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

Apple on Wednesday announced a new developer programme under which it has reduced the App Store commission rate to 15 percent — half of the standard 30 percent cut that it takes on paid apps and in-app purchases. The new initiative, called App Store Small Business Programme, is open for developers who earn up to $1 million (roughly Rs. 7.41 crores) in annual sales per year from all their apps. Apple says that its latest move will benefit a “vast majority” of developers. However, the number of developers coming under the eligibility criteria of the new programme has not yet been revealed.

The App Store Small Business Programme will go live on January 1, 2021. Apple will make it available for existing developers who made up to $1 million in 2020 for all their apps, as well as the developers new to the App Store. In case if a participating developer surpasses the $1 million threshold, the standard commission rate will apply for the remainder of the year. Also, if a developer's business drops below the given threshold in a future calendar year, Apple said that they could re-qualify for the 15 percent commission rate the year after.

Details about the new programme will be provided in early December. Meanwhile, it is important to note that the developers eligible to avail the reduced commission rate will be required to enrol for the benefit. This means that Apple will not apply the new rate automatically for the eligible 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.”

Apple has lately been facing an outrage from the developer community as well as regulators for its 30 percent commission that is in place for quite some time. Companies including Basecamp and Spotify have also bashed the iPhone maker for taking the cut from all purchases users made through the App Store or the in-app purchases take place through their apps.

However, Apple's commission isn't applicable to all developers. It exempted companies including Amazon and Facebook at some point or the other. But those deals weren't announced publicly. In late 2016, Apple also provided a discount of 15 percent in its commission to subscription services particularly for the subscribers who stay on board for over 12 months.

But up until now, Apple maintained its stand for charging the 30 percent cut. That rigidity helped the company expand its revenue from the App Store.

According to a report by app analytics firm Sensor Tower, the App Store generated $32.8 billion (roughly Rs. 2,43,300 crores) globally from in-app purchases, subscriptions, and paid apps and games in the first half of 2020. This was 24.7 percent more year-over-year from the $26.3 billion (roughly Rs. 1,95,100 crores) generated during the same period in 2019.

In 2019 alone, Apple said that the App Store facilitated $519 billion (roughly Rs. 38,49,500 crores) in commerce worldwide, with over 85 percent of that total accruing to third-party developers and businesses of all sizes. The new programme is speculated to help small and independent developers generate even more digital commerce through their apps and games.

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