Apple’s App Store is an economy unto itself. That comes with challenges.
Angela Lang/CNET
Apple’s changing the way it treats small developers next year, halving the 30% commission it charges on sales made through its App Store for the iPhone, iPad and Mac computer. The 15% commission will apply to companies making up to $1 million in sales per calendar year.
“The savings mean small businesses and developers will have even more funds to invest in their businesses, expand their workforce and develop new, innovative features for app users around the world,” Apple said in a statement. The program will begin on Jan. 1, 2021, and will be based on a developer’s sales this year.
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Apple said it chose $1 million because internal studies find that apps tend to find greater success when they reach that amount. And if a developer dips below that amount, they become eligible for the program again.
Apple’s moves come after years of debate among its 28 million app developers, who’ve bristled at the iPhone maker’s commissions as the digital storefront’s expanded to more than 1.5 billion active devices. Apple has also required the only way people can download sanctioned iPhone and iPad apps is through its app store. To many developers, Apple’s heavy-handed approach stifles their business.
Apple’s charged a 30% commission on all app sales since launching its App Store in 2008, a year after the first iPhone debuted. Apple also charges up to 30% for in-app purchases of digital goods like extra lives to play a game, a new look for your character or a subscription to language learning app. It also requires developers to submit their apps for review to ensure they’re secure and meet editorial guidelines around issues such as nudity and harassment.
For developers, the enormous app economy, which Apple pegged at more than a half trillion dollars, is worth it in the end. Apple users are typically more willing to pay for apps as well.
“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,” Apple CEO Tim Cook said in a statement. “Our new program 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 banned Fortnite from its App Store in August.
Angela Lang/CNET
Under pressure
Developers haven’t just complained about Apple’s commissions, some have pushed back. Most notably, Epic Games, the developer behind the hit battle royale game Fortnite, sued Apple in August over its commission structure.
Epic itself charges a 12% fee for games sold through its own marketplace. Epic says that commission amount is more fair, allowing the company to make money while giving game makers more funds to feed back into development.
To many industry watchers, the battle between Epic and Apple amounts to a corporate slap fight over money between a multibillion dollar company and a multitrillion dollar company. But to some, it’s a more dramatic example of a long-standing issue Apple’s faced.
David Barnard, a longtime self-employed independent developer based in Texas, estimates Apple’s commissions on his apps add up to about $750,000 over the past 12 years. “Would I have loved to put that into a retirement account? Sure,” he said. “But I probably would have reinvested that into the apps — hiring more developers and all that.”
Barnard is also a developer advocate at app sales platform RevenueCat, where he meets and learns about many other developers’ businesses. He believes Apple’s stringent app review process causes more trouble for developers than the company’s commission.
Still, he said if Apple gives more money to developers, it could help companies get off the ground. It may even allow some developers to come up with new app ideas they’d otherwise have dismissed because they wouldn’t be able to make the business work under Apple’s fees, he said.
But he also suspects it wouldn’t make that much a difference to others.
“If you can’t make the economics work when Apple takes 30% off the top when you sell digital trinkets in a game, you have different problems,” he said.
