On November 18, Apple announced a new program called the App Store Small Business Program. It’s designed to benefit the vast majority of app developers on the App Store by reducing Apple’s commission from 30% to 15% for developers who earned less than $1 million on the store during the previous calendar year.
In other words, for small and independent developers, it allows them to keep more of their revenue in a time when the financial impact of mobile has never been higher. With COVID, more businesses than ever before are shifting their priorities to mobile or expanding their preexisting efforts there.
Here’s how it works:
- For a new developer/app, you pay 15% commission up to $1 million in annual revenue. If you surpass that limit, you start paying 30%. That 30% is locked in moving forwards in subsequent years.
- For a preexisting developer/app, if you’re above $1 million in annual revenue, you’re still paying 30%.
- If you previously were making above $1 million in annual revenue, but your revenue dipped below that number, you can apply for the lower tier for the next year.
For big players, nothing has changed. For small players, you get to pay 15% as long as you stay under $1 million in annual revenue. But according to estimates from Sensor Tower, an app analytics firm, about 98% of companies that pay Apple a commission now will be affected by this change. For that, we applaud Apple.
One is left to wondering whether this move at least in part is due to increasing anticompetitive scrutiny on Apple’s App Store. After all, they are currently embroiled in a lawsuit with Epic Games over Apple’s restrictions on preventing apps from offering other in-app purchasing methods besides the one offered by the App Store.
On its face, this seems like a PR move designed specifically to quiet a significant number of developers while at the same time sacrificing a minimum amount of Apple’s revenue. For example, Sensor Tower estimates that the 98% of companies that will now classify for the App Store Small Business Program only account for 5% of App Store revenue. In other words, Apple is framing this move as one designed to enable innovation and help small businesses, and this is undoubtedly true. But it is most assuredly not a move that will significantly reduce its overall take from App Store purchases.
However, let’s hope this is only the first of many steps that enables mobile to thrive. At Embrace, we believe mobile is the future. It offers a better user experience than web, and is increasingly becoming a larger part of the day-to-day routine in our lives. Whether we use mobile for communication, business, education, games, etc., it’s clear that empowering companies to innovate and sustain businesses in mobile is a desirable goal for society.
This move is only the beginning in what is sure to be a continual reexamination of what constitutes a healthy marketplace for businesses and consumers in mobile. As more and more of our lives shift to mobile, we will ask more and more questions about the best way we can all benefit from it.
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