What you need to know
- Apple is reducing its App Store commission rate for the 'vast majority' of developers.
- It will now take 15 percent instead of 30 from developers who earn up to $1 million a year.
In huge developer news, Apple has today announced it will reduce its App Store commission rate from 30% to 15% for small businesses who earn up to $1 million a year in revenue.
In a press release today (opens in new tab) the company stated:
The program will launch on January 1, 2021. Apple says the move will benefit "the vast majority of developers" who sell digital goods and services on the App Store. Apple said "comprehensive details" would come next month, but outlined the following:
- 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.
Apple says the standard 30% rate will remain in place for anyone earning more than $1 million in proceeds. Data from Sensor Tower reported by the New York Times suggests the measures would impact 98% of Apple's developers that pay a commission (84% of developers do not), but that those developers only account for less than 5% of Apple's App Store revenue. This is just an estimate however, and Apple has not officially provided any details.
You can read the full report here. (opens in new tab)
In an accompanying feature (opens in new tab) Apple has highlighted the reaction of some developers to the new program. From that piece:
Speaking to iMore, indie iOS and Mac developer James Thomson said:
Stephen Warwick has written about Apple for five years at iMore and previously elsewhere. He covers all of iMore's latest breaking news regarding all of Apple's products and services, both hardware and software. Stephen has interviewed industry experts in a range of fields including finance, litigation, security, and more. He also specializes in curating and reviewing audio hardware and has experience beyond journalism in sound engineering, production, and design.
Before becoming a writer Stephen studied Ancient History at University and also worked at Apple for more than two years. Stephen is also a host on the iMore show, a weekly podcast recorded live that discusses the latest in breaking Apple news, as well as featuring fun trivia about all things Apple.
If this is true, then 95% of Apple's revenue comes from the top 2% of developers. They can do whatever they want for the bottom 98% and it won't have a big effect on their bottom line. It is interesting to see Apple adopt a progressive taxation scheme where "poorer" developers pay lower commissions. Perhaps the scheme isn't being explained properly, but it seems paradoxical that a developer could lose money by going from $900K (15% tax or $765K net) to $1M (30% tax or $700K net) and would have to go to $1.1M to reach $770K net. It looks like Apple is (presumably gleefully) slapping Epic in the face again because Epic will still be stuck with the 30% rate.
It's like a marginal tax. you pay 15% on all sales up to $1 million, and 30% on sales over $1 million in the year it happens: "If a participating developer surpasses the $1 million threshold, the standard commission rate will apply for the remainder of the year."
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