Apple recently announced plans to cut App Store commission rates for smaller businesses and developers. If firms earn less than $1million a year from paid app revenue and in-app purchases, then Apple’s commission rate will fall from 30% to 15%. If a developer passes the million-dollar threshold then they are immediately bumped into the 30% category for the rest of the year.
Apple’s CEO, Tim Cook, said he hoped that the reduced commission would help “developers fund their small businesses, take risks on new ideas, expand their teams, and continue to make apps that enrich people’s lives.”
This sounds like good news all round but as with anything to do with the tech behemoth, it has sparked conflict and conversation.
Majority will qualify for discount
Apple predict the majority of developers will qualify for the discount but have declined to say how much revenue they will lose as a result of the change. The answer according to analytics company Sensor Tower is ‘not much’. They estimate that 98 percent of developers will be eligible for the cut, but those developers generated just five percent of the App Store’s total revenue last year.
Apple has not always had an easy relationship with developers, particularly some of the larger players. These include Epic who make Fortnite and Basecamp both of whom have incurred Apple’s wrath either for failing to offer support for in-app purchases, or for suggesting users pay outside the App Store.
Basecamp’s David Heinemeier Hansson is particularly scathing about the price drop: “The only good thing about this cynical, Machiavellian ploy by Apple to split developers with selective handouts is that it shows they’re sweating.”
Tim Sweeney, Epic’s CEO, was equally unimpressed and insisted that by giving smaller firms a break: “Apple is hoping to remove enough critics that they can get away with their blockade on competition and 30% tax on most in-app purchases.” Epic will of course continue to pay the higher rate.
Small developers welcome the change
Not surprisingly smaller developers take a different view and are welcoming the change. My colleague Richard Stephenson, CEO at YUDU said: “We are delighted at Apple’s new-found flexibility. We’ve built more than 1,000 iOS apps for our clients, many of whom are selling digital magazine subscriptions. This latest news of the halving of Apple’s commission will radically change the economics for digital publications. This is a timely change with publishing moving rapidly into the digital domain.”
The new scheme is having worldwide repercussions. Ryk Cloete, digital manager, at Future Managers said: “As the leading technical and vocational publisher in South Africa, we welcome this move by Apple. It will allow publishers the opportunity to invest more resources in creating quality educational material that will ultimately be to the benefit of students in colleges across South Africa and Africa as a whole.”
Adam Birtwistle, a technical customer service manager in the UK, predicts the move by Apple will have a knock-on effect: “I think the pressure will certainly be on Google Play to follow suit with reducing the 30% cut they take to at least match the 15% that Apple has dropped to. Overall, this is good news for consumers and creators alike as I think it will result in lower priced in-app purchases.”
One app developer, who declined to be named, was not convinced: “I’m not Apple’s biggest fan. What they’ve done is monopolise the tech industry, it’s their way or no way. Thirty percent for the privilege of being on their store, that’s daylight robbery”.
One of the sticking points for smaller developers is the million-dollar limit. A recent comment on Twitter makes the point: ‘You now have a rational incentive to pull your app from the store after it makes $999,999 unless you’re REALLY sure it’s going to make at least $1,215,000 for this year AND next year.” For companies hovering on the threshold edge, it’s going to be a tough call.
The new ‘App Store Small Business Program’ starts on the first day of 2021. Developers are not automatically enrolled and have to apply to be part of the scheme. Apple say they will be releasing more information about the program in the run-up to Christmas.
For more than a decade the App Store has driven Apple’s astonishing growth. Companies both big and small have long demanded more flexibility from the tech giant and now Epic is lawyered up and challenging Apple’s decision to pull Fortnite from the app store for attempting to bypass in-app payments. In the US Apple has also been the focus of antitrust complaints.
This initiative by the company is clearly an attempt to get both developers and regulators onside after what has been a series of bruising confrontations. Perhaps the program will not only lower rates but also lower temperatures at the same time.
When you are as big as Apple there’s no place to hide. Whatever decisions the firm takes there will always be those to whom Apple can do no wrong, while the opposition struggles to see it ever doing anything right. For the twelfth biggest company in the world with revenues of more than $270B, these may be nice problems to have.
About: With a digital publishing system that’s straight-forward and easy, YUDU provides publishers with the tools to deliver the best version of their publications to the widest audience, fully mobile-ready, with full statistics on their use, and advanced integration options with statistics services like Google Analytics ready to go.