Apple to reduce App Store commission to 15 per cent for small app developers
The new scheme will come into effect on 1st January 2021
Apple on Wednesday announced that it is reducing its App Store cut from 30 per cent to 15 per cent for developers with annual revenues less than $1 million in 2020.
The new scheme, dubbed App Store Small Business Programme, will come into effect on 1st January next year.
App developers earning more than $1 million in the previous calendar year will still have to pay the current 30 per cent commission on purchases made by iPhone and iPad users on all of their apps.
If a developer surpasses the $1 million threshold, the standard 30 per cent commission rate will apply to them for the remainder of the year.
According to Apple, the new programme is aimed at helping small businesses and independent developers and will cover "vast majority" of iOS app makers.
"The program's reduced commission means small developers and aspiring entrepreneurs will have more resources to invest in and grow their businesses in the App Store ecosystem," it stated.
The company added that small business owners will continue to benefit from Apple's suite of developer tools, including programming languages, development applications, secure payment interface, and over 250,000 application programming interfaces (APIs).
The iPhone maker, however, declined to specify what percentage of its more than 28 million registered app developers would qualify for the programme. It also refrained from disclosing how much of its App Store revenue would be affected by the reduced cut.
App Store generated an estimated $50 billion in revenue last year, according to CNBC. Apple also said that "in 2019 alone, the App Store ecosystem facilitated $519 billion in commerce worldwide - with over 85 per cent of that total accruing solely to third-party developers and businesses of all sizes."
Analytics firm Sensor Tower estimates new App Store Small Business Programme to cover nearly 98 per cent of app developers, although it also said that those developers generated just 5 per cent of the App Store's total revenue in 2019.
Apple has been under fire for its App Store policies recently. In August, Epic Games launched a lawsuit against Apple over antitrust claims, after the iPhone maker removed its popular Fortnite game from App Store.
Apple's decision about Fortnite came after Epic Games announced a direct payment plan for Fortnite users, offering them a 20 per cent discount on the Apple price for in-app purchases. The firm said that bypassing the 30 per cent tax to Apple enabled it to lower costs for users.
Apple criticised Epic Games for breaching App Store's guidelines and removed Fortnite from the App Store.
Epic Games filed a lawsuit against Apple (and Google), urging the court to give a ruling that would change the way tech giants run their app stores.
Epic described Apple's payment system as monopolistic and illegal and said the iPhone maker had designed policies to ensure that "the App Store is the only distribution channel for developers to reach iOS app users."
A US district court in September delivered a temporary restraining order, instructing Apple not to block Epic Games' 3D games development software Unreal Engine, or to terminate the gaming giant's developer accounts on its platform.
Epic also filed a preliminary injunction against Apple the same month, attempting to force the iPhone maker into allowing Fortnite back into the App Store and to restore Epic's developer accounts.
"Apple's anti-competitive behaviour threatens all developers on iOS, and this latest move further demonstrates that their App Store policies are arbitrary and capricious," commented Spotify, which has also challenged Apple's App Store commission rates.
"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," it added.