Apple has been getting hit by app developers lately for its commission policy of taking 30 percent of all purchases. It has made a change that makes it seem like it will benefit smaller businesses, but critics say it really doesn’t mean much. Apple announced it is lowering the commission it makes on purchases from companies that make less than $1 million in proceeds in the App Store each year.
App Store Commission
Apple announced on Wednesday it is lowering the commission it takes from software and app developers who make $1 million or less from the App Store. While it does take 30 percent from purchases, it drops to 15 percent for subscriptions that are still active after a year or more. Now it will keep the lower 15-percent rate for companies making less than the mark of $1 million.
The company has been taking it on the chin for its fee structure and policies from the bigger firms it deals with, including Microsoft, Spotify, Match Group (the company behind match.com), and Epic Games. Epic has dragged them into court after the App Store dropped its Fortnite game because it was breaking policy by offering subscriptions away from the App Store.
“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,” said Tim Sweeney, Epic Games Chief Executive Officer.
Apple has replied to its critics to say that its rules apply evenly to developers and that the Apple Store gives them an easy way to reach its user base without having to create their own payment systems in all the different companies it operates in.
Estimates from financial services company Moody’s are that lower commissions will impact less than one percent of Apple’s revenue and operating profit. At that point, you can see why the larger companies are unimpressed with the change. Further, it will benefit from the feedback of the smaller developers.
This is where you can understand the tag of “calculated.” Certainly, Apple did the math before its decision and announcement.
Yet, analytics firm Sensor Tower said based on the publishers it tracks, 97.5 percent of iOS developers generated less than $1 million per year in gross consumer spending. Yet, they only contributed 4.9 percent of the 2019 revenue for the App Store.
Apple analyst Gene Munster of Loup Ventures estimated that small developers covered under the program make up 20 percent of Apple’s App Store revenue. He believes the lowered App Store commission will be a $1.6 billion reduction for Apple and about 0.5 percent of its overall revenue.
The Apple-sponsored App Association said in a statement that the “reduced commission for small businesses will allow them to put additional resources towards scaling up and innovating new products and services.”
Match group said the problem still exists that Apple’s policies force developers to use its payment system even if it competes against those developers.
“And if you manage to grow your revenue over $1 million, they then double their cut — arbitrarily – making it even harder for the startup to continue to grow,” said Match.
Spotify is filing an antitrust complaint against Apple in Europe. It said that it hopes “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.”
Impact on Users
How does this affect you, the Apple user? You’re still paying the same amount, at least at this point. It’s only a matter of where your money is going. Some people are very against Apple and its policies and stay away from their ecosystem because of it. They choose not to feed it into it, so this comes down to consumer choice.
The question is what the larger companies are going to do, the ones who make more than $1 million. But the answer is right there. These companies that make more than $1 million in commission from the Apple Store are probably going to continue making $1 million, but that won’t stop them from filing lawsuits against Apple and trying to change things.