Apple Reduces App Store Commission to 15 Percent for ‘Vast Majority’ of Developers

On Wednesday, Apple unveiled a new developer program in which the App Store commission rate has been lowered to 15 percent, half of the usual 30 percent cut it takes on paid applications and in-app purchases. The new project, called the App Store Small Business Scheme, is open to developers who, from all their applications, receive up to 1 million (approximately Rs. 7.41 crores) in annual revenue each year. Apple claims that a “vast majority” of developers will profit from its new move. However the number of developers falling under the new program’s eligibility requirements has not yet been disclosed.

On January 1, 2021, the App Store Small Business Programme will go live. Apple will make it available for all its applications to current developers who made up to $1 million in 2020, as well as to new developers in the App Store. The regular commission rate would apply for the remainder of the year if a participating developer hits the $1 million mark. Also, if in a future calendar year the company of a developer fell below the given threshold, Apple said they might re-qualify the year after for the 15% commission rate.

Information on the new curriculum will be issued at the beginning of December. In the meantime it is important to remember that it would be mandatory for developers eligible to benefit from the reduced commission rate to apply for the benefit. This means that Apple would not automatically extend the new rate to qualifying developers.

“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,” said Apple CEO Tim Cook in a prepared statement. “Our new programme 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.”

For its 30 percent commission, which has been in effect for quite some time, Apple has recently faced an indignation from the developer community as well as regulators. Companies such as Basecamp and Spotify have also bashed the iPhone manufacturer for taking the cut from all purchases made via the App Store or through their applications for in-app purchases.

The commission from Apple, however is not available to all developers. At one point or the other it exempted companies such as Amazon and Facebook. But those transactions weren’t officially announced. At the end of 2016, Apple also offered a 15 percent discount on its subscription service commission, especially for subscribers who have been on board for more than 12 months. Yet Apple has maintained its stand to charge the 30 percent cut until now. The rigidity helped the business grow its App Store revenue.

The App Store created $32.8 billion (approximately Rs. 2,43,300 crores) globally from in-app purchases, subscriptions, and paid apps and games in the first half of 2020, according to a study by app analytics company Sensor Tower. From the $26.3 billion (approximately Rs. 1,95,100 crores) produced during the same time in 2019, this was 24.7 percent year-over-year.

In 2019 alone, Apple said that $519 billion (approximately Rs. 38,49,500 crores) in trade worldwide was enabled by the App Store, with over 85% of that amount going to third-party developers and companies of all sizes. The new program is intended to support small and independent developers, through their apps and games, to create even more digital commerce.