Apple slashes App Store ‘tax’ in half for small developers

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It’s no secret that iOS developers aren’t happy with the cut of money that Apple collects each time an app is sold on the App Store. In fact, the issue became a national headline over the summer when “Fortnite” developer Epic Games decided to file a lawsuit against the Big Tech giant.

Now, in the face of growing anti-trust concerns, Apple has decided to reduce its App Store “tax” for smaller developers. Although that won’t help the likes of Epic Games, developers earning less than $1 million in annual sales will now cough up 15 percent of each purchase. That’s half of Apple’s usual 30 percent fee. The new rate applies to both paid app downloads and in-app purchases.

Even so, some developers still aren’t happy.

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Cutting Some Slack

Apple’s latest move, offically dubbed the App Store Small Business Program, is one of the most noteworthy in the history of the digital marketplace.

The iPhone maker claims that the “vast majority” of iOS developers will be eligible for the program. It didn’t mention an exact percentage. However, analytics firm Sensor Tower estimates that 98 percent of developers will be eligible.

Apple also declined to comment on how much of its revenue will be affected by the new policy.

That being said, considering that it only affects small developers, the damage shouldn’t be significant. Sensor Tower also estimates that the developers who will be eligible for the reduced fee only account for five percent of the App Store’s total revenue. Last year, the App Store brought in around $50 billion for Apple.

As the company has shifted its focus from hardware to services, the App Store has played a key role. That won’t be changing anytime soon as the consumer market is quickly becoming saturated with smartphones, tablets, and even wearables like smart watches and wireless earbuds.

Moving forward, Apple will need to continue relying heavily on its flagship digital marketplace as a key source of revenue.

Mixed Feelings

So far, developers have had a mixed reaction to Apple’s decision to cut its App Store fee. Indie developers and small studios certainly have nothing to complain about. Dropping the fee from 30 to 15 percent is a huge reduction that will lead to more income with each purchase.

In a statement, Apple says, “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.”

For app developers, not publishing on the App Store is almost unthinkable. Apple’s digital marketplace is used by more than 1.5 billion people around the world. That’s a huge market share that can’t be ignored. As such, Apple has been able to charge its 30 percent fee and developers have been left with no choice but to pay it.

Despite the recent reduction, some developers aren’t happy. Two of the most disgruntled are Epic Games and Spotify. In a statement on Wednesday, the latter said, “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’s grievance with Apple started some three years ago when it exited the company’s in-app purchase program. The streaming platform claims that it is unfair it paid a 30 percent fee on subscriptions while Apple’s rival service, Apple Music, doesn’t. That is a valid complaint.

It has also been a topic of discussion amongst regulators in recent months.

Convenient Timing

The divide between Apple and iOS developers has never been larger. Concerns about anti-competitive behavior and complaints about the App Store’s high fees have prompted regulators and lawmakers to take a closer look at the Big Tech firm.

In June, the EU launched a pair of investigations into Apple. Its App Store practices were the highlight of one. EU Competition Commissioner Margrethe Vestager said in a statement, “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.”

Microsoft is another company that aired grievances about Apple’s App Store policies with regard to its cloud gaming service, xCloud. Though not a payment issue, Apple’s policy at the time restricted apps that it didn’t review. That means games which are accessible through a service like xCloud weren’t allowed. Ultimately, Apple changed its policies, paving the way for game streaming services on iOS.

Apple has also had smaller conflicts with companies like Basecamp, Facebook, and WordPress.

Conveniently, Apple is framing the new App Store Small Business Program as a form of COVID-19 relief. It claims that it is designed to offer support to small app makers amid the economic hardship caused by the virus.

While that is true, the timing is suspect. Apple hasn’t confirmed whether the program was being developed prior to the pandemic.

Regardless, it seems that Apple is offering an olive branch at the perfect moment. With regulators eyeing it closely, the corporation is offering developers a show of good faith. That might not be enough to spare it from anti-trust rulings in the days ahead.

How Can Developers Sign Up?

Timing conspiracies aside, the reduction in App Store fees is an undeniable boost for smaller developers. To take advantage, Apple is asking developers to apply for the program. This means it won’t automatically lower fees.

For now, the $1 million threshold will be measured based on the developer’s income during 2020. New developers will qualify immediately.

It’s worth noting that the $1 million cut-off is fluid. In other words, if a developer goes over $1 million in annual earnings during a calendar year, their fee goes back up to 30 percent. However, if they fall back below the marker, their fee drops back as well.

Apple did note that the program will go into effect on January 1. However, it hasn’t released all of the details about how to sign up. Developers should keep an eye out for more updates at some point next month.

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