Apple to reduce its App Store fees for small developers

Apple Inc said on Wednesday it plans to start a program to lower its App Store commissions for software developers who make $1 million or less in proceeds each year from the store, but some of the company's critics called the move "window dressing."

Apple takes a 30 per cent cut of most purchases made on the App Store, although the commission drops to 15% for subscriptions that remain active for more than a year.

Apple said the "vast majority" of developers will benefit from its program launched to give companies a boost during the pandemic, which will become effective January 1.

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

"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 App Store fees and rules have come under fire from large firms such as Microsoft Corp, Spotify Technology SA, Match Group Inc and Epic Games as well as startups and smaller companies that allege the fees deprive consumers of choices and push up the price of apps.

In reply to its critics, the iPhone maker has previously said its rules apply evenly to developers and that the App Store provides an easy way to reach its huge base of users without having to set up payment systems in the 175 countries where it operates.

The move will affect a broad swath of developers who make up a small portion of Apple's App Store revenue. Based on the publishers it tracks, analytics firm Sensor Tower said 97.5 per cent of iOS developers generated less than $1 million per year in gross consumer spending. But those same developers contributed only 4.9 per cent of the App Store's 2019 revenue.

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"It’s a symbolic gesture," said Sarah Maxwell, a spokeswoman for the Coalition for App Fairness, a group of Apple's critics. "You have to apply to the program, and the vast majority of developers who generate livable revenue through their apps won't benefit from this change."

The announcement, however, will have no effect on developers that generate huge amounts of cash from wildly popular apps from the likes of music giant Spotify and video game sensation Epic Games.

According to research firm Sensor Tower, the move by Apple affects apps generating less than five percent of its revenue from the App Store.

Apple says its marketplace has some 1.8 million apps, most of them free. The App Store in 2019 generated some $519 billion in commerce in 2019, with about 85 percent flowing to the developers, according to the company.

But Apple's policies have been coming under increasing scrutiny.

Apple and the developer of the blockbuster game Fortnite, Epic Games, are fighting in court over whether the California-based company's tight control of its App Store, and its 30 percent cut of revenue, counts as monopolistic behavior. 

Apple pulled Fortnite from its store in August after Epic released an update that dodges revenue sharing. A trial to resolve the dispute is expected year.

Spotify meanwhile has filed a complaint with EU authorities alleging Apple has abused its dominant position to extract unfair fees from online services.

The Coalition for App Fairness, a newly formed association with includes Spotify, Fortnite, and several other app developers, expressed disappointment with Apple's move.

"Developers want a level playing field from Apple, NOT a symbolic gesture," the coalition said in a Twitter statement.

"Apple's announcement today is a calculated move and ignores fundamental flaws with the App Store, specifically."

The group said the $1 million thresholds is arbitrary and that Apple's policies are still hurting many app developers.