Apple today announced that they will be reducing the App Store commission rate from 30% to 15% for developers who earn less than $1 million USD from the App Store. This comes as Apple has been under pressure from developers like Epic Games and Spotify, who have called Apple’s 30% commission unfair and anti-competitive.
The reduced fees will apply to both app sales and subscriptions. Once a developer’s sales expand beyond the $1 million USD mark, then all additional sales are subject to the 30% rate.
John Gruber writes in his article:
Let’s say a new developer enters the program (and thus qualifies for the 15 percent commission) and their apps are on pace to generate $1.2M in sales. At 15 percent, $1.2M in revenue would generate $1.02M in earnings — putting them over the threshold, so their entire earnings the next year would face a 30 percent commission. If their sales remain flat the next year, the same $1.2M in revenue would earn them only $840K at 30 percent. They’d have to generate $1.5M in revenue to earn the same profit that $1.2M in sales brought them the year before. Basically, if the end of the year draws near and a developer in the Small Business Program has revenue approaching $1.2M, they’re incentivized to pull their apps or reduce their prices to keep from going over the threshold.
John makes an interesting point. The $300k difference between $1.5M and $1.2M means the difference between being able to pay for an entire developer’s salary for a year. For a small business, it’s a legitimate concern.
And kudos to John for finally figuring out that higher taxes on earnings can disincentivize people and businesses from wanting to produce. Though I’m sure the comparison will be lost on him.