Apple Drops App Store Fees to 15% for All Developers Making Under $1 Million From App Store

[Rogifan]

Epic and Spotify not happy. They do have a point when Tim Cook says all developers are treated equally and that’s clearly not the case. This is probably also something that looks good but doesn’t touch the developers generating the majority of App Store revenue so won’t really impact Apple’s bottom line but will make for good PR.

Apple’s biggest App Store critics are not impressed with its new fee cut for small developers

Epic and Spotify are not pleased with Apple’s new App Store cut, saying it doesn’t solve core problems.

www.theverge.com

 

[Ntombi]

Still confusion around whether this is 15% up to first $1M or not. Seems like it’s not though.

https://twitter.com/x/status/1329074716896755717

It’s only confusing for those who haven’t read it.

It’s 15% up to the first million after App Store fees.

 

[Rogifan]

Since you said "that's my question" to someone talking about going forward (you stay at 30%) I read your question as one for the following year... not asking about retroactively applying it in the same year (which didn't seem to be mentioned by the other poster).


For those who qualify, it is 15% on the first $1m (technically, first $1.176m) and then 30% beyond it.They then don't qualify for the following year.

For those who don't qualify, it is 30% on everything. But if they earn less than $1m in a year (ie, $1.429m less 30% commission), then they would qualify the following year.

”For those who qualify”. That‘s my question. If it was 15% on the first $1M of revenue then every developer would qualify. If it’s 15% based on annual sales of less than $1M then obviously not ever developer would qualify. Based on Epic and Spotify’s response it seems like the latter is the case. To which if I’m a small developer then I’m working to ensure my revenues are under $1M OR at least $1.2M.

 

[thuchu1]

This is great. I’m a dev that doesn’t earn even close to that limit so very nice indeed.
Imagine getting near the end of the year and sitting at 990k income. Surely it would be better to pull the app and lose a bit to get the next year at 15%?
Wouldn’t it make sense to make the first 1m 15% and 30% for everything earned over 1m?

Totally agree. It applies to post-fee earnings, but there's still a point where across $1 you make significantly less.

If I'm understanding correctly, $1,428,571 in revenue is the limit because 30% of $1 less is $999,999. So:

$1,428,570 * 85% = $1,214,285
$1,428,571 * 70% = $1,000,000

I wonder if there's a huge revenue gap around $1M where most developers will fall cleanly on one side or the other.

 

[Doc C]

A lived for a long time in a country where your income tax was calculated using a third degree polynomial. Your choices: 1. Your head explodes. 2. You download a table that gives the tax amount for every income amount.

I assume that you are being a bit facetious. However, if not, I am genuinely curious which countries use this kind of system - from my perspective, it doesn't provide any benefits over a progressive system.
(I've always why there isn't a flat-tax system with a relatively high personal deduction, or better, refundable tax credit. It would be relatively balanced, and filing taxes would be infinitely easier. This obviously couldn't be done for the app store though. Still, a progressive system seems to make more sense, since it would seem to encourage smaller developers while maintaining revenue from the larger & more successful developers.)

 

[jlc1978]

I can go to Safari and sign up for Spotify or Netflix or buy a book from Amazon but I can’t do it in-app because somehow magically once I’m in an app then Apple deserves 30% of that transaction?

Yup. Apple is the retailer that brings the customers to them, and like any retailer gets a markup.

 

[Rogifan]

It’s only confusing for those who haven’t read it.

It’s 15% up to the first million after App Store fees.

But if you’re already grossing $1M or more it’s 30%, not 15% on $999K and 30% on everything after. Meaning a game developer making over $1M is never paying 15%.

 

[zorinlynx]

Unbelievable. Someone, who earns 999999$, is getting about 150000$ more than someone, who earns 1000001$ before Apple tax.

I agree this is pretty idiotic. They should probably do it the way they do progressive taxes.

Your first million dollars of profit is at the 15% payment to Apple.
Everything above that is at 30%.

This way you don't end up with someone making one more dollar that year and suddenly making $150K less.

 

[ryank425]

This is great. I’m a dev that doesn’t earn even close to that limit so very nice indeed.
Imagine getting near the end of the year and sitting at 990k income. Surely it would be better to pull the app and lose a bit to get the next year at 15%?
Wouldn’t it make sense to make the first 1m 15% and 30% for everything earned over 1m?

I think that is what the article says. It would make no sense to do it otherwise.

 

[Rogifan]

Yup. Apple is the retailer that brings the customers to them, and like any retailer gets a markup.

OK I purchased my Netflix subscription on my iPad using Safari. I purchase Kindle books via Amazon’s website. Apple get’s nothing. How is that any different that purchasing the subscription/book in app (other than not being as user friendly)? So if I do it in Safari I’m not Apple’s customer but if I do it in the app I am?

 

[jlc1978]

Morally, the right incentive is for the developer who work harder to generate more sales revenue will not be paying a higher fee 👌🏻

Morality has nothing to do with it. Apple provides the developer with access to a customer base that allows them to make a lot of money on a software product, and can decide what cut it wants. If it is too high, the developer can go elsewhere. It's no different than in B&M retail; where the more you sell through a retailer often means giving them a bigger discount; since your revenue is tied to access to that market.

 

[jlc1978]

OK I purchased my Netflix subscription on my iPad using Safari. I purchase Kindle books via Amazon’s website. Apple get’s nothing. How is that any different that purchasing the subscription/book in app (other than not being as user friendly)? So if I do it in Safari I’m not Apple’s customer but if I do it in the app I am?

You're not using Apple's payment system; it's in Apple's interets to have Netflix avaiable on device and so will cut a deal with them; for most apps that is not the case. Apple can do withouit Epic more than Epic can without Apple, so Apple has the upper hand in a negotiation.

 

[Rogifan]

Morality has nothing to do with it. Apple provides the developer with access to a customer base that allows them to make a lot of money on a software product, and can decide what cut it wants. If it is too high, the developer can go elsewhere. It's no different than in B&M retail; where the more you sell through a retailer often means giving them a bigger discount; since your revenue is tied to access to that market.

So this isn’t about what it costs to run the App Store. It’s rent seeking. It’s Apple saying if not for us you couldn’t make money so we deserve some of it. Unless of course you’re a big and powerful enough player that we need you as much (if not more than) you need us. In that case then we’ll work out special deals or create special exemptions where we don’t take a cut of anything. 😉

 

[Rogifan]

You're not using Apple's payment system; it's in Apple's interets to have Netflix avaiable on device and so will cut a deal with them; for most apps that is not the case. Apple can do withouit Epic more than Epic can without Apple, so Apple has the upper hand in a negotiation.

Well now you’re changing the subject. I was talking about customer acquisition, not payment systems. But basically your answer is Apple can do whatever it wants for whatever reason it wants just because.

BTW, a number of pro-Apple bloggers/pundits (like Jason Snell) say Apple should just allow developers the option to use their own IAP along side Apple’s. If they did that a lot of this anti-trust noise would die down.

 

[jlc1978]

I wonder if there's a huge revenue gap around $1M where most developers will fall cleanly on one side or the other.

I would guess that is the case and Apple picked 1million as a demarcation that will avoiud flipping back and forth for a lot of developers. I would not be surprised if Apple cut those on the edge some slack or instituted some type of save revenue policy that said basically the year you pas $1million we won't drop you below the amount you netted the preevious year if 30% does that.

 

[DesertNomad]

They should really just charge everyone 15% up to the first $1m in developer revenue, then 30% after that.

 

[omenatarhuri]

As an independent developer this is absolutely great. Love it.

 

[manu chao]

Not sure I see how that works.

Suppose you sell $1,428,570 of apps, which results in earnings of $999,999 after the 30% cut. Hence, you are subject to the 15% rate, so Apple sends you $1,214,284.

Then suppose you sell $1,428,572 of apps, which results in earnings of $1,000,001 after the 30% cut. You are therefore subject to the 30% rate, so Apple sends you $1,000,001.

In other words, selling one additional $2 app would cost you over $200k.

Yes, but it will cost you these $200k in the following year. If your gross revenue is between the lower limit ($1,176,471) and the upper limit ($1,428,571) or moves in and out that zone from year to year, your net revenue can fluctuate from year to year by between $176,471 and $214,286.

 

[J InTech82]

I can hear the cries now..."But but but but but I'm an indie developer and I make over 1 million!"

 

[jlc1978]

Well now you’re changing the subject. I was talking about customer acquisition, not payment systems. But basically your answer is Apple can do whatever it wants for whatever reason it wants just because.

Pretty much. Retailers ave been doing that as a normal course of business for years; look at slotting fees, quantity discounts, etc. If anything, Apple redid software distribution to put more power and money in the hands of developers; in the early days a developer had to create a disk, print and package the product, and get a distributer to sell it, and or buy a small ad in Byte or Creative Compiting and hope orders came in. Of course, they also had to come up with the money upfront to be able to do that. Returns went against them; in the end if they go 30% they were lucky. Then again, copy programs would mean that once one person bought the product many mpore might get it for free. Apple changed that.

So this isn’t about what it costs to run the App Store. It’s rent seeking. It’s Apple saying if not for us you couldn’t make money so we deserve some of it. Unless of course you’re a big and powerful enough player that we need you as much (if not more than) you need us. In that case then we’ll work out special deals or create special exemptions where we don’t take a cut of anything. 😉

Yes, that is waht a retail store is all about. You can make, advertise, store and ship a product on your own; but if you want access to a customer base we created then you need top pay for it. End the end, it comes down to which side needs the other more and thus must make concessions.

 

[bobenhaus]

ahh Apple's knees are starting to buckle under the pressure.

 

[jlc1978]

Like every other developer, I am not going to charge less for my apps. I am going to charge the same amount on the AppStore and Steam. The price of a product is set by how much people are willing to pay for it. Even if EPIC lowered their cut even more, that is still a very expensive store to sell on.

Good point. Customers already pay X so why cut prices, especially since 15% is unlikely to yield the additionla customers to make it worthwhile. It's basic economics.

Apple would have to have a 40% cut before I looked at EPIC and thought it was better value. The AppStore gives me way too much value, like dealing with sales tax and VAT world wide. If I had to deal with even just US sales tax myself that would warrant cutting off the US market even if the cut on the store was 5%.

Another good point. Apple takes care of all the myriad tax law variations across jurisdictions. You'd have to be able to know there is an 8.5% sales tax in town A for an address but in in the same town for someone across the street it's 9.5%.

 

[cmaier]

If they had done this from the beginning of the App Store I’d have a swimming pool today.

 

[nicho]

”For those who qualify”. That‘s my question. If it was 15% on the first $1M of revenue then every developer would qualify. If it’s 15% based on annual sales of less than $1M then obviously not ever developer would qualify. Based on Epic and Spotify’s response it seems like the latter is the case. To which if I’m a small developer then I’m working to ensure my revenues are under $1M OR at least $1.2M.

Can you just please read the press release. It literally answers this question You’ve constructed and answered yourself, but still keep asking.

 

[jlc1978]

15% still too much. Imagine a merchant having to pay that much commission to visa or MasterCard

Bad anology. A better one is how much markup does the merchant make on the product the maufaturer shipped to them. Credit card processing, like Apple's payment system, is a cost to the merchant not the supplier so that charge is irrelevant to the argument. If it is too high the merchant may not accept that card, a la AMEX.