Apple Cuts App Store Commission To 15 Percent For Small Businesses With Less Than $1M Revenue

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Written by Dana Sanchez
App Store
Photo by Alireza Khoddam on Unsplash

Apple says it plans to help small-business developers by reducing the commissions it charges them from 30 percent to 15 percent on paid app revenue and in-app purchases on App Store, one of the world’s most dominant mobile software marketplaces.

Developers who earn up to $1 million in annual sales per year from all their apps in 2020 can qualify for the reduced App Store rate of 15 percent, half of Apple’s standard 30 percent fee.

Tim Cook, the CEO of Apple, said the move is a way to support small businesses, which he described in a statement as “the backbone of the global economy and the beating heart of innovation”.

An estimated 98 percent of developers will be eligible for the 15 percent cut, but those developers generated 5 percent of the App Store’s total revenue in 2019, according to analytics company Sensor Tower, New York Times reported.

The App Store generated an estimated $50 billion in revenue in 2019 according to CNBC. Cook has described App Store as the future of the company’s business. 

Apple faces growing antitrust scrutiny over the App Store business model, 9to5Mac reported. Multiple lawsuits and complaints have been filed recently over Apple’s “business-killing” practices related to how it treats developers.

Fortnite creator Epic is suing Apple and Google over their store policies, which have also been criticized by Spotify, Match Group and others.

The world’s most popular video game, Fortnite was kicked off Apple’s App Store for adding a direct payments feature and bypassing Apple’s standard 30 percent fee.

Since the beginning of the App Store, Apple has taken a 70-30 split with developers on paid apps. With subscriptions, they took 30 percent the first year, and then it dropped to 15 percent in subsequent years. This commission is at the heart of possible antitrust violations over The App Store, 9to5Mac reported.

Apple had a year of bad publicity in 2020, The Verge reported. Much of it focused on Apple’s 30 percent take of all paid app sales and in-app purchases and the many rules it imposes on developers before it allows entry into the App Store.

Companies including Tinder parent Match Group and Spotify banded together to criticize Apple for monopolizing the iOS marketplace and for using its power to stifle competition and charge unreasonable fees to developers large and small. Other controversies included a European antitrust investigation into the App Store and Apple Pay, a public showdown with software maker Basecamp and disagreements with FacebookMicrosoft, and others over unfair restrictions on third-party iOS apps.

The new commission program should please niche app makers, indie game developers and others who felt the scale and success of the App Store didn’t translate to tangible developer benefits in recent years, according to The Verge.

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“The move should help generate some positive press for Apple and please smaller app makers. But it doesn’t really address the concern of developers such as Epic Games who want a way to reach iPhone owners without taking part in Apple’s payment system,” Axios reported.

David Heinemeier Hansson, co-founder and chief technical officer of Basecamp, described Apple’s move on Twitter as clever but cynical and sick.

“Machiavelli would be so proud of Apple. Trying to split the App Store opposition with conditional charity concessions, they – a $2T conglomerate – get to paint any developer making more than $1m as greedy, always wanting more. As clever as its sick,” Heinemeier Hansson tweeted.

He described the App Store commissions as an “abusive tax on payment processing” that remain abusive, even after “being lowered from 10x to 5x the market rate.”

Some social media users agreed. “Apple is incredibly smart at being evil – now they have ~98% of developers on their side while only losing ~1.5% of App Store revenue,” VortexHero tweeted. “If you complain now, you’re either a greedy corporation (even though they get special treatment – ex: Amazon) or hate indie devs. Pure evil.”

Others tweeted support for Apple, such as Rajvi Sandiford: “You’re delusional if you can’t recognize the immense value that the Apple AppStore bring to developers…a business with 1 person is still in fact, without a doubt, a small business. You’re making yourself look like a Clown face on CNBC, it’s hilarious. You’re envy and greed are showing.”

Rajvi Sandiford@Rajvi_Sandiford·Replying to @dhhYou’re delusional if you can’t recognize the immense value that the Apple AppStore bring to developers…a business with 1 person is still in fact, without a doubt, a small business. You’re making yourself look like a

Clown face

on CNBC, it’s hilarious. You’re envy and greed are showing.