Apple to lower App Store fees for small developers, but some critics not impressed

Apple Inc said on Wednesday it plans to start a program to lower its App Store commissions for software developers who make $1 million or less in proceeds each year from the store, but some of the company's critics called the move "window dressing."

Apple takes a 30 per cent cut of most purchases made on the App Store, although the commission drops to 15 per cent for subscriptions that remain active for more than a year.

The iPhone maker said developers will automatically get the lower 15 per cent rate if they generate $1 million or less in proceeds — defined as the portion of store purchases that the developer keeps — in a calendar year.

Apple's App Store fees and rules have come under fire from large firms such as Microsoft Corp, Spotify Technology SA, Match Group Inc and Epic Games as well as startups and smaller companies that allege the fees deprive consumers of choices and push up the price of apps.

"This would be something to celebrate were it not a calculated move by Apple to divide app creators and preserve their monopoly on stores and payments, again breaking the promise of treating all developers equally," Epic Games chief executive officer Tim Sweeney said.

In reply to its critics, the iPhone maker has previously said its rules apply evenly to developers and that the App Store provides an easy way to reach its huge base of users without having to set up payment systems in the 175 countries where it operates.

The move will affect a broad swath of developers who make up a small portion of Apple's App Store revenue. Based on the publishers it tracks, analytics firm Sensor Tower said 97.5 per cent of iOS developers generated less than $1 million per year in gross consumer spending. But those same developers contributed only 4.9 per cent of the App Store's 2019 revenue.

"It's a symbolic gesture," said Sarah Maxwell, a spokesperson for the Coalition for App Fairness, a group of Apple's critics. "You have to apply to the program, and the vast majority of developers who generate livable revenue through their apps won't benefit from this change."

'Huge win' for smaller developers

On the other hand, Taylor Bond, vice-president of client experience at MindSea Development, a Halifax-based creator of mobile apps, called the move a "game-changer" for smaller developers in a resource-intensive business. 

"For small businesses, this is a huge win, and it ensures that they will be able to use some of Apple's native development toolkits and payment more effectively, without giving away 30 per cent of their revenue."

The App Store generated $59.3 billion US from gross consumer spending in the first 10 months of 2020 and Apple would have made $17.8 billion if it took a 30 per cent cut, according to Sensor Tower estimates.

"This latest move further demonstrates that their App Store policies are arbitrary and capricious," streaming music company Spotify, which is pursuing an antitrust complaint against Apple in Europe, said in a statement. "We hope that regulators will ignore Apple's "window dressing" and act with urgency to protect consumer choice, ensure fair competition, and create a level playing field for all."

Apple said the new program will start on Jan. 1 and it will give more details on which developers qualify next month.