Apple is taking steps to adopt policies that favor small businesses. The company announced on Wednesday that it is halving store fees for smaller companies as of January 1, 2021. The company said that developers that brought in $1 million or less in revenue from their apps in the previous year will now pay a 15% commission on those apps starting next year. Apple had initially pegged its commission for all paid app revenue and in-app purchases at 30%.
The program, tagged App Store Small Business Program, seeks to improve how iOS developers can make money using Apple’s digital app marketplace. Apple did not specify the exact percentage of its more than 28 million iOS app developers that stood a chance to qualify. It only said that a significant number of developers should be able to access the program. Apple did not also state the number of its revenues that would be affected by this new move.
According to CNBC, Apple App Store generated about $50 billion in revenue in 2019 alone. The revenue stream is one of the company’s most significant asides from its Smartphone device. The App Store is also the foundation of the company’s digital services strategy, according to CEO Tim Cook.
If an analysis by Sensor Tower, an analytics company, is anything to go by, then an estimated 98 percent of developers are expected to qualify for this new Apple App Store policy. This set of developers Sensor Tower added, generated a meager 5 percent of the App Store’s total revenue in 2019.
Apple said it would be releasing information in the coming weeks about eligibility criteria, deadlines, and other requirements. However, the company has asked developers to enroll in the program before they can be considered. Many are baffled as to why the company has asked developers to apply for the program before they can gain a chance to qualify instead of automatically enrolling everyone. Observers said this approach by Apple might have been taken to forestall fraud and other abuses that could set in if the company undertook an automated approach, the Verge reports.
Just before formal guidelines and eligibility are announced in a few weeks, Apple has released pre-qualification criteria. The company said the 2020 revenue of any developer would determine the first qualification requirement. New developers can qualify immediately. However, if at any point in 2021 a developer exceeds the $1 million revenue figure, such developer will be removed from the program and reverted to the 30% commission rate. If such developer’s revenues dip below $1 million once again, they can re-qualify for the program.
Cook said the new policy was Apple’s way of supporting small businesses, who he described as “the backbone of the global economy and the beating heart of innovation.”
Apple’s first attempt at reducing commission for developers was in 2016 when the company allowed subscription services to keep an extra 15 percent of the revenue if subscribers stay hooked to their subscription for more than 12 months.
There have also been commission reductions or exemptions for some services such as Amazon Prime Video and in-app Prime Video rentals and purchases. However, most of these cuts have been extended only to developers the company negotiated with behind closed doors.
Apple would be seeking to please niche app developers, indie game developers, and other developers in the iOS ecosystem, which felt that Apple is ripping them off. They complained that the App Store’s accumulated success over the years has not trickled down to them.
Apple courted controversy throughout the year when the press focused on its 30 percent commission rate for all paid app sales and in-app purchases. A searchlight was also beamed at the company for the stringent rules it postulated for new developers before they’re granted access to the App Store.
Then came the European antitrust investigation into Apple and App Store; its clash with Basecamp, among others. Apple has also been engaged in a war of words with The Big Four members, Facebook and Microsoft, over third party restrictions.
Although Apple may position its latest move as a way for the company to help developers impacted by the coronavirus pandemic, many observers said Apple might be trying to launder an image that has been dented by waves of controversy within the past year.