Apple has announced a reduction of its App Store commissions from 30% to 15% for developers who earn less than $1 million per year. As part of its new App Store Small Business Program, the reduction in commissions will apply to both paid apps and in-app purchases.
App Store Small Business Program reduces commission to 15% for developers earning less than $1 million
Under the App Store Small Business Program, Apple is aiming to help small developers during the pandemic so that they can save on their investments and grow their virtual business. This program will not be for developers and companies that already have billings above $1 million (post-commission deduction revenues), whether it is from in-app purchases or app sales.
The company has outlined its changes as following:
- Existing developers who made up to $1 million in 2020 for all of their apps, as well as developers new to the App Store, can qualify for the program and the reduced commission.
- If a participating developer surpasses the $1 million threshold, the standard commission rate will apply for the remainder of the year.
- If a developer’s business falls below the $1 million threshold in a future calendar year, they can requalify for the 15 percent commission the year after.
Tim Cook, Apple’s CEO, said in a statement:
“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.”
Apple has more than 1.8 million apps in the App Store, and each one of them has been reviewed by a team before it was published in the store. Along with review and developer support, the company is responsible for creating more than 250,000 application programming interfaces, development tools, and secure payment interfaces. The company shared this information in its announcement to show why it charges its 30% commission and also referred to the independent study done by Analysis Group earlier this year. Apple firmly believes that its 30% App Store commission is justified.
Apple is the center of many antitrust investigations and lawsuits around the world, and this move seems like a response to these legal troubles. Although not openly, Apple has been making changes to please developers such as opening up HomePod to third-party music services, allowing third-party browser and mail apps as defaults, and now lower commission rate for deserving developers. Despite these changes, we don’t expect companies like Spotify and Epic, which earn billions per year, to be satisfied. They had created a movement under the guise of supporting small developers and their revenue, and while Apple’s response benefits the small devs, it does not benefit the big companies in any way. Epic still will not be allowed to create an alternative store for iOS, for now.