Apple Halves Its App Retailer Price for the Smaller Firms

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Facing growing antitrust scrutiny of what other companies are charging for access to its app store, Apple said Wednesday it would save half the fees of the smallest app developers.

Developers who brought in $ 1 million or less from their apps in the previous year will pay a commission of 15 percent on those app sales starting next year, down from 30 percent, according to the company.

The move, which will hardly have any impact on Apple's bottom line, is an abrupt change in the company's public intransigence regarding its fees. For 12 years, the App Store has helped fuel Apple's remarkable growth, and the company seems reluctant to do anything to change that. Even when fees policy was the focus of antitrust complaints, Apple defended them aggressively.

Now Apple appears to have found a way to earn goodwill from thousands of developers and give ammo to its executives to defend its commission against regulators and journalists without costing the company a lot.

Sensor Tower, an app analytics company, estimates that the change will affect around 98 percent of companies that pay Apple a commission. According to Sensor Tower, these developers made less than 5 percent of App Store sales last year. Apple said the new rate would affect the "vast majority" of its developers but declined to offer specific numbers.

Apple said in a statement that it made the change because 2020 was a difficult year for many small businesses.

"We're launching this program to help small business owners write the next chapter on Creativity and Wealth in the App Store and create the kind of quality apps our customers love," said Tim Cook, Apple CEO, in a Message publication. The smaller commission will "help developers fund their small businesses, take risks for new ideas, grow their teams, and continue to create apps that enrich people's lives," he said.

The fee cut is unlikely to calm the tide between Apple and the larger app developers who have long protested the fee the loudest, and it might just be a sop for state and federal regulators.

Epic Games, maker of the popular Fortnite game, sued Apple over its fee in August. A month later, 13 companies and groups, including Spotify and Match Group, formed the nonprofit app fairness coalition to fight the “app tax”. And American and European regulators are investigating Apple for anti-competitive behavior, including because of its commission.

App developers couldn't be asked to comment immediately, as Apple notified journalists Tuesday of the news under the agreement that they would not be able to speak to outside groups until they posted the news in New York at 6 a.m. on Wednesday at the earliest . Apple included comments from several smaller companies in its press release that were happy with the change.

Apple introduced its 30 percent commission in 2008 with its App Store, which only had 500 offers. Now the App Store is one of the largest trading centers in the world, generating half a trillion dollars in sales in 2019.

This makes the commission the biggest driver of Apple's Internet services business, which grossed more than $ 53 billion last year.

Apple calculates 30 percent of all sales of “digital goods and services” in an app; B. a virtual article in a game or a subscription to a music, TV, news or dating app. (In the second year of a subscription, Apple's cut decreases to 15 percent.) Apple does not cut any physical goods or services, such as: B. an Uber ride or shoes bought in the Amazon app.

With the global online migration, especially during the pandemic, the App Store has become an increasingly important gateway to customers for businesses of all sizes. Apple's growing power has led both lawmakers and developers to label the 30 percent cut a "highway robbery".

No company has fought Apple's commission harder than Epic. In August, the company got Apple to dump its hugely popular Fortnite game from the App Store. Then Apple quickly sued it and launched an elaborate PR campaign against it. This week, Epic expanded its litigation to Australia, where the laws could favor its complaints.

Epic has argued that Apple could ask for a more reasonable price. Epic operates its own online marketplace for games, which generates 12 percent of sales from other companies – and makes a profit of 5 to 7 percent, according to the company.

Apple has argued that 30 percent is the same as other companies' tariffs, including app stores from Google, Microsoft and Samsung, and game stores from Sony PlayStation and Microsoft Xbox.

Even so, Apple didn't apply its cut evenly. Larger companies with services Apple wanted for iPhones to make the devices more attractive to buyers have negotiated better prices. Documents released by the House of Representatives in July showed that Apple executives offered Amazon a 15 percent commission for the publication of its Amazon Prime Video app in the App Store in 2016.

Apple said it would use the combined revenue of all a developer's apps in the previous calendar year to determine what rate a company should be billed for. Any developer, including new developers, with $ 1 million or less in the previous year pays the 15 percent rate for the year, even if their revenue exceeds $ 1 million that year.