Apple To Cut Commission Fees on Small App Developers by 50%

The move is good for small developers, not-so-good for Apple Store generated revenues.
Anthony RussoNov 18,2020,17:50

Apple (Nasdaq: AAPL) announced Wednesday that it will launch a new program aimed to cut commission fees in half charged to small developers that generate as much as $1 million in annual revenue.

The California-based tech giant, which currently takes a 30% commission from its App Store, will reduce that figure from 15% for small developers, according to its statement today. If developers wind up passing $1 million in sales through a calendar year, then they will be charged at the normal 30% rate. However, if developers’ annual sales later fall below $1 million in a calendar year, then it could regain the 15% commission rate.

The move will go into effect on Jan. 1 under the “App Store Small Business Program.” The program aims to give more small developers and “aspiring entrepreneurs” more flexibility for investments and the ability to grow, as they deal with economic challenges amid the pandemic.

"Small businesses are the backbone of our global economy and the beating heart of innovation and opportunity in communities around the world,” Tim Cook, the chief executive officer of Apple said in a statement today.

He added, “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."

The App Store accounts for a big portion of the company’s services business, which brought in $14.55 billion for the third quarter. Its services business accounted for 22% of Apple’s total revenues in the period.

Also, the move won’t have an impact on major app makers. According to a third-quarter 2019 estimate from the intelligence data firm Sensor Tower, the top 1% of app publishers through the App Store and Google’s Play Store, generated $20.5 billion in sales, or 93% of total revenues.

(Source: Sensor Tower)

However, Apple is also facing legal challenges from big app developers. In September, Spotify Technology (NYSE: SPOT), Match Group (Nasdaq: MTCH), and Fortnite maker Epic Games, collectively teamed up with a nonprofit organization that intends to push for legal and regulatory action to challenge the smartphone giant’s App Store fees.

By midday, Wednesday, the stock in Apple was trading 33 cents higher from Tuesday’s close at $119.72 per share. Shares of Apple are up 62% year-to-date.

Topics:Apple, Spotify, Match Group, Fortnite, Epic Games.