Apple to Reduce App Store Fee to 15 Percent for Most Developers

Posted on November 18, 2020 by Paul Thurrott in Apple, iOS, iPadOS, Mobile with 65 Comments

With multiple threats of antitrust action looming against it, Apple has finally bowed to common sense and is lowering its App Store fees for developers. No, not across the board, this is Apple. But it’s the first major crack in an unfair and illegal system that has been harming developers and thus customers for years. It comes via a new developer program called the App Store Small Business Program that Apple says will “benefit the vast majority of developers who sell digital goods and services on the store.”

The App Store Small Business Program launches January 1, 2021, and it provides qualifying developers—those that make less than $1 million per year in the App Store, literally 98 percent of them—with a reduced commission of 15 percent on paid apps and in-app purchases. That’s half the current rate of 30 percent, and it means, in Apple’s words, that “small developers and aspiring entrepreneurs will have more resources to invest in and grow their businesses in the App Store ecosystem.”

“Small businesses are the backbone of our global economy and the beating heart of innovation and opportunity in communities around the world,” Apple CEO Tim Cook said in a prepared statement. “We’re launching this program to help small business owners write the next chapter of creativity and prosperity on the App Store, and to build the kind of quality apps our customers love.”

Under the terms of this new program, existing developers who made up to $1 million in 2020 on the App Store, and any new developers, can qualify for the program and the reduced commission. Should a developer passes the $1 million threshold, the standard 30 percent commission will apply for the year. And if the developer’s business falls below $1 million in subsequent years, they can qualify for the reduced commission again.

Will this be enough to call off the antitrust hounds? Of course not: Most agree that Apple’s fees should be closer to 3 or 4 percent, and a former Apple engineer in charge of the App Store has publicly stated that the service is run at a massive profit and that Apple’s fees and rules are arbitrary. But halving the fees for most developers is still a savvy move. And is long overdue.

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Comments (72)

72 responses to “Apple to Reduce App Store Fee to 15 Percent for Most Developers”

  1. codymesh

    all the people who were like "Apple needs and deserves the 30% cut for creating and maintaining the platform!" going to be real quiet now.

    • ajgisler

      In reply to codymesh:

      Why? What has changed? Apple made the decision on their own, granted with pressure from the governments and the bad PR.
      I do think the 30% fee is ridiculously high but I think Apple, Google etc should be allowed to set the price they want.


      • rm

        In reply to ajgisler:

        Google has more leeway here. There are competing App stores like Samsung's app store. Apple has no leeway here because they 100% control the market with impenetrable barriers of access to it. Developers and customers have no choice but to pay Apple those fees. Yes, part of the cost of purchasing an app includes the higher cost of selling the app that goes to Apple; it raises the cost to consumers. But even Google needs to charge a lot less.

      • codymesh

        In reply to ajgisler:

        If your comment is going to be "I think Apple, Google etc should be allowed to set the price they want" when the entire issue is that it is being done while these companies constitute a virtual monopoly in mobile software distribution, please stop weighing in on the issue.

    • digiguy

      In reply to codymesh:

      I don't care about Apple (I am Windows and Android guy) but I think companies should be free to set their prices. Having said that I am glad that they do this for smaller developers and even more happy that Epic will be excluded from it

    • Paul Thurrott

      Nah. They'll just keep cheering em on and thinking they did this for the right reasons.
    • lvthunder

      In reply to codymesh:

      I'm not going to be quiet. My guess is this program isn't going to effect the bottom line all that much. My main concern is they shouldn't be forced to run the app store at a loss.

    • sammyg

      In reply to codymesh:

      Nope. I think Apple, Google, Microsoft , Sony etc can charge want they want. If developers or customers don’t like it they will go elsewhere.


      Microsoft has effectively raised the price of Xbox Live to $100 by eliminating the 12 month option. They are pushing users to Game Pass. That said I know people that are going PS5 for this very reason. Where is Paul’s story about this?????

      • Freezal

        Wait. You don't need Xbox live or Game Pass to use an Xbox to install and use apps or games. How is this the same thing?
        The only valid argument is that the Microsoft store requires excessive fees as well, and since app distribution is locked, they are guilty of the same exploitation as Apple in this regard.

        The issue people lose is here:

        If you don't like the rules you cannot go to a different solution on that Apple device you paid for. Therefor Apple is dictating what you can and cannot do on the hardware you purchased, this is a problem.

        Imagine you purchased a car and Ford tried to dictate who you were allowed to carry as passengers, or where you were allowed to drive, or required you only buy tires from a ford dealer which they charged a 30% markup.

        The only legal recourse they have now is to void your warranty if you don't follow the rules (and even that is not allowed in all states).

        This is the issue most people like me have. And people like me have this issue with any platform that conducts business this way.



        • sammyg

          In reply to Freezal:

          Yes you can install games and play them in single player mode without Xbox Live. If you want to play multiplayer you need Xbox Live Gold.


          Example, and one that is relevant here on this site, you need Xbox Live Gold to play Fortnite Battle Royal, basically the only part of the game anyone plays. You don't need that to play the same thing on the PS4/PS5.


          I guess I should not assume that the average smartphone buyer has some brains? If you buy an iPhone expecting it to be able to get apps from other apps stores........well that is on you. Spend five seconds doing some research before you buy a $500+ piece of kit.


          "The People" are not losers just the dumb ones. You analogy using a Ford car is so flawed, let's not even talk about it because its embarrassing for you.


          Lots and lots and lots of people actually like the walled garden that Apple provides. Especially when you consider the alternative of Google. I do NOT use Google products, none of them and that is by choice. I want my information to remain my information and not Google to sell. Apple, wether it's a marketing point or not is privacy focused and that is what I want.


          I choose to game on the Xbox because I like its wall garden as well. I have a gaming PC and its gets little use outside of the flight sim DCS. MP gaming on the PC is a complete train wreck with the insane amount of cheating that goes on in AAA games like COD, BF, Fortnite, Apex etc. So much so that most console gamers will shut off cross play when an game has it on.



      • codymesh

        In reply to sammyg:

        there is no "elsewhere" to go, that's the point.


        The game console market and their associated game stores aren't analogous to general computing devices market and their associated general software distribution stores.


        Also, based on your own logic why shouldn't Microsoft be allowed to "do what it wants" and push people to Xbox Game Pass? You're the one advocating for this without realizing lol.


        PSN used to be free, but people said "companies should do what they want" and also "they will go elsewhere" (?). Now PSN is no longer free and Sony put PS5 cloud saves behind a paywall. Your logic enables this kind of anti-consumer behavior, you argue in favor of it, but then you're also complaining about it?


        Pick a lane.

        • sammyg

          In reply to codymesh:

          I am 100% behind Microsoft pushing people to GamePass by upping the price of Xbox Live.


          I am a iPhone user, and a Xbox user with GamePass. If I did not like what Microsoft was doing I could move to the PS5 (I have a PS4). If I did not like what Apple was doing I could move to Android.


          There are choices. I choose Apple and Microsoft.


          PS - By the way PSN Multiplayer is now free via a recent change. Microsoft should do the same thing IMHO.

  2. arthemis

    A step in the right direction yes, but will it be enough to keep regulators at bay? No, probably not, and that is a good thing.

  3. doubledeej

    This is a great change, but the $1m threshold seems backwards. Usually higher volume equates to lower fees, not higher fees.

  4. anoldamigauser

    Well, this covers 98% of developers in the App Store, but it sure is not covering 98% of the sales through the App Store. You can bet that the fees earned by these smaller developers are nowhere near what Apple earns from the 2% of developers that clear $1 million per year.

    The big boys are still paying 30% of any sale through the App Store and 30% of any subscription renewed through the App Store, and 30% of any in-app purchases. Apple is not losing that much of the revenue generated by the App Store, so the impact will not change their "services" revenue story. Sorry, but this is just marketing.

  5. bluvg

    In reply to Jeffsters:

    "The market can advise otherwise."


    How?

  6. jchampeau

    Paul, when you say "Most" agree that Apple's fees should be closer to 3 or 4 percent, what is your source? That sounds annecdotal, but maybe it isn't. 30% is too much, but 3-4% might not cover the cost of the credit card processing fees plus what it actually costs to run the store (people, bandwidth, legal, data centers, software dev and upkeep, etc., etc.). They're in business to make money and they should get to, as long as it isn't unreasonable. 10% sounds right to me, along with allowing app makers to design their apps to use outside payment systems like the Amazon shopping app.

    • jchampeau

      In reply to lvthunder:

      Users wouldn't necessarily have to enter their card numbers each time. If they have their card numbers already stored in Apple Wallet, they could pay in apps with them just like happens with Uber, Lyft, Hilton, and Target.

      • lvthunder

        In reply to jchampeau:

        Apple Wallet isn't available on TVOs. That and Apple gets a cut if you use Apple Pay.

        • jchampeau

          In reply to lvthunder:

          Doing anything on TVos with the "crime against humanity" Apple TV remote, as Paul aptly describes it, is awful. It seems Apple knows this and that's why you get a push notification on your iPhone when a search box or whatever comes up on Apple TV to use your phone instead of the touchpad. So that problem is already solved. And Apple gets a very small cut of Apple Pay purchases, but that's not what this article any of the comments under it are about, nor is it what's drawing scrutiny and antitrust action. According to articles on Macrumors and CNN, they get 0.15% of each transaction, or 15 cents per $100. For app store purchases, they get 30%, or $30 on a $100 purchase.

    • Paul Thurrott

      It doesn't matter what sounds right to anyone. What matters is what is right. And Apple's fees are indefensible and unrelated to its cost of having this business.
  7. ruvger

    Apple also charges $90 per year just to put your app in the store.


    Personally, I would settle for 30% as long as I could tell my customers there are other ways to pay (through my website).

  8. will

    I believe it should be 15% across the board, 7% if you have a subscription, and FREE, and I think it is, if your app costs $1.

  9. SRLRacing

    IMHO This is almost worst that 30% across the board. Its going to be difficult for me to fully articulate why but I will give it a shot. This makes a business in the app store viable in the app store if it makes between 15-30% margin up until the day it crosses that $1M threshold then suddenly the business becomes non-viable. That kind of margin is dreamlike in most cases, for example Apple itself holds a 38% margin on their revenues so if they had to pay someone a 30% cut of their revenues they would have a more typical 8% margin despite being one of the most wildly profitable companies on the face of the planet. Personally, I am dancing in the streets if I hold a 5% margin in my business. You do this while you have the sword of Damocles hanging above your head of being Sherlocked or being outlawed by other policy changes. Apple's App store policy ultimately stifles innovation, growth, and competition when it could truly become a place where businesses can grow, innovate, and thrive.

    • mattbg

      In reply to SRLRacing:

      This is a good point - if it isn't already, it should be progressive so that you only pay the 30% on revenues >$1M and not the whole amount.


      They word it like this (this is verbatim from the Apple press release), so it's possible that it does only apply to the revenues after you hit $1M - if it only applies to the part of the year after you hit $1M:


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


  10. spiderman2

    oh apple it's so nice, it's totally not because of the antitrust


  11. Daekar

    Great PR move that won't affect the bottom line that much. It might be 98% of the developer population which is affected, but it's not anywhere near that of the money which flows through the App Store. This is a master stroke, really...they get to have their cake and eat it too, reaping the benefits of a more vibrant small-app population and sucking the money out of large corporations all while getting credit for helping out the little guy.

  12. scovious

    Wow so now everyone can get the Amazon deal, except for big companies like Amazon?

  13. SvenJ

    3-4% isn't reasonable. That is based on some concept of credit card fees. Apple does way more than move digital money around to maintain the app store. Don't know if 15% is right. 30% probably was at one time.

    • steenmachine

      In reply to SvenJ:


      Agree. They handle all worldwide transactions, digital store upkeep, all the employees supporting the app ecosystem, the servers / infrastructure, developer tools, plus current and future ecosystem investments.


      I recall at the time Steve Jobs stating 30% was ~ break even. Obviously revenue and costs have exponentially grown since 2008, I'm sure not at the exact same rates. Regardless, I think it would be very hard to define what a "right" amount is.


  14. kjb434

    ?

    98% get the new rate.

    The 2% likely was able to negotiate their own rate anyway.


  15. Chris_Kez

    For a company that seems able to execute long-term strategy, they are curiously on the back foot when it comes to the App Store.

  16. red.radar

    I feel like this will harm Apple in the end. It just proves the rules are arbitrary and capricious.


    So Apple makes a deal for giants like amazon. And makes a deal for the small guy. Yet people in the middle pay full price ? The action in of itself highlights how there is no check and balance in the system.


    App stores need regulated like utilities.

    • lvthunder

      In reply to red.radar:

      Welcome to retail. If you have something that Amazon sells for you they set the final sales price. You set the retail price and get half. Then Amazon sells it at whatever price they want. Pricing is pretty arbitrary.


      App stores do not need to be regulated like utilities. I could understand if you said ISP's should, but not app stores. App stores run just like traditional retail stores.

      • akcanuck

        In reply to lvthunder:

        The difference is I'm not forced to sell through Amazon or any other retailer.

        • Chris_Kez

          In reply to akcanuck:

          You are if you want to easily reach Amazon’s customers. Walmart is famously abusive towards their suppliers yet manufacturers line up for the “privilege” because they want to be on Walmart’s shelves and in front of millions of retail shoppers.

          • VancouverNinja

            In reply to Chris_Kez:

            Yes Walmart is a good negotiator with their suppliers - what's the point? Consumers can still buy their dishwasher soap from somewhere else. This is the part that is missing in the arguments supporting Apples practices. They have reached a monopolistic postition and now they must be fair. If not they will be forced by law to become fair.


            • lvthunder

              In reply to VancouverNinja:

              In what market does Apple have a monopoly? I don't think they even reach 50% in any market.

              • fishnet37222

                In reply to lvthunder:

                In the iOS App Store market. On PCs, Macs, and Android devices the user can either install apps directly or install additional app stores. Businesses can also deliver their apps directly to the user. That is not possible with iOS/iPadOS.

                • SvenJ

                  In reply to fishnet37222: Apple maintaining control of the apps that land on iOS via the app store is a feature. If you could install from any old where, it reduces the security, and reliability of the platform. Yea, I drank the koolaid, but that is Apple's pitch and it does resonate with a large part of their base. If that goes away, they no longer have that differentiator. If you as a developer don't want in that market, don't write for iOS. If you as a consumer don't agree with that policy, buy an Android device. You have that choice. Apple is far from the only choice for developers or consumers.


                • lvthunder

                  In reply to fishnet37222:

                  You can't define a market that way. If so then every game console would be guilty of the same thing.

              • VancouverNinja

                In reply to lvthunder:


                From the hearings.


                "Apple is the leading smartphone and mobile vendor in the United States and its underlying platform, iOS/iPadOS, has 52 percent marketshare, compared to just 47 percent for Android. “In 2018, Apple sold its 2 billionth iOS device, and is projected to sell its 2 billionth iPhone by 2021,” the report notes.


                The issue, of course, is that Apple has monopoly power over the app stores on its mobile platforms, which generated over $120 billion in revenues and “an estimated $138 billion in economic activity in the U.S. last year.”


                “Apple has significant and durable market power in the market for mobile operating systems and mobile app stores, both of which are highly concentrated,” the report says. “More than half of [all] mobile devices in the U.S. run on iOS or iPadOS … Apple’s market power is durable due to high switching costs, ecosystem lock-in, and brand loyalty. It is unlikely that there will be a successful market entry to contest the dominance of iOS and Android. As a result, Apple’s control over iOS provides it with gatekeeper power over software distribution on iOS devices. Consequently, it has a dominant position in the mobile app store market and monopoly power over the distribution of software applications on iOS devices.”

        • lvthunder

          In reply to akcanuck:

          Skipping the big retailers isn't the best move if you want to be successful.

      • VancouverNinja

        In reply to lvthunder:

        You can't apply the "retail" model to this. In retail there is competition that keeps stores from monopolistic and predatory pricing. Users and developers have no choice or options to buy from somewhere else.


      • Paul Thurrott

        App stores do need to regulated when they're controlled by monopolies that abuse their developers, partners, and customers as Apple does. That is why every major antitrust organization in the world, almost literally, is investigating the company right now. But thanks for chiming in.
        • bleduc

          In reply to paul-thurrott:


          I wish you would comment on the other stores too:


          Microsoft Store Fees (July 2020):


          Store Fees. The Store Fee (plus any taxes due in connection with the payment of such Store Fee, if applicable) you owe to Microsoft will be deducted from Net Receipts to calculate the App Proceeds payable to you in accordance with this Section 6. The Store Fee is:

          1 Fifteen percent (15%) of Net Receipts for any Apps (and any In-App Products in such Apps, including) that are not listed in Section 6(b)(ii) below.

          2 Thirty percent (30%) of Net Receipts for: (a) all Apps and In-App Products acquired by Customers in the Microsoft Store on an Xbox console and billed to such Customers on a non-subscription basis;

          (b) all Games (and In-App Products in Games) regardless of platform of acquisition; and (c) all Apps and In-App Products acquired by Customers in the Microsoft Store for Business; Microsoft Store for Education; Microsoft Store on Windows 8 devices; or Microsoft Store on Windows Phone 8 devices.


          Google Play Service fees:

          For apps and in-app products offered through Google Play, the service fee is equivalent to 30% of the price. You receive 70% of the payment. The remaining 30% goes to the distribution partner and operating fees.

          As of 1 January 2018, the service fee for subscription products decreases to 15% for any subscribers that you retain after 12 paid months. If a subscriber has been active as of this date, that time will be counted. For example, if a subscriber has been active for four months, the service fee will be reduced to 15% after eight more paid months.

          • Paul Thurrott

            Other stores? When you go after the bad guys, you go after the biggest one first. Then the others will fall, either voluntarily or not. But if you're talking about Microsoft, the Microsoft Store on Windows isn't a monopoly and/or the only way to get apps on Windows. In fact, very few customers even use it, comparatively speaking. If you're talking about any console store, those businesses are tiny (10s of millions of units) compared to mobile (several billion units). If you're talking about Google, I have. But to reiterate, same basic issues as Apple App Store but Android does allow for third-party stores, eliminating a central complaint about iOS/iPadOS.
  17. melinau

    Apple (along with all the other "Tech Giants") will hopefully be brought to heel & properly regulated world-wide. This move is clearly designed to garner positive PR on TV networks & Press, as it's hardly a serious concession. I don't know if 4% is a fairer charge, but it sounds reasonable. While 4% of millions (billions?) is less than 30% it's still ample.

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