It seems that antitrust hearings and a lawsuit from Epic Games were not in vain – Apple still decided to reduce the commission for developers in the App Store by half. The company calls it a program to support small businesses, because the preferential commission will only work for those developers whose turnover is less than 1 million dollars a year.
In other cases, the commission will still be the same 30% – but such a step from Apple can still only welcome. After all, now young developers who decide to post their first application in the App Store, will be able to earn more. And as a rule, not many small studios have a turnover of one million dollars.
How to reduce the commission in the App Store?
Developers, the income from applications which in 2020 amounted to no more than 1 million dollars, as well as those who have not yet published their applications in the App Store, will be able to participate in the program Apple and pay commission at a reduced rate. The new program will take effect from January 1, 2021.
If the income from the applications of the developer, participating in the program, will exceed the threshold of 1 million dollars, from that moment until the end of the year for it will be the standard rate of 30%. If income falls within a year (for example, if a developer previously received more than a million from an application and began to earn less), Apple will also recalculate the commission and allow you to pay 15%, but from the following year.
Apple decided to take this step very timely, as lawmakers around the world are paying more and more attention to the App Store, which for most people is the only way to install software on the iPhone or iPad. The report of the U.S. House of Representatives Subcommittee on Antitrust Law, published in October, said that Apple is receiving “overnormative profits” from the App Store.
It is unlikely that the innovation will affect application prices and subscription costs in the App Store. It’s just that developers will not be able to pay Apple extra 15% and leave more revenue to themselves.
Fortnite vs Apple
Apple also gained an advantage in court against Epic Games. Now the creator of Fortnite will not be able to claim that it acts on behalf of small developers. It is possible that in the end the parties will conclude a settlement agreement.
Epic Games itself will not be able to participate in the program, because according to various estimates earned 1.2 billion dollars for 2019 in the App Store.
It is noteworthy that last month Apple said that the reduction in commissions in the App Store could damage the financial performance of the company. Revenue of the App Store is the bulk of Apple’s services business, which brought $14.55 billion for the quarter ended September, representing 22 percent of the company’s revenue for that period.
But Apple will still charge 30% commission on the most profitable applications, which means that the impact on Apple’s revenue from this step can be minimal. In addition, the commission will return to 30% once the developer receives from the application more than a million dollars for the year.
Apple claims that the App Store has about 1.8 million applications, but not all of them are cash to the corporation. Sensor Tower, an application analytics company, estimates that in 2019 only 1% of application publishers brought 93% of revenue to the App Store and Google Play.
This change will help small companies that offer online services in applications. Apple does not charge a fee for physical goods purchased through the applications, such as a pair of sneakers in the application store or a cab ride. But various events held online, such as a yoga session on the Internet, Apple considers digital goods, and for them there is a fee.