Apple Reduces App Store Comission to 15% for Small Developers »

This morning, Apple announced a change coming to the App Store next year:

Apple today announced an industry-leading new developer program to accelerate innovation and help small businesses and independent developers propel their businesses forward with the next generation of groundbreaking apps on the App Store. 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.

There is some fine print:

  • Existing developers who made up to $1 million in 2020 for all of their apps, as well as developers new to the App Store, can qualify for the program and the reduced commission.

  • If a participating developer surpasses the $1 million threshold, the standard commission rate will apply for the remainder of the year.

  • If a developer’s business falls below the $1 million threshold in a future calendar year, they can requalify for the 15 percent commission the year after.

Here’s John Voorhees:

For example, a developer that earns less than $1 million in 2020 on all of their apps after subtracting the amount paid to Apple for App Store commissions is eligible for the program and would pay a 15% commission on App Store earnings beginning January 1, 2021. Hypothetically, if the same developer has post-commission earnings of greater than $1 million in aggregate on all of their apps by, for example, September 1st, their App Store commission rate (assuming a paid-up-front app) would increase to 30% for the remainder of the year. That same developer would continue to pay 30% in 2022 but would be eligible for the 15% rate again in 2023 if their 2022 post-commission earnings fell below $1 million. It is our understanding that App Store earnings of all kinds count toward the $1 million total regardless of whether the source is a paid-up-front app, In-App Purchase, or a subscription.

It has been interesting to see the reaction to this. I have many friends who make their livings on the App Store, and for indie developers like them, this is a big win. However, Apple’s label of “small business” could easily conflict with the $1 million cutoff. If an app developer find success in the store and builds out a small company, chances are they’re making more than $1 million a year from the store, yet this program doesn’t apply to them.

I would love to see the data used to select the cap, but of course, we probably never will. That said, for those developers who stand to gain from this, it’s a good day.

On the other hand, I’ve also seen criticism of Apple’s framing of this, as the company couched it in the COVID-19 pandemic:

The App Store Small Business Program, which will launch on January 1, 2021, comes at an important time as small and independent developers continue working to innovate and thrive during a period of unprecedented global economic challenge. Apps have taken on new importance as businesses adapt to a virtual world during the pandemic, and many small businesses have launched or dramatically grown their digital presence in order to continue to reach their customers and communities. The program’s reduced commission means small developers and aspiring entrepreneurs will have more resources to invest in and grow their businesses in the App Store ecosystem.

While this reasoning is good, of course, it’s not the whole story. Moves like this are also designed to fend off regulators, who are already looking at Apple’s business practices when it comes to the App Store. I doubt this will be enough to halt any pending legislation, but honestly, I care a lot less about that than those who are going to see more revenue for their work starting in January.