Apple To Cut App Store Commission By Half, But Not For Fortnite And Other Like It

Apple announced a cut of 15% to its long time App Store’s rate last week.

This’s by far the most significant change in the way developers earn their share in the history of the iPhone maker’s app marketplace.

The change is part of the App Store Small Business Program and it allows any developer whose annual sales is less than $1 million to apply for a cut of 15% on all in-app purchases and paid app revenue.

Apple said the majority of iOS developers would benefit from the reduced commission but it refused to specify how many of them are qualified for the program and how its revenue from App Store will be affected.

According to CNBC, App Store’s 2019 revenue is $50 billion and it is currently one of the company’s pivotal businesses, along with iPhone making. The marketplace is also a pillar of the digital service strategy Tim Cook talked about.

Sensor Tower claimed that more than 98% of developers would be benefited from this App Store Small Business Program; however, the revenue they generated accounted for only 5% of the digital store’s revenue in 2019.

The program will take effect starting January 1, 2021. Developers who wish to join it will have to apply for it. Apple said more details, including deadlines and eligibility requirements, would be released in December.

The iPhone maker didn’t say why it didn’t just enroll the developers eligible for the program automatically. Our best guess is it is trying to minimize abuses and fraud.

The Cupertino tech giant did announce some rules when it made public the program. New developers are qualified right away and it would look at the proceeds of 2020 to determine eligibility for the year 2021.

If developers exceed the threshold in 2021, they will be automatically removed from the program and subjected to the original 30% commission. If they fall back to below $1 million, they can enter the program again.

According to Tim Cook, the move is to support small businesses – the heart of innovation and the backbone of the economy:

Another large change regarding commission was rolled out in 2016 when Apple cut 15% from the commission of subscription services if a subscriber signed up through an iOS app for more than a year.

Another cut Apple has made is to Amazon Prime Video and Prime Video rentals. However, these changes are made behind closed doors and developers who do not negotiate directly with it do not enjoy this benefit.

The new program is surely a piece of good news for indie developers, niche app makers, and other developers who have failed to translate the success of the App Store into tangible developer benefits.

Apple has had quite a rough year with controversy revolving around its 30% cut of in-app purchases and paid app sales, along with the host of rules developers must comply with before joining the App Store.

The problems Apple is dealing with include Appel Pay’s and App Store’s antitrust investigation, a quarrel with Basecamp over Hey email client, the legal battle with Epic Games over the in-app purchase option of the game maker in Fortnite, and a series of other troubles with Microsoft. Facebook, and others over restrictions imposed on third-party iOS apps. There are also smaller issues, like when WordPress said Apple forced it to include in-app purchases.

These controversies are mostly about Apple rules over commissions, payment options, and other elements of app distribution.

Many large app makers, including Spotify and Match Group – Tinder’s parent company, have joined hand recently to criticize the Cupertino tech giant for its monopolistic control of the App Store, exploiting its power to hamper competition, and extracting an unfair amount of commission from large and small developers.

The new App Store Small Business Program is positioned as a helping hand extended to small businesses to deal with the hardship caused by the COVID-19 pandemic. However, it can’t be excluded from the recent controversies Apple is entangled in.

The company said there were many reasons driven the move to introduce the program. It also refused to reveal if the App Store Small Business Program had been in the making before the pandemic.

Whatever the reason is, the new program and 15% cut may work to help heal the relationship between Apple and iOS developers.

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