Apple will reduce App Store cut to 15 percent for most developers starting January 1st

Illustration by Alex Castro / The Verge

Apple on Wednesday announced a reduction to its longstanding App Store commission rate — one of the most substantial changes to how iOS developers earn money in the history of the iPhone maker’s digital app marketplace — as part of a new program for small businesses.

The new App Store Small Business Program, as it’s called, will allow any developer who earns less than $1 million in annual sales per year from all of their apps to qualify for a reduced 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 the “vast majority” of iOS app developers should be able to access the program, but Apple declined to say what percentage of its more than 28 million registered app makers would qualify. Apple also declined to specify how much of its App Store revenue would be affected by the reduced commission.

The App Store, which generated an estimated $50 billion in revenue in 2019 according to CNBC, is one of Apple’s most pivotal businesses beyond the iPhone and represents a pillar of the digital services strategy CEO Tim Cook has touted as the future of the company’s business. According to 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.

The new small business program goes into effect starting January 1st, 2021. Developers will be asked to apply for the program, and Apple says it will be releasing more information about that process and other eligibility requirements and deadlines in December. Apple did not elaborate on why it’s choosing not to automatically enroll developers into the program, but it’s possible requiring that developers enroll may reduce the potential for fraud or other abuses that could arise if Apple simply auto-enrolled everyone below the threshold.

Apple did spell out some of the program’s rules today. The company says it will look at developer proceeds for the year of 2020 to determine eligibility starting in January. New developers can also qualify right away. For those app makers that exceed the $1 million threshold at any point in 2021, they will automatically be removed from the program and subject to the standard 30 percent cut. If a developer falls back below the $1 million threshold in a future calendar year, Apple says they can re-qualify for the program and its reduced commission rate.

Apple CEO Tim Cook described the move as a way to support small businesses, which he describes in a statement as “the backbone of the global economy and the beating heart of innovation”:

Small businesses are the backbone of our global economy and the beating heart of innovation and opportunity in communities around the world. 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.

This isn’t the first time Apple has reduced commission rates for certain developers. The company’s most recent change of this magnitude occurred in late 2016, when it first began allowing subscription services to keep an extra 15 percent of revenue if a subscriber stays signed up through an iOS app for longer than 12 months.

Apple has also reduced its App Store cut or exempted certain services altogether, as it did for sign ups to Amazon Prime Video and more recently for in-app Prime Video rentals and purchases, but the company often only cuts such deals behind closed doors and has not typically extended those benefits to developers it does not negotiate directly with.

This new program is sure to please more niche app makers, indie game developers, and other members of the iOS ecosystem who’ve felt the scale and success of the App Store hasn’t translated to tangible developer benefits in recent years. Apple has weathered a rather rough year of bad press, much of it focused on Apple’s 30 percent cut of all paid app sales and in-app purchases and the many rules it imposes on developers before it grants entry into the App Store.

The string of controversies includes the launch of a European antitrust investigation into the App Store and Apple Pay; a public showdown with software maker Basecamp over the developer’s Hey email client; an unprecedented legal battle with Epic Games over the inclusion of Epic’s own in-app payment options in Fortnite; and a series of spats with Facebook, Microsoft, and others over what Apple’s rivals and competitors feel are unfair restrictions on third-party iOS apps.

There were also many smaller dust-ups — like when WordPress accused Apple of forcing it to add in-app purchases — and they’ve typically revolved around the App Store model and Apple’s many rules around payment options, commissions, and other financial elements of app distribution.

Scores of big-name app makers and well-known companies, from Tinder parent company Match Group to Spotify, have banded together in recent months to criticize Apple for exerting potentially monopolistic control over the iOS marketplace and of wielding its immense power to harm competition and extract unreasonable fees from developers large and small.

The App Store Small Business Program, though it is positioned as a way to offer relief to app makers during the ongoing economic downturn precipitated by the COVID-19 pandemic, can’t be divorced from these many controversies Apple has found itself in throughout the last year. The company tells The Verge there is no one reason why it decided to launch the program now, and it declined to say whether the program had been in the works prior to the onset of the pandemic.

Yet it is evident Apple’s relationship with developers is on much shakier ground now than in years past, and this new commission reduction may very well help repair it.

Update November 18th, 9:13AM ET: Added information from Sensor Tower indicating the App Store cut would apply to an estimated 98 percent of iOS app developers who generate roughly 5 percent of the store’s revenue.

Comments

Epic won.

In what way have Epic won here?

The courts recently through out Apples seeking punitive damages claim against Epic, because Apple couldn’t prove it, and by how much.

The other thing is Apple is still collecting 30% for all in app purchases (IAP), for every transaction, which EPIC, and everyone doesn’t like, because after one year of subscriptions, Apple reduces it down to 15%, but it always stays at 30% for all IAP, even after a year.

I believe Epic wouldn’t have taken on Apple, if they knew Apple was going to change their policies recently, and allow Amazon’s new game streaming service (Luna) on Apples platform. Because Epic wanted that as well, but Apple didn’t allow that at the time. Even Microsoft, Google, Nvidia, and others wanted to have their cloud gaming services on Apples platforms. Apple doesn’t allow a native iOS app that allows cloud game streaming services, but now Apple will allow a web app. Apples rules and policies are crazy. Apple knew they couldn’t win that battle in court, and had to change, or give somewhere.

Apple would still be collecting 30% from Epic but as they were doing more than a million dollars in business a day, let alone a year. They aren’t going to be beneficiaries of this and surely most people can see that Epics end goal is to boost their own profit margins, which this doesn’t achieve.

Epic might have made a song and dance about how they were suing Apple for everyone’s benefit, but the primary thing they wanted is to be able to load their own Epic App Store into the OS and/or use their own payment processors to pocket all proceeds from sales, neither of which are things they have gotten out of Apple to date.

This will be the question. If Epic was "doing it for the little guy" then they won and should get back on board, IAP and all.

Pretty sure most (you and myself included) think that line was BS though and they will continue their hold out…but I would happily be proven wrong.

Yeah I think it’s BS, but happy to be proven wrong. I don’t play Fortnite, but I imagine many people would love it back.

If they do continue with the lawsuit I’m interested to see how that argument evolves. They previously tried to argue that 30% was highway robbery, but didn’t seem able to convince a judge that 30% wasn’t market rates. They didn’t do well arguing that point then, but next time Apple will be at half those "market rates" for most devs, namely the "small guys" Epic said were most impacted.

Curious how Epic responds both publicly but also legally. I’m sure they’ll claim a victory in the public domain, but not sure it helps their lawsuit based on some issues they seemed to present previously.

I suspect they’ll continue to sue as they really care about opening iOS up more so that getting reduced rates for themselves or others. Fairly sure their target is 0% paid to Apple.

It’ll also be interesting to see which other marketplaces implement a similar policy. I’m sure a bunch will.

this is for a year and the issue is monopoly power.

There is no monopoly. You can’t monopolize a single OS on a platform that holds minority market share in the computing industry. It’s a dog & pony show for Epic. They can just side load their Apps. They have options.

But Apple did exactly what I thought they would.

You need to study the definition of monopoly a bit more…and you aren’t the only one.

Monopoly is the worst framing for the issue and ignores the scale of platforms today with users in the billions. I think that alone means iOS should be come under some scrutiny – but I wouldn’t side with Epic.

Apple is wrong, and a bully, period. Try and think Smigit, you are wrong with some of the things you said. Epic wanted to offer their own game store on Apples platforms. It wasn’t about the money. All they needed was the ability to place their app store on Apples platforms. Epic could just allow a login to their service, and customers could play the games that they wanted. Epic doesn’t even have to ask for money. Customers could go to Epics website for any payments, therefore bypassing Apples monetization methods. Just like Netflix. Apple is the one that is being an evil controlling bully. Microsoft made an app for iOS, that offered something similar to what Epic, and others were trying to do, but Apple rejected it. It seems like Apple is allowing certain web apps this ability.

Like I said in my previous posts, if Epic knew that Amazons Luna cloud gaming service was coming to Apples platforms. Then most likely Epic wouldn’t have gone after Apple. Epic could have pulled all of their games from Apple iOS platforms, and maintained all the apps themselves, and on their own servers. Plus collect all the money for themselves.

So use your head Smigit. Epic wouldn’t have gone after Apple, if they knew Apple was going to change their evil controlling ways. Epic is the one losing all the money from Apples customers right now.

All they needed was the ability to place their app store on Apples platforms.

So it is about the money. They’re free to do this on other platforms… but they want iOS because Apple customers actually pay for things. And Apple has the customers who pay for things because these people know that Apple has their backs: they’re not getting some two-bit shit show full of cruft, scams, and malware.

Yeah, I guess it does come down to money and control. Just like its control and money for Apple. It has nothing to do with Apple having their customers backs, or some two-bit shot show, full of cruft, scams or malware, like you try to make it look. It’s about control, and money for Apple, and Apple knows full well if they fully embrace web apps (PWAs) like the rest of the other platforms, then why would any developers spend any time to make a specific native app for Apples platforms, when developers have to recreate roughly the same app for other platforms as well? Where as a developer could write one PWA, that would run on Apples platforms, Windows, Android, Chrome OS, and many Linux platforms. Plus since they are web apps, then Apple would have no say in any web apps monetization. That is why Apple is scared to lose a gaming cash cow. Remember Apple makes over 70% of their revenue from games on their app store.

Remember Apple makes over 70% of their revenue from games on their app store

For the fiscal year 2019, the company’s iPhone business accounted for approximately 54.7% of total sales; the company’s Services segment made up approximately 17.7% of revenue; Mac sales generated 9.8% of total revenue; Wearables, Home and Accessories segment comprised 9.4% of the company’s sales; the iPad accounted for 8.1% of the company’s sales. investopedia

App Store sales are counted under ‘Services’. Unless you meant that they make 70% of their App Store revenue off of games, that number is not accurate.

"The mobile games’ revenue is expected to hit $76.7 billion worldwide by the end of 2020. At the end of 2019, mobile games revenue grew to $68.5 billion. However, mobile gaming stats for 2020 show that this figure is estimated to experience a 12% increase by the end of 2020."

Type in a browser "Mobile game revenue statistics". The majority of that revenue is going to Apple.

70% of the total market revenue ≠ 70% of their revenue.

It wasn’t about the money.

Everything you posted was about Epic making money.

Epic wants its store on iOS so it can sell things. They want to bypass apples sales processor so they pocket all profits. Etc etc

A streamer That I watch (Adrian) streams ios fortnite.he is affected

"If Epic was "doing it for the little guy" then they won and should get back on board, IAP and all."

No, reduced payment to Apple is just part of what Epic is fighting for. As long as there are no alternative app stores on iOS and as long as all developers have to use Apples payment service Epic didn’t win.

But people like you are falling for what Apple is trying to do here: Give up a very small part of their revenue (2,5%) and divide the opposition into two groups. Those that benefit from this change enough to be placated and those that don’t benefit or want more than just a little money. Apple is taking a page out of the classic Roman playbook: Divide et impera.

Epic are free to get off iOS and try their luck at getting money out of Android customers. If they really didn’t need Apple, they wouldn’t be putting us through this ridiculous dog and pony show with high-cost court battles. They’d just quietly pull their apps and be done with it.

But they aren’t. And that’s because they know where the money is, and they’re shitty that Apple isn’t giving them a bigger piece.

You are so wrong. Apple has purposely put up road blocks to stop companies like Epic, Microsoft, and everyone else. If Epic knew that Apple was going to let Amazon have a cloud based gaming platform. Then I guarantee you Epic wouldn’t have gone after Apple. Apple has only decided this stuff after the ridiculous dog and pony show as you put. BTW, 2 of Apples cases against Epic were thrown out of court, like Apple seeking punitive damages, when Apple did more damage to Epic, by removing all of Epics apps and services from Apples platforms. Google had the same Fortnite app problem, but they only banned the one app. Where as Apple went on a rampage to remove everything from Epic, on Apples platforms, when it was only the one Fortnite game app. Apple is an evil bully, don’t kid yourself. Microsoft tried but Apple put up road blocks for them, as well as Google. Since Apple is going to allow a web app for Amazons Luna cloud gaming platform, then now Microsoft is going to do the same. I am sure Epic will do the same now.

Apple justification for those fees is having built a massive userbase of over a billion active users, who are highly engaged with purchasing apps and games. Epic doesn’t have a right to this private marketplace.

Nope, I still think Apple’s policy sucks…but in court Epic made it seem like they were standing up for all the devs who couldn’t afford to.

I’m not defending Apple, don’t get it twisted.

Epic wasn’t doing it for public benefit. But that’s not the point.
The point is Epic making money on Fortnite is business – Capitalism.
Apple forcing everyone to use their store is Monopoly – not Capitalism.

Monopoly? It’s Apple’s platform. Epic is welcome not to participate. Over 1.5 billion active iOS devices and about a billion active users. There’s always other platforms.

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