). Hopefully this will reduce scrutiny of Apple and give them a bit more goodwill in the antitrust suits - it's good that they're being flexible, though it's a shame it's required regulatory involvement before Apple took action themselves. This also shows Apple is aware it may lose some of the antitrust suits, and as such has taken action to reduce one vector for attack.
It's unfortunate that rather than looking upon this as a good thing for everyone, there is little doubt some of the fanatics here who think Apple can do no wrong and is in it for the good of society will come up with ad hominem attacks for those who dare to criticise Apple. In fact I see Lkrupp has already stepped up to the plate as expected.
It will be interesting to see if Google follows suit, I very much doubt console makers will follow.
So Apple is going to cut off its nose to spite its face? They're going to cut out 90% of their services revenue overnight? Yeah good one.