On Wednesday Apple announced it was cutting its App Store fees in half for small developers. This news comes in the midst of a fresh lawsuit between the tech giant and Epic Games, and the latter’s CEO isn’t buying it.
App Store Small Business Program
The new App Store Small Business Program will reduce its cut of App Store transaction by half for developers who earn less than a million U.S. dollars a year. This brings Apple’s cut down to 15 per cent from 30 for approved developers. It is set to begin on January 1, 2021.
According to Apple, more comprehensive details will be released in early December. However, the company has released some initial criteria:
- Existing developers who made up to US$1 million in 2020 for all of their apps, as well as developers new to the App Store, can qualify for the program and the reduced commission.
- If a participating developer surpasses the US$1 million threshold, the standard commission rate will apply for the remainder of the year.
- If a developer’s business falls below the US$1 million threshold in a future calendar year, they can requalify for the 15 per cent commission the year after.
“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,” Apple’s CEO, Tim Cook, said in a statement.
“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.”
Timing is everything
Despite Cook’s assertions of noble intentions, the timing is certainly convenient. This program has been announced in the midst of Apple’s App Store practices being investigated by an antitrust probe in the EU. And here in Australia the ACCC is investigating both Apple and Google’s app store practices.
There is also talk of the U.S. Department of Justice launching its own investigation into Apple’s in-app purchasing policy.
These investigations are at least partially due to public complaints regarding the 30 per cent cut that Apple takes from all in-app purchases. This has been particularly significant because developers aren’t able to offer alternative payment methods via the App Store without violating its policies.
The most notable example of this violation has been Epic Games. Several months ago Fortnite was booted from the App Store and Google Play for allowing players to purchase in-game currency directly from the mobile apps on iOS and Android.
To make this payment option more attractive, Epic offered a 20 per cent discount, which still worked out better for the company than Apple and Google’s 30 per cent cut.
This resulted in Epic suing both companies in the United States. Epic Games also began legal proceedings against the company here in Australia on Wednesday. Epic is arguing that Apple’s refusal to allow alternative payment options is a breach of Australian consumer law.
Interestingly, by the end of the day Apple had subsequently announced the App Store Small Business Program.
Epic doesn’t by it
Epic Games’ CEO, Tim Sweeney, isn’t convinced by Apple’s claim that its new initiative is intended to help small businesses.
“This would be something to celebrate were it not a calculated move by Apple to divide app creators and preserve their monopoly on stores and payments, again breaking the promise of treating all developers equally,” Sweeney said in a statement to Gizmodo Australia.
Sweeney also brought up the fact that up until this point, not all companies with ties to the App Store were treated the same. In fact, at least online tech giant is already charged at a reduced rate.
Back in July an antitrust hearing in July revealed that Amazon was only required to pay Apple 15 per cent of first year Amazon Prime Video subscriptions purchased through its App Store app.
“By giving special 15% terms to select robber barons like Amazon, and now also to small indies, Apple is hoping to remove enough critics that they can get away with their blockade on competition and 30% tax on most in-app purchases. But consumers will still pay inflated prices marked up by the Apple tax,” Sweeney said.
“iOS and Android need to be fully open to competition in stores and payments, with a genuinely level playing field among platform companies, app creators, and service providers. That, and not gerrymandering the community with a patchwork of special deals, is the only path to a fair app marketplace.”
Disclosure: the author owns 12 shares in Apple.