Apple is proactively cutting its 30-percent take of App Store revenue on products from developers who earn under $1 million to 15 percent with the company continuing to face legal repercussions over that policy.
The company plans to roll out an App Store Small Business Program on Jan. 1 where those smaller developers can apply for a reduced commission payment. That simply means if a developer made under $1 million in the previous year, it’ll be able to apply for the reduced commission, dropping the percentage of their profit turned over to Apple from 30 to 15 percent. This is the widest “discount” Apple has offered for App Store developers since most instances of cuts before this were only on a case by case basis or for specific offerings, like subscription services.
“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,” Apple CEO Tim Cook said. “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.”
More than 98 percent of developers will be eligible for this commission cut, according to mobile analytics company Sensor Tower—and it shouldn’t affect Apple’s bottom line too much. The data shows that the developers who will qualify for the Small Business Program made up less than five percent of the App Store revenue for 2020.
Additionally, if a developer who falls under the Small Business Program ends up surpassing the $1 million threshold, the 30-percent commission will only apply to the time after it’s reached, not retroactively for the entire year. And if a business falls below the $1 million mark in the future, it can re-apply for the 15-percent commission.
Apple’s ongoing legal feud with Epic Games was based around the App Store taking that 30-percent cut of all digital purchases within an app that don’t apply to physical goods. Now, Apple has somewhat loosened its hold on one area of complaint, while still keeping its main source of income safe.
While Apple didn’t directly say anything about it, this feels like a way to try to avoid making further changes to its policies while still holding its monopoly within its own ecosystem. Apple is likely hoping it will detract attention from the complete lack of competing app stores on its mobile platform with this move, according to Epic CEO Tim Sweeney.
“It’s great news for these small developers, but rather calculated to divide,” Sweeney said. “Give special 15 percent terms to tech titans like Amazon, and to small developers who together account for less than 5 percent of App Store revenue, and hope to maintain the monopoly store and payment service. Since 95percent of App Store revenue is from larger developers, consumer prices remain inflated by Apple’s 30 percent tax on most digital purchases.”
Other companies like Spotify and people within the development space echoed this sentiment, saying that this was a “clever” tactic from Apple to give a little ground and maintain the ability to call developers hitting that $1 million threshold complaining about wanting a better commission rate greedy.
Further fallout from the ongoing legal battle between Epic and Apple, along with reactions to this most recent “concession” for smaller developers, will continue heading into the trial date set for May 3, 2021.