Apple has announced a reduction to its App Store commission rate – one of the most substantial changes to how iOS developers earn money – as part of a new program for small businesses.
The new App Store Small Business Program will allow any developer who earns less than USD 1 million in annual sales per year from all of their apps to qualify for App Store cut of 15 percent, half of Apple’s standard 30 percent fee, on all paid app revenue and in-app purchases.
The company says that this will have a big impact on a majority of apps, with Apple’s details on eligibility coming in December, before the change comes into effect on January 1. Apple has been facing criticism over fees from companies like Epic Games, and the issue has also come up during antitrust hearings.
Apple CEO Tim Cook said, “Our App Store has always been an important engine of economic growth. It has helped create millions of new jobs and build a path to entrepreneurship accessible to someone with great ideas. The new plan will help developers fund their small businesses, expand their teams, take risks on new ideas, and continue to make new apps.”
The new small business program will go into effect from January 1, 2021. Developers will need to apply for the program, and Apple will be bringing out more information and other eligibility requirements and deadlines in December. Apple did not provide details on why it’s choosing not to automatically enroll developers into the program, though it is possible that it may reduce the potential for fraud that could arise if Apple auto-enrolled everyone below the threshold.
Apple came up with some of the program’s rules and said that it will look at developer proceeds for the year 2020 to determine eligibility starting in January. New developers can also qualify right away. App makers who exceed the USD 1 million thresholds in 2021, will be removed from the program and subject to the standard 30 percent cut. If a developer falls below the USD 1 million thresholds, Apple says he can re-qualify for the program and the reduced commission rate. This new program will please more niche app makers, indie game developers.
The App Store generated an estimated USD 50 billion in revenue in 2019, and it is one of Apple’s most pivotal businesses, and CEO Tim Cook touts it as the future of the company’s business.
As per the analytics company Sensor Tower, an estimated 98 percent of developers would be eligible for the 15 percent cut, but those developers generated just 5 percent of the App Store’s total revenue last year.
This is not the first time that Apple has reduced the commission rates for certain developers Apple’s change occurred in 2016 when it first began allowing subscription services to keep an extra 15 percent of the revenue if a subscriber stays signed up via an iOS app for more than 12 months.
Apple’s relationship with developers is shakier now than in the past, let’s hope this new commission reduction may help repair that.