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Apple will halve the fees for the App Store to 15% for small developers

Apple CEO Tim Cook spoke at the World Developer Conference (WWDC) at the San Jose Convention Center in San Jose, California on Monday, June 4, 2018.

Josh Edelson AFP | Getty images

Apple will reduce its App Store commission rate to 15 percent for software developers with less than $ 1 million in annual net sales on its platform, the company announced Wednesday.

Apple currently charges a commission of 30% of the total cost of paid apps and in-app app purchases. For some small app makers, the new policy could halve the amount they pay Apple.

Apple says the App Store for Small Business will launch on January 1

, and that eligible developers will receive reduced fees in the App Store for paid apps and in-app purchases. New developers who have not posted to the App Store before will also qualify for a lower commission of 15%.

This move is an olive branch of Apple, as lawmakers around the world are increasingly focusing on their business practices for the App Store, which is the only way for most people to install software on an iPhone or iPad. A report by the House on Antitrust Judiciary Subcommittee, released in October, said Apple was generating “above normal profits” from the App Store.

The new program is for small developers who make less than $ 1 million a year in all of their apps in Apple’s App Store, at Apple’s fees. Once the developer crosses this threshold, they will be charged at the standard rate of 30%, Apple said. If they later fall below $ 1 million in sales per calendar year, the lower commission may be refunded. Apple said it would reveal more details about the terms of the reduced commissions next month.

Wednesday’s announcement is separate from Apple’s 15% lower fee for the second year of subscriptions calculated through the App Store, which also applies to large companies and was introduced in 2016.

Last month, Apple said in an annual statement to the SEC that cutting the commission rate on the App Store could hurt the company’s financial results. Revenue from the App Store is a major part of Apple’s services business, which generated $ 14.55 billion in the quarter ending in September, representing 22% of the company’s revenue for the period.

But Apple will still charge a 30% fee for in-app purchases for the most profitable apps, which means the impact on Apple’s finances may be minimal. In addition, the maximum discount for each publisher is limited, as the commission is refunded up to 30% after sales, after Apple’s fees exceed $ 1 million.

Apple says there are about 1.8 million apps in the App Store, but apps are the best business. The top 1% of app publishers generate 93% of revenue in the App Store and Google Play Store, according to a 2019 forecast by app analytics firm Sensor Tower.

The change will help small companies offering virtual classes or in-app sessions that have fixed costs such as instructor time and are becoming increasingly important during the Covid-19 pandemic. In a separate post on its website, Apple highlighted the swimming coach app, the coding app for kids, and independent play as businesses that can benefit from the policy change.

Apple does not charge a commission for physical goods purchased through applications such as personal class bookings or Uber. But he believes that other classes or events held online, such as a virtual yoga session, are digital goods and subject to commission. It suspended these fees until the end of the year after a noisy public dispute with Facebook.

The changes are unlikely to soften Facebook or Fortnite Epic Games maker, which is embroiled in legal battles with Apple over the company’s 30% fee and related practices. An August estimate suggests that Epic Games has raised more than $ 1.2 billion in the App Store to date, making it unacceptable for the reduced commission.

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