Apple lowers App Store ‘tax’ to 15% for developers making under $1M a year
Apple’s changing the way it treats small developers next year, halving the 30% commission it charges on sales made through its App Store for the iPhone, iPad and Mac computer. The 15% commission will apply to companies making up to $1 million in sales per calendar year.
“The savings mean small businesses and developers will have even more funds to invest in their businesses, expand their workforce and develop new, innovative features for app users around the world,” Apple said in a statement. The program will begin on Jan. 1 and will be based on a developer’s sales this year.
Apple said it chose $1 million because internal studies find that apps tend to find greater success when they reach that amount. And if a developer dips below that amount, they become eligible for the program again.
The shift comes after years of debate among Apple’s 28 million app developers, who’ve bristled at the iPhone maker’s commissions as the digital storefront’s expanded to more than 1.5 billion active devices. Apple has also required that the only way people can download sanctioned iPhone and iPad apps is through its app store. To many developers, Apple’s heavy-handed approach stifles their business.
It’s not just small developers that have taken issue with Apple over the App Store commissions. Epic Games, maker of the hit battle royale game Fortnite, and powerhouse music service Spotify also have targeted the company.
Apple’s latest change “demonstrates that…App Store policies are arbitrary and capricious,” Spotify said Wednesday in a statement, adding that “Apple’s anti-competitive behavior threatens all developers on iOS.” Spotify pulled out of Apple’s in-app purchase system three years ago in protest against the 30% commission, which Spotify must pay while Apple’s own rival music service, Apple Music, doesn’t.
“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,” Spotify said Wednesday.
Apple has charged a 30% commission on all app sales since launching its App Store in 2008, a year after the first iPhone debuted. Apple also charges up to 30% for in-app purchases of digital goods like extra lives to play a game, a new look for your character or a subscription to a language learning app. It also requires developers to submit their apps for review to ensure they’re secure and meet editorial guidelines around issues such as nudity and harassment.
For developers, the enormous app economy, which Apple pegged at more than a half trillion dollars, is worth it in the end. Apple users are typically more willing to pay for apps as well.
“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,” Apple CEO Tim Cook said in a statement. “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.”
Developers haven’t just complained about Apple’s commissions, some have pushed back. Fortnite developer Epic sued Apple in August over its commission structure after Apple banned Fortnite from the App Store because of direct-payment disputes. (It also sued Google, which had kicked the game out of its Play Store for similar reasons.)
Epic itself charges a 12% fee for games sold through its own marketplace. Epic says that commission amount is more fair, allowing the company to make money while giving game makers more funds to feed back into development.
Meanwhile, Spotify and other companies have filed complaints about Apple’s practices with the European Union’s Competition Commission. The EU in June launched two investigations into Apple, one focused on its App Store and the other on its handling of the technology behind its Apple Pay payments service.
“It appears that Apple obtained a ‘gatekeeper’ role when it comes to the distribution of apps and content to users of Apple’s popular devices,” EU Competition Commissioner Margrethe Vestager said in a statement at the time.
To many industry watchers, the battle between Epic and Apple amounts to a corporate slap fight over money between a multibillion-dollar company and a multitrillion-dollar company. But to some, it’s a more dramatic example of a long-standing issue Apple’s faced.
David Barnard, a longtime self-employed independent developer based in Texas, estimates Apple’s commissions on his apps added up to about $750,000 over the past 12 years. “Would I have loved to put that into a retirement account? Sure,” he said. “But I probably would have reinvested that into the apps — hiring more developers and all that.”
Barnard is also a developer advocate at app sales platform RevenueCat, where he meets and learns about many other developers’ businesses. He believes Apple’s stringent app review process causes more trouble for developers than the company’s commission.
Still, he said if Apple gives more money to developers, it could help companies get off the ground. It may even allow some developers to come up with new app ideas they’d otherwise have dismissed because they wouldn’t be able to make the business work under Apple’s fees, he said.
But he also suspects it wouldn’t make that much a difference to others.
“If you can’t make the economics work when Apple takes 30% off the top when you sell digital trinkets in a game, you have different problems,” he said.