Apple Slashes App Store Commission Fees to 15 Percent for Small Businesses

Apple Slashes App Store Commission Fees to 15 Percent for Small Businesses

This move should help many businesses that were unhappy with some of the fees.

Apple announced Wednesday that it is launching a new App Store Small Business Program, which will reduce the commission charged to developers from 30 percent to 15 percent, for qualifying apps run by smaller businesses. Apple is defining that as having earned less than $1 million in proceeds in the last year, as well as developers new to the App Store.

The program will launch next January, and it comes as Apple has been battling for months with Epic Games, the maker of the popular video game “Fortnite,” over app fees.

Apple currently takes 30 percent in commissions, from subscription fees and in-app purchases, a practice which has led to scrutiny from governments around the world. Apple CEO Tim Cook was asked about the topic when he testified before Congress this fall.

“Small businesses are the backbone of our global economy and the beating heart of innovation and opportunity in communities around the world. We’re launching this program to help small business owners write the next chapter of creativity and prosperity on the App Store, and to build the kind of quality apps our customers love,” Tim Cook said in the announcement.

“The App Store has been an engine of economic growth like none other, creating millions of new jobs and a pathway to entrepreneurship accessible to anyone with a great idea. Our new program carries that progress forward—helping developers fund their small businesses, take risks on new ideas, expand their teams, and continue to make apps that enrich people’s lives.”

When apps cross the $1 million threshold, they will be charged the standard commission for the remainder of that year, although in future years they can get the 15 percent again if their proceeds drop below that mark.

The news follows the start of legal and public relations hostilities between Apple and Epic Games, which seem likely to be protracted. Epic has challenged both the 30 percent commission and Apple’s rules about in-app purchases, and after Epic set up its own purchasing system this summer, Apple banned its mobile version from its App Store. Epic went on to sue Apple in United States District Court in California.

Epic Games, following a funding round earlier this year, has now been valued at over $17 billion, at least as of early August. Apple, however, has a valuation of over $2 trillion, making it the most valuable company in the world.

While the original iPhone launched in 2007 with only native apps, Apple changed its mind the following year and allowed third-party applications, with the launch of the App Store. It created a brand new, extremely valuable sector of the tech economy, but also led to occasional acrimony with some business partners.

Stephen Silver, a technology writer for The National Interest, is a journalist, essayist and film critic, who is also a contributor to Philly Voice, Philadelphia Weekly, the Jewish Telegraphic Agency, Living Life Fearless, Backstage magazine, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. Follow him on Twitter at @StephenSilver.

Image: Reuters