Put the bandage on before you bleed: Apple changes the App Store commission

It is difficult to condense into a headline on the one hand what happens and at the same time induce why it happens, but that is what we have tried.

Apple yesterday issued a statement in which they warn that a new regulation will come into force in December regarding the commissions charged for the sale of apps in the App Store. These are rules that especially affect small developers, since the limit to benefit is to earn less than a million dollars in the App Store.

If this is your case, the commission that Apple will retain will be 15% instead of 30%. An important amount that will now remain in the creator’s pocket, instead of in the intermediary.

Although anything that is to benefit those who make the App Store the largest software store in the world is welcome, there is no doubt that the situation of scrutiny Apple is under has motivated, or at least prompted, to move a tab before that the situation reaches an irremediable point.

According to Apple, the idea comes to compensate developers for how difficult the year 2020 has been. Here’s what they say (translated from English)

Apple Announces Small Business Program on the App Store

Apple has announced an industry-leading developer program to accelerate innovation and help small businesses and independent developers jumpstart their businesses with innovative apps in the App Store. The new App Store Small Business Program will benefit the vast majority of developers who sell digital products and services in the store, allowing them to benefit from a reduced commission on payment applications and in-app payments. Developers can apply for admission to the program and their reduced commission of 15% if they earned less than a million dollars during the previous year.

The App Store Small Business Program will launch on January 1, 2021, and comes at an important time for small and independent developers to continue working to innovate during a period of unprecedented global economic challenges.

Apps have taken on a new importance as businesses adapt to a virtual world during the pandemic and many small businesses have launched or significantly developed their digital presence in order to continue reaching their customers and communities.

The program’s reduced commission means that small developers and aspiring entrepreneurs will have more resources to invest and grow their business in the App Store ecosystem.

Although the full details will be known in early December, the basics of the program are simple:

• Existing developers who made less than a million dollars in 2020 in all their apps, as well as new developers in the App Store can apply to participate in the program and benefit from the reduced commission.
• If a participating developer exceeds the million dollar threshold, the standard commission will apply for the remainder of the year.
• If a developer sees their business drop below one million dollars in a subsequent year, they can reapply to enter the program and benefit from the 15% commission the following year.

The standard commission of 30% in the App Store remains in force for apps that sell digital goods and services and that earn more than a million dollars a year, understood as earnings after the commission has been subtracted.

At the beginning of the year, an independent study carried out by the Analysis Group found that Apple’s commission structure is the usual one on gaming and app distribution platforms.

Because right now?

As we have reiterated on numerous occasions, as in the article on the confrontation with Fortnite, a narrative of abuse of power is being built, both on the side of some developers, who want to enjoy everything without having to pay for anything, as for the Governments, increasingly attracted to the mere fact that Apple (and Amazon, and Facebook, and Google) are big and therefore have to pay for it.

The antitrust investigations that have been initiated in various countries, sometimes at the behest of developers and others directly from politics, seek to be able to impose fines or alter the market to favor locals, without necessarily feeling linked to it being fair or no.

It’s about politics and money, the two things that most pervert the spirit of the law.

The shadows of Apple’s proposal

Although the complete and final wording has not yet been published, the approach leaves a dark area for developers, which is around one million euros (€ 843,000), the threshold to be able to benefit from the reduced commission program of the App Store.

If a developer approaches that magic number, they may be more interested in removing the App from the App Store than risking over a million dollars in sales and paying a 30% commission. (If you win $ 999,999 (-15%) you have $ 849,999 left and if you win $ 1,000,001 (-30%) you would win $ 7000,000)

The way to solve this situation, without the developer having to worry about monitoring his income statement, would be for the percentages to be applied on the corresponding tranches, that is, up to one million dollars, 15% and on what exceeds one million. dollars, 30%.

Even better would be to put a percentage scaling up to 30%, by profit tranches, so that the jump is less abrupt and there is a real incentive to continue making money selling in the App Store.

But for all this we will have to wait for December.