The apple, which has always been tough, suddenly lowered its stance. On the evening of November 18th, Beijing time, Apple announced a new policy: developers’ commission rates in the Apple App Store will be cut from 30 per cent to 15 per cent. As soon as this news came out, it caused 1000 shocks in the industry.
The APP Store, Apple’s second-largest core business, generated about $50 billion in revenue in 2019, second only to iPhone revenue. In addition, the 30% “Apple tax” has been the focus of controversy in the industry, Apple has also eaten a lot of lawsuits, but has been unmoved.
Yesterday, Apple suddenly took the initiative to cut the proportion of app Store pumping, and cut it in half.
What exactly is the intention?
$1 million is a threshold
Any preferential policy has a threshold, and so does Apple.
To enjoy this policy, you must be a small business or independent developer with an annual income of less than $1 million.
According to Apple officials, they plan to launch a new App Store Small Business Program, which aims to boost digital commerce and app innovation, create new jobs, and help small developers and independent developers continue to deliver great software to Apple users.
The first step in the plan is to reduce the proportion of app Store pumping. The thresholds are as follows:
Existing developers with total app revenue of less than $1 million by 2020, as well as new app Store developers, can participate in the program and enjoy a 15% reduction.
If the developer’s total app revenue exceeds $1 million, it will be billed at the standard 30% rate.
Developers who earn less than $1 million in future calendar years can be eligible for a 15% commission the next year.
This is undoubtedly a good policy for small businesses or independent developers.
Developers who launch any app in the Apple Store pay a percentage of the commission, which is also called an “Apple tax.” The 15 per cent cut will significantly boost their earnings.
Apple’s App Store is understood to have more than 28 million developers and 1.8 million apps. While Apple did not say how many of them would qualify, about 98 percent of developers are expected to qualify for low commission rates, according to Sensor Tower.
Raj Joshi, Moody’s senior credit officer, also said:
“Apple’s announcement that it will halve commission rates for developers earning less than $1 million is positive news.”
It’s worth noting that this isn’t the first time Apple has reduced the percentage of developers who smoke.
In 2016, it allowed developers who enjoyed subscriptions through the App Store for more than a year, retaining an additional 15 percent of their revenue. This policy is currently continuing and is available to all developers and large enterprises of the platform.
By contrast, the tax cut is clearly more forced and is specifically for independent developers and small businesses.
That’s why Tim Cook, Apple’s chief executive, made it clear.
Small businesses are the backbone of our global economy and the pulse of innovation and opportunity in the global community. The App Store has always been a unique engine for economic growth, creating tens of millions of new jobs and paving the way for anyone with great ideas to start a business.
Our new program continues to move this forward, helping developers fund small businesses, boldly implement new ideas, expand teams, and continue to develop apps that enrich people’s lives.
It is reported that the policy will take effect on January 1, 2021, Apple will also release more details about the policy in December.
Is Apple losing?
So, is Apple really lying on its hands with a “all for developers” stance?
The answer is obvious: no.
Last month, Apple said in its annual filing with the Securities and Exchange Commission that lowering its App Store commission rate could hurt the company’s financial performance, with revenue of $14.55 billion, or 22 percent, in the quarter to the end of September.
A tax cut for all companies on the platform would put a lot of pressure on Apple’s financial performance.
But it is conditional on only developers or businesses with annual net profits of less than $1m, who have little impact on their earnings.
In 2019, 93 percent of Apple’s App Store revenue will come from the top 1 percent of developers, while those with less than $1 million will account for only 5 percent of its total revenue, according to Sensor Tower. By this re all accounts, while small businesses account for 98 per cent of the 1.8m apps, the impact on revenue is not large.
And once these companies earn more than $1 million, it will return to the original 30 percent tax.
In this way, Apple aims to leverage “small profits” to pry into the larger application market.
From the 1% revenue source, and 98% of the small business ratio can be seen, the current App Store ecological market has been seriously polarized, the main market is monopolized by some giant enterprises, larger small enterprises are difficult to play and survive.
Apple’s profits this time, while small, are undoubtedly attractive to independent developers and small businesses. Perhaps it will spur more developers to create small, sophisticated, high-quality apps that add vitality to the entire App Store ecosystem.
More importantly, Apple’s move is likely to further help ease pressure on antitrust investigations.
Apple has been one of the main targets of antitrust regulators in recent years. In particular, its app Store’s high tax rate of 30% has been criticized by the industry.
In a report released in October, members of the House Judiciary Committee’s antitrust panel explicitly stressed that Apple’s App Store generated “extraordinary profits.” The App Store ecosystem is understood to have facilitated $519 billion in business transactions worldwide in 2019, with more than 85 per cent going to third parties.
At present, the antitrust regulator has not made any feedback. Apple’s move, however, has drawn the ire of many big companies.
Large companies don’t buy
Apple’s App Store charging policy has come under fire from big companies such as Microsoft, Spotify, Match Group and Epic Games.
None of these companies is included in their low commission rate policy. Epic Games, for example, has generated more than $1bn a year in revenue from its Fortnite app app alone.
They allege that Apple’s charging policy deprives consumers of their options and pushes up the price of apps.
Among them, Tim Sweeney, founder of Epic Games, says
Apple’s move is only intended to dispel monopoly criticism and free them from competition, impose a 30 percent tax on most in-app purchases, and consumers will still pay for apple taxes.
Epic Games is a world-renowned gaming company with more than 350 million users and is one of the world’s most popular games. At 30 per cent, Apple has made hundreds of millions of dollars from this game alone.
In August, Epic Games publicly challenged it over its displeasure with the high percentage of “Apple taxes”, which sold Fortnite directly to players, bypassing the Apple App Store’s built-in payment platform.
In response, Apple removed the offending app directly from the App Store. Less than an hour later, Epic Games filed a civil monopoly lawsuit against Apple in U.S. District Court for the Northern District of California.
Apple has been subject to such litigation emails far more than once. Several companies, including Spotify, Basecamp, Tile and Proton Mail, have filed lawsuits against the App Store over the proportion of fees it charges. They even set up the App Fairness Coalition to protest against Apple’s App Store sharing system.
But none of these actions have allowed Apple to adjust its pumping ratio. This time, Apple’s cut in commission rates for small businesses is something they see as something else. As Spotify claims directly:
Apple’s anti-competitive behavior threatens all developers on iOS, and its latest move is further evidence that its App Store policies are free and capricious.
We want regulators to ignore Apple’s “superficial articles” and take urgent action to protect consumer choice and ensure a level playing field for all.
It’s worth noting that Apple’s App Store is not the highest in the industry, with a 30 percent percentage draw.
Google Play is 30%, but some other third-party app platforms have exceeded that. Tencent mobile gaming platform, for example, has a 60% share of its online gaming cooperation model, with 60% of developers and 40% of Tencent.
Apple, by contrast, is at the forefront of public opinion. Some analysts believe that “it may be because Apple’s App Store has a much higher proportion of paying users than Android users, and the gaming company’s revenue from this channel is very significant, so it has a greater impact on revenue.” “
Whatever the reason, Apple’s App Store has come under fire and has been investigated by antitrust regulators.
But judging by Apple’s response to the many lawsuits, it doesn’t seem like it’s going to make any concessions.
For Apple, an exception to adjust the ratio of large companies would not only result in huge economic losses, but would even threaten long-established business barriers.
Some netizens believe that the lawsuit initiated by Epic and other enterprises has increased the tax model. Cut the commission rate by 15% to calm “public anger” and then continue to tax the “rich”.
What do you think of Apple’s move?