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Apple Drops App Store Commission to 15% for Small Developers

Responding to increasing criticism and threats of government regulation, as well as the economic stress from the COVID-19 pandemic, Apple has announced the App Store Small Business Program, which will slash the App Store commission from 30% to 15% for developers who earn $1 million or less per year. The program is slated to launch on 1 January 2021.

Apple says that more details will be forthcoming in December, but for now, here’s what developers need to know:

  • New and existing developers who made up to $1 million from the App Store in 2020 will be eligible.
  • If a developer passes the $1 million annual revenue mark, they will be charged the higher 30% commission only for the remainder of the year.
  • If a developer falls below the $1 million threshold in a calendar year, they can requalify for the 15% commission in the next calendar year.

Based on estimates from analytics firm Sensor Tower, this change will benefit 98% of developers while impacting just 5% of App Store revenue. (However, developer David Barnard says to take Sensor Tower’s data with a grain of salt.)

With Apple giving such a boon to small developers, you would expect larger companies critical of Apple like Epic Games and Spotify to be overjoyed since they have often claimed they are fighting Apple for the sake of such small developers. But—surprise!—they’re not happy.

Epic Games has been in a fight with Apple for months after it tried to slip a way to buy in-game currency for its smash-hit game Fortnite into the iOS version while bypassing App Store payments. Apple immediately banned the app, which triggered a flurry of lawsuits. Epic CEO Tim Sweeney had this to say about Apple’s new program:

This would be something to celebrate were it not a calculated move by Apple to divide app creators and preserve their monopoly on stores and payments, again breaking the promise of treating all developers equally.

Epic’s goal, as stated in its lawsuit against Apple, is not just side-loading of apps in the App Store, but to allow competing app stores, like the Epic Games store, to be distributed by Apple in its own App Store.

Spotify, a partner with Epic in the Coalition for App Fairness, also released a statement:

Apple’s anti-competitive behavior threatens all developers on iOS, and this latest move further demonstrates that their App Store policies are arbitrary and capricious. While we find their fees to be excessive and discriminatory, Apple’s tying of its own payment system to the App Store and the communications restrictions it uses to punish developers who choose not to use it, put apps like Spotify at a significant disadvantage to their own competing service. Ensuring that the market remains competitive is a critical task. We hope that regulators will ignore Apple’s ‘window dressing’ and act with urgency to protect consumer choice, ensure fair competition, and create a level playing field for all.

Despite those objections, actual independent developers were thrilled.

Whether or not this is primarily a PR move on Apple’s part, it means real money in the pockets of developers. David Barnard estimates that he would have raked in an additional $380,000 over the past 12 years with a 15% commission, or an average of over $31,000 per year. That’s a real difference to a real person.

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Comments About Apple Drops App Store Commission to 15% for Small Developers

Notable Replies

  1. Epic Games and Spotify are really P.O.ed that they are too big to qualify; they are the ones who started the big kerfuffle. I suspect that Mark Zuckerberg and Jack Dorsey getting their derrières hauled before the US congress last week while Apple Is biding time before it is seated on the podium is a contributing factor as well:

  2. I’m astounded and oddly amused by how brazen Apple can be in these things. It’s a really smart move. Divides the developer sphere into two groups. One that’s huge and now will be much more friendly towards Apple. The other much smaller and finding themselves left with fewer allies yet paying just as much as before. However, since Apple’s bottom line is driven almost entirely by the latter group (it’s estimated just 2% of all devs make up the big sellers driving 95% of Apple’s App Store revenue [NYT is the actual source but I won’t link to paywalled content]), Apple will lose barely a dime over all this. In terms of goodwill, Apple could have hardly gotten more bang for buck with any other move. Crafty really. Chapeau! :laughing:

  3. He didn’t. He meant “huge” in terms of numbers, not revenue. The Times article says that the program covers 98% of developers, but they only contribute 5% of revenue(!)

    It’s also, you know, a good thing to do, full stop.

  4. I think Apple should go with a simpler method of a 15% commission on the first $1mil revenue in a calendar year and then 30% for additional revenue. Much more straight forward and prevents companies from avoiding that $1M threshold.

    Epic won’t be happy until Apple pays them to develop for the Apple platforms.

  5. This is true. But this is a good way for Apple to thumb its nose and shut Epic Games, etc. up about claiming to be the great big knights in shining armor fighting the evil empire to defend and protect the livelihoods of small developers who are suffering from the 30%. They now have less to whine about to regulatory groups.

  6. I’ve never understood how sophisticated marketeers can come up with these plans that create these undesirable donut holes. A developer with just under $1 mil in revenue will net just under $850K after Apple takes its bite; while one earning just over $1mil will net just over $700K, a loss of $150K in net revenue for increasing his gross revenue. This is bonkers.

    As Paul (and others) have noted, a progressive schedule where Apple takes a 15% commission on gross revenue below $1 mil and 30% on revenue above that point eliminates this problem. Furthermore, there is now no longer a need to administer this arbitrary division in developer types. Apple’s loss is limited to $150,000 for any company. So Apple’s cut grosses out to 15% for a $1 mil developer; 22.5% on a $2 mil developer, 27% on a $5 mil developer, 28.5% on a $10 mil developer, and 29.7% on a $50 mil developer. It’s a big deal to small developers and pocket change to large ones.

  7. I wonder how many developers straddle that one million revenue, or if it’s more that most make just thousands or less and then a few make well over one million?

    For any developer who might be near a million, if they apply for the program and get accepted, they will be charged 15% for the first million and the 30% after they reach one million on additional revenue. However, if that happened, the next year they would be ineligible for the 15% level.

  8. That was my take as well, the 1M boundary zone is probably not that populated.

  9. I agree. Perhaps it’s not a common zone, but even still, since it’s just a program that will apply to people (it’s not like Apple’s trying to attract people to it), there’s no reason to have the gotcha point.

    We ran into this all the time when we were in charge of the Take Control books. It was all too easy to end up with coupon combinations that didn’t make sense, and we worked hard to avoid such situations, even when it meant that we had to create and manage many more specific coupons.

  10. I read somewhere that the reason Apple makes you enroll in this discount plan is to prevent sleazy developers from creating multiple dev accounts to keep their revenue for each under the $1M level. By making you apply for it, Apple can investigate and make sure you only have one account. If they just gave the discount automatically for everyone, devs could just release each of their apps under a separate account and get the discount even though their total revenue was way more than $1M.

  11. OK, that’s fair. It shouldn’t be possible to game the system on the other end either.

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