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Apple App Store to Take Reduced Cut from Small Developers

Michael Behr

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Apple App Store

By reducing its commission on App Store revenues for a range of developers, Apple says it will encourage the creation of new apps.

Global tech giant Apple will lower the commission it charges on a range of third-party apps sold through its App Store.

Under the App Store Small Business Program, Apple will reduce its cut of revenues from 30% to 15% for any developers that made under $1 million during the previous year, including new developers. Revenues will be based on apps sales, in-app purchases and subscriptions.

Should a developers revenue exceed $1 million, Apple will apply the standard commission rate for the remainder of the year. If revenues fall below $1 million, the developer can requalify for programme the year after.

The initiative will launch on January 1st next year, with Apple set to release further details in December.

Apple claims that the move will help small developers and businesses design a new wave of apps.

“Small businesses are the backbone of our global economy and the beating heart of innovation and opportunity in communities around the world,” said Apple CEO Tim Cook in a statement.

“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.”

While Apple has not said how much revenue it will lose as part of the move, it did note that of the 1.8 million apps it takes revenue on, the majority would qualify for the programme.

With around 2.2 million apps available on the app store, that would mean that on average, each app makes over $22,000 of revenue through the app store.

Apple’s app store made the company gross revenue of around $50 billion in 2019, against around $260 billion of total revenue for the company in 2019.

The company said that the App Store’s ecosystem facilitated $519 billion in commerce worldwide in 2019.

With a small number of larger developers providing most of the revenue and unable to qualify for the programme, it is unlikely that the move will greatly affect Apple revenues.

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Between the Google Play Store and the Apple App Store, two tech giants hold a great deal of power over third-party developers, big and small.

This imbalance tipped over this year when Epic Games, the developer behind the hugely popular game Fortnite, announced plans to offer in-game currency at a discount when bought through Epic Games’ own store rather than through the app store.

The attempt to undercut Apple and Google led the tech giants to ban Fortnite from their platforms, leading to a battle that was as much ideological as it was legal and financial. Microsoft entered the fray on Epic’s side, and a judge ruled that while Apple could ban Fortnite, it could not ban Epic’s highly popular Unreal Engine developer tool, the basis of many of its products.

Legal proceedings have heated up recently as last week a judge threw out two claims Apple had made against Epic as part of a series of countersuits against the game developer. In addition, Epic brought a lawsuit against Apple in Australia this week.

The tech industry is also facing intense scrutiny in both the US and the EU over a range of issues, from its role in spreading information to the power they hold over smaller companies.

As such, the timing of the reduced commission programme can be seen as an attempt to rehabilitate Apple’s image with smaller developers.

Michael Behr

Senior Staff Writer

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