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

[Maximara]

Here is how the program is actually set up (from Apple themselves):

"While the comprehensive details will be released in early December, the essentials of the program’s participation criteria are easy and streamlined:

• Existing developers who made up to $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 $1 million threshold, the standard commission rate will apply for the remainder of the year.
• If a developer’s business falls below the $1 million threshold in a future calendar year, they can requalify for the 15 percent commission the year after."

This should clarify any confusion. The last part is a little more complicated then many people would like but from an accounting POV I fully understand why Apple has to do it this way.

 

[I7guy]

Totally, this Apple discount actually helped Epic's argument. In any business, wholesalers and large developers get more discount than the little guys. So Apple actually not only Apple is discriminating but this proves that their fees are ridiculously high.

Not really. Wholesalers get a discount because they are a large $$$ volume customer. In this case Epic is not buying anything from Apple and Apple is providing for $99 a platform for distribution. The 30% fee is an industry standard as even noted by the judge.

What is common place however, is to give fledging businesses a break, which Apple is doing through it's restructured fees.

 

[gimarbazat]

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.

It’s still a ‘pay to play’ and apple, with their monopoly, is taking advantage of devs.

The timing of this discount is interesting given that Apple acted after knowing the democrats are coming to power soon and possibly impose restrictions on these large unscrupulous corporations.

 

[k2k koos]

Well done Apple, almost there, to make it fair on those just hovering around 1M, adjust the program to:
15% on the first 1 million
30% on all sales above 1 million, then no one loses out and is totally fair.

Thank you Tim and team, I'll gladly take an M1 Macbook Pro for the suggestion

 

[Ntombi]

Maybe I am misunderstanding but going from 207350 to 207351, one has to pay 3% more tax.View attachment 1672450

But only on the $1.

You pay each tier’s amount, until you exceed it, then pay the next tier’s amount only on the amount over it. It doesn’t suddenly tax all of your income at the highest rate when you hit that threshold.



For example, in this rate,

If Jo Schmo earns $47,000, she pays 10% of $9,875, 12% on $30,249 (the amount between $9,876-40,125), and 22% on $6,784 (the amount over $40,126).

 

[jlc1978]

Totally, this Apple discount actually helped Epic's argument. In any business, wholesalers and large developers get more discount than the little guys. So Apple actually not only Apple is discriminating but this proves that their fees are ridiculously high.

Ot in retail, as Apple is; if you are large enough you can get a much bigger slice of teh final proce tahn if you are a small retailer. So, what Apple is doing is in line with normal retail practices; with the exception that it now gives small sellers a break, somethiong few chanins do.

 

[iDento]

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?

Dude, if you make 1,000,001$, they will cut 150,000.30$.

 

[jlc1978]

If you own a building or apartment and rent it out at a higher rate than your cost of capital, you are also rent seeking.

Not really. Rent seeking is getting more than what it would cost to keep it in production. If something will only return your cost of capital, then there is no reason for you to not seek alternative uses for the money where you can exceed your cost of capital. Cost of capital is the minimum you need to make a project worthwhile. Even so, your hurdle rate may be higher than the cost of capital when risk or other factors are considered.

That, however ignores that "rent seeking" is used to attempt to gain rent (which has nothing to do with rental properties) via political means where you essentially get free returns (less cost of obtaining government action), such as regulations that create barriers ot entry and allow you to raise the price.

 

[jlc1978]

It’s still a ‘pay to play’ and apple, with their monopoly, is taking advantage of devs.

Apple is not a monopoly. There are plenty of alternate choices for apps and smartphones/tablets.

The timing of this discount is interesting given that Apple acted after knowing the democrats are coming to power soon and possibly impose restrictions on these large unscrupulous corporations.

Perhaps.

 

[Abazigal]

It’s still a ‘pay to play’ and apple, with their monopoly, is taking advantage of devs.

The timing of this discount is interesting given that Apple acted after knowing the democrats are coming to power soon and possibly impose restrictions on these large unscrupulous corporations.

If we want to delve into politics, I don’t really expect the government to be able to get much done on this front, considering that the senate and Congress are still going to be at loggerheads. So Apple is actually a lot safer than one might imagine.

 

[manu chao]

Not really. Rent seeking is getting more than what it would cost to keep it in production. If something will only return your cost of capital, then there is no reason for you to not seek alternative uses for the money where you can exceed your cost of capital. Cost of capital is the minimum you need to make a project worthwhile. Even so, your hurdle rate may be higher than the cost of capital when risk or other factors are considered.

That, however ignores that "rent seeking" is used to attempt to gain rent (which has nothing to do with rental properties) via political means where you essentially get free returns (less cost of obtaining government action), such as regulations that create barriers ot entry and allow you to raise the price.

If property prices (and commensurate with them rental prices) increase faster than general inflation, whoever owns property gets a free return without having to move a finger. If you own something and its price increases, you experience windfall profits. If you have a product or service whose production costs don’t really increase much as your sales volume increase, you also can sit back and watch the profits roll in.

 

[jlc1978]

If property prices (and commensurate with them rental prices) increase faster than general inflation, whoever owns property gets a free return without having to move a finger. If you own something and its price increases, you experience windfall profits. If you have a product or service whose production costs don’t really increase much as your sales volume increase, you also can sit back and watch the profits roll in.

None of which is rent seeking.

 

[sirozha]

That’s the number ($1,428,571) that makes sense to me based on the article. There could be some misunderstanding somewhere, we’ll find out more shortly I think.

An extra 15% of 1.43MM puts another $214k into the dev’s pocket. At least that’s how I read it.

Developers don’t pay taxes?

 

[I7guy]

But only on the $1.

You pay each tier’s amount, until you exceed it, then pay the next tier’s amount only on the amount over it. It doesn’t suddenly tax all of your income at the highest rate when you hit that threshold.



For example, in this rate, View attachment 1672838

If Jo Schmo earns $47,000, she pays 10% of $9,875, 12% on $30,249 (the amount between $9,876-40,125), and 22% on $6,784 (the amount over $40,126).

Got it, it's more akin to the way airlines charge for luggage, where one pound makes a difference between free and having to pay.

 

[nicho]

I don't think you understand how this works. Think of how income tax brackets work in the US - you have certain threshold over which you pay a higher tax. At the $1,428,570 cap the developer would be pocketing an extra $214,285.65 i the back.

Since the threshold is $1,428,570 there is not going to be and flip flops in and out of the program for the dev who sits at $1.3m sales because the threshold is $128,670 above their average baseline.

This isn’t an income tax and while you can do math you apparently can’t read a press release and understand the nature of this program.

A developer who is paying 15% commission will receive more than $1m from that $1,428,570 in sales. They will, therefore, not be eligible for the reduction the following year. Since the amount rises to 30% commission on every dollar after $1m proceeds, there are precisely zero situations in which a developer would receive more than $200,000 extra.

 

[Santiago]

I guess we'll see a lot of people creating separate LLCs for their apps.

If by "lots of people" you mean companies which have multiple apps each of which individually makes less than $1 million annually, collectively make more than $1 million annually, have no use for sharing data between each other which can only be done with apps from the same developer, and are willing to risk Apple getting cross and banning them entirely, then yes, "lots of people".

 

[Maximara]

Here is how the program is actually set up (from Apple themselves):

• Existing developers who made up to $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 $1 million threshold, the standard commission rate will apply for the remainder of the year.
• If a developer’s business falls below the $1 million threshold in a future calendar year, they can requalify for the 15 percent commission the year after.

This should clarify any confusion. The last part is a little more complicated then many people would like but from an accounting POV I fully understand why Apple has to do it this way.

 

[Maximara]

I have got to love how Epic basically has no case now.

 

[Maximara]

This isn’t an income tax and while you can do math you apparently can’t read a press release and understand the nature of this program.

A developer who is paying 15% commission will receive more than $1m from that $1,428,570 in sales. They will, therefore, not be eligible for the reduction the following year. Since the amount rises to 30% commission on every dollar after $1m proceeds, there are precisely zero situations in which a developer would receive more than $200,000 extra.

I have to ask how many developers are going to be in this situation? As an accountant I understand why this is set up this way by Apple - it is prevent gaming of the system by lowering the price just enough to get below the bar the next year and get the break that year.

 

[Maximara]

If by "lots of people" you mean companies which have multiple apps each of which individually makes less than $1 million annually, collectively make more than $1 million annually, have no use for sharing data between each other which can only be done with apps from the same developer, and are willing to risk Apple getting cross and banning them entirely, then yes, "lots of people".

It wouldn't just Apple who would be asking about this shell game. I imagine the IRS (or equivalent) would be very interested in this.

 

[Abazigal]

I get that it can suck for the developer if he were to earn just over 1 million dollars for the year, though if I were him, I would instead focus on further growing my revenue beyond that threshold, rather than deliberately limit my sales to stay under 1 million.

I think a report by app sensor suggests that the majority of developers (over 90% of them) are earning way below $1 million, so this just means extra money for them either way. It also helps even the playing field for everybody, because the larger companies also tend to have larger budgets for marketing and advertising, so this gives the smaller developers a little bit of extra cash to spend in this area as well.

So for the larger developers like Epic or that DHH guy who released the $100/year email app that are complaining, my response to them is - that's precisely the point. To give the smaller developers more a fighting chance against entities like yourself.

Just reminds me of sour grapes all around.

 

[manu chao]

None of which is rent seeking.

According to Wikipedia: "Rent-seeking means seeking to increase one's share of existing wealth without creating new wealth". Increasing the rent on a property I own increases my wealth without creating new wealth.

 

[Abazigal]

According to Wikipedia: "Rent-seeking means seeking to increase one's share of existing wealth without creating new wealth". Increasing the rent on a property I own increases my wealth without creating new wealth.

The value proposition that Apple brings is precisely that they help to grow the pie, by aggregating the best customers, and creating a trusted and secure marketplace which predisposes people to purchasing more apps than they otherwise would (just look at the state of the android App Store).

They are not just some glorified payment processor that the critics make them out to be.

 

[manu chao]

The value proposition that Apple brings is precisely that they help to grow the pie, by aggregating the best customers, and creating a trusted and secure marketplace which predisposes people to purchasing more apps than they otherwise would (just look at the state of the android App Store).

They are not just some glorified payment processor that the critics make them out to be.

Note that I haven't said anything about Apple here. But if Apple were to increase its cut from 30% to 35%, that definitely would fall under the definition of rent seeking.

The reverse is harder to label. For example, if Apple needed the 30% cut to cover the cost of the App Store initially but with the number of iOS devices (and the App Store spending per device) having risen much more than the costs of the App Store, it now could achieve the same with, let's say, 15%, then it really is in the eye of the beholder whether that is merely being rewarded for good business and product decisions or profiting unfairly from network effects.

 

[felipesalomao]

What about end annually fee of USD 100.00 to be developer. In Google you pay just one time.. Or at least reduce price to USD 30.00 annually..