by Dan Moren
Apple reduces App Store cut to 15 percent for small businesses
The new App Store Small Business Program will benefit the vast majority of developers who sell digital goods and services on the store, providing them with a reduced commission on paid apps and in-app purchases. Developers can qualify for the program and a reduced, 15 percent commission if they earned up to $1 million in proceeds during the previous calendar year.
The company promises full details next month, but right now, it seems as though the program mainly does what the headline says: developers earning less than $1 million in proceeds (after Apple takes its cut) will see the commission they pay to Apple reduced to 15 percent, instead of the usual 30 percent.1 The program launches as of January 1, 2021.
There are a few other factors mentioned in Apple’s post: for example, developers new to the App Store can qualify for the program (thus, new companies that don’t have a year’s worth of revenue yet would probably qualify, but some existing giant company that walks in the door with its own app would probably still pay 30 percent). And, unsurprisingly, it’s easier to end up in the higher bracket than get out of it: if developers pass the $1 million mark during the year, they’ll have to pay 30 percent on any revenue over that amount for the rest of the year; but if a developer drops below $1 million, they have to requalify for the 15 percent cut the next year.
This seems, on the whole, to be a positive move. Apple previously cut its commission to 15 percent for subscriptions after the first year of a subscriber’s tenure, but this is the first blanket change of the App Store commission in its existence. Of course, it comes amidst not only frustration from developers with the strictures of the store, but also a high profile battle with Fortnite developer Epic, as well as increased scrutiny from the government and regulators.
Obviously, this isn’t a panacea for complaints with the App Store: the review process remains murky and capricious2, in-app purchase continues to be a battleground, and, perhaps most relevant for the antitrust regulators looking into matters, Apple’s App Store is still the only way to legitimately install software on iOS. But Apple is clearly counting on the fact that leaving more money in the hands of many of the companies that are often its most enthusiastic partners and its most vocal critics may go a ways to smoothing over some of those other concerns. We’ll keep an eye out for more details on the plan next month.