Photo Credit: James Yarema
Apple says it will charge lower App Store commission fees to developers who make less than $1 million a year. Your move, Spotify.
The move comes in the heat of a grueling battle between Apple and companies like Spotify and Epic Games. Both companies feel that the 30% ‘Apple Tax’ is too much, and have devoted enormous resources to challenge the charge. They’ve launched the Coalition for App Fairness, and have urged developers of all sizes to join them in the fight against the 30% fee.
But Apple may have taken the wind out of the sails of some smaller developers. Now, those smaller developers stand to receive a better deal. Apple says developers will automatically be dropped to the 15% rate if they generate $1 million or less in proceeds. Proceeds are defined as the portion of store purchases that the developer keeps.
Sounds shrewd. But the move to give a more favorable rate to small-time developers has already sparked more criticism. Epic Games CEO Tim Sweeney says he believes it’s a calculated move by Apple to divide creators “and preserve their monopoly on stores and payments – breaking the promise of treating all developers equally.” Sweeney’s company would not be eligible for the lower 15% rate, considering the billions Fortnite rakes in each year.
The financial impact of Apple’s move is unclear. Analytics firm Sensor Tower estimates that around 97.5% of iOS developers generate less than $1 million per year in proceeds. The group is only responsible for approximately 4.9% of the App Store’s 2019 revenue.
But one Apple analyst, Gene Munster of Loup Ventures, believes the umbrella could be as much as 20% of total App Store commission revenue.
He’s lowered his projections for Apple’s revenue down to $14.2 billion, representing a $1.6 billion reduction after the policy changes. As expected, many of the App Store’s larger players are unhappy that the cut isn’t for everyone.
Match Group says Apple’s rules still force developers to use its payment system. “And if you manage to grow your revenue over $1 million, they then double their cut – arbitrarily – making it even harder for the startup to continue to grow.” Spotify responded similarly, saying it hopes regulators in the EU ignore what it calls ‘window dressing.’
Apple says the new App Store commission program will start on January 1st. The company will detail which developers are eligible for the new lower rate next month. For now, it’s a wait-and-see game on how it impacts Spotify’s fight against the ‘Apple Tax’ in the EU.