Apple announced it will charge a reduced commission on its App Store from next year for small businesses. App publishers with less than USD 1 million in annual turnover can benefit from the new reduced rate of 15 percent, compared to the normal commission fee of 30 percent for Apple.
The commission is Apple's share of the cost of paid apps and in-app purchases over the store. The turnover threshold applies for existing developers based on their total sales in the past year on the App Store. Publishers new to the App Store will also benefit from the reduced rate until they pass USD 1 million in sales.
Called the App Store Small Business Program, the new offer is expected to benefit small companies struggling during the coronavirus crisis. It also comes amid growing industry and regulatory pressure on Apple and Google to justify the commissions, which apply across the board regardless of the size of publisher or type of app.
The App Store’s standard commission rate of 30 percent remains in place for apps selling digital goods and services and making more than USD 1 million in proceeds, defined as a developer’s post-commission earnings. Apple said it would release more details on the new scheme in December, ahead of it taking effect from 01 January 2021. Developers benefitting from the reduced commission will see no change in the services provided by Apple.
It's unclear what the financial impact for Apple will be from the reduced commission. The company said the "vast majority" of developers selling on the App Store would benefit from the lower rate.
Services have been an important growth area for the company as the smartphone market becomes saturated. In the past fiscal year to September 2020, services contributed USD 53.8 billion in revenues, or a fifth of the total at Apple. It's not known what share of this comes from the App Store.
A report released by Apple in June said that its App Store ecosystem supported USD 519 billion in billings and sales in 2019. Of the total, 85 percent went to third-party developers and businesses, with no commission for Apple, according to the research by Analysis Group.
