Apple cuts App Store fees in half for most developers

Apple on Wednesday announced the App Store Small Business Program (to launch on January 1, 2021) which will benefit the vast majority of developers who sell digital goods and services on Apple’s App Store by cutting fees in half via reduced commissions on paid apps and in-app purchases. Developers can qualify for the program and a reduced, 15 percent commission if they earned up to $1 million in proceeds during the previous calendar year.

Apple App Store on Apple devices
Apple’s App Store

Michael Liedtke for The Associated Press:

[The $1 million threshold excludes] two of Apple’s fiercest critics, music streaming service Spotify, and Epic, the maker of the popular Fortnite video game.

Both those companies have helped spur increasing scrutiny of Apple’s app store practices among lawmakers and regulators in the U.S. and Europe.

Apple is framing its fee reduction as a way to help most of the companies that make the roughly 1.8 million apps in its store during the tough economic times brought on by the pandemic. About 98% of the app developers generate less than $1 million in revenue annually, according to the mobile analytics firm SensorTower.

But the reduced commission probably won’t leave much of a dent in Apple’s revenue. That’s because the small developers in line to qualify for the cut only contribute about 5% of Apple’s app store revenue, based on SensorTower’s estimates.

MacDailyNews Take: Apple’s App Store cost money to maintain. It is not somehow magically free of costs because it’s Apple’s. There are servers, power, maintenance, employees, etc.

As Apple CEO Tim Cook said in a statement introducing the program: Small businesses are the backbone of our global economy and the beating heart of innovation and opportunity in communities around the world. 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. The App Store has been an engine of economic growth like none other, creating millions of new jobs and a pathway to entrepreneurship accessible to anyone with a great idea. Our new program carries that progress forward — helping developers fund their small businesses, take risks on new ideas, expand their teams, and continue to make apps that enrich people’s lives.

6 Comments

  1. I’m pretty sure Epic will use this against Apple. Whilst I applaud Apple for doing this to help out small developer businesses, it could be challenging for Apple to argue why the split field is fair.

  2. At first, I thought this idea was awesome, but it does present some interesting issues. For example, what if a company is just on the verge of going over the $1 million threshold at the end of the fiscal year? Do they somehow try to prevent that happening so they don’t cross over into the 30% tax bracket? It seems like Apple should have a more graduated system, i.e 15% @ $1 million, 20%@ 2 million, 25% @ $3 million, etc.

    Or something.

    And if I’m misunderstanding, please clarify. I’ve seen one explanation on how it works, and it seemed fairly convoluted to me.

    1. Usually in circumstances like that, it’s 15% on the 1st million, everything over that is 20% up to $2 million, etc. I’ve not read this one, but I’d suspect that’s the case here.

  3. Apple should simply make the commission 15% for the first $1 million in sales, and increase the commission to 30% for any sales above $1 million. Reducing the commission to heavy hitters for their first $1 million in sales won’t hurt Apple’s bottom line one bit. Plus, this system automatically creates a graduated scale for total commissions as sales go above $1 million, and it allows the rules to be identical for all.

    1. Yes, that makes sense, then you don’t have to set up a bureaucracy to approve anything, App developers don’t have to “qualify” for anything. Apple simply deducts the appropriate amount depending on total sales. In some ways, the big developers subsidize the App Store for the small developers.

    2. If I was to use a business tax analogy if you jack up the rate this then creates a barrier to further expanding your business. No, the best way of of doing it is to gradually increase the rate and that then provides an incentive for further expansion.

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