Daily Management Review

Apple To Reduce Fee For Smaller Developers Using Its App Store By 50%


Apple To Reduce Fee For Smaller Developers Using Its App Store By 50%
In what is a partial concession by iPhone maker Apple Inc in its battle with those criticising the company’s policy of how it exerts power in its digital ecosystem, the company announced that it will reduce the commission it charges from smaller selling software through its App Store by 50 per cent.
Only 15 per cent instead of the current 30 per cent commission will be charged by Apple of the App Store sales of companies that are able to generated less than $1 million in revenue from the sale of software from its platform, including in-app purchases, and the new rates would be applicable starting next year, the iPhone maker said on Wednesday. But for those app developers who generate more $1 million from sale through the app Store, the company would continue to charge a commission of 30 per cent. That means this concession will not have any impact on the most vocal critics of the business practice of Apple such as the video game developer Epic Games Inc.
At the core of a number of court cases this year from other tech companies and some users has been the 30 per cent commission that Apple charges. The critics have complained of the manner in which it dictates policies over its vast digital world comprising of people who use iPhones and other Apple devices. There have been criticisms of the larger than necessary market share of Apple and its unfair usage of such dominance against different companies. They have alleged that such polices and business practices results in customers footing the bill and in workarounds by some developers with the aim of avoiding the fees charged by Apple.
Apple and other tech companies on antitrust grounds are being investigated by the United States Congress, the European Union, the Justice Department and the Federal Trade Commission.
The fees charged by Apple actually aids in funding of a system that helps users to download third-party software safely over more than 1.5 billion devices globally, the Cupertino, Calif., company has said. About $519 billion in world-wide commerce, more than 85 per cent of which went to third-parties, was facilitated by the App Store ecosystem, Apple had said last year. The fees that are charged by Apple are similar to what is charged by its rival app stores that are run by Alphabet Inc.'s Google and other tech companies.
The "vast majority" of app developers that use its App Store would be affected by the lower fees, Apple said. The company however did not specify a number or percentage. According to Apple, about 85 per cent of the app developers in the App Store actually end up paying nothing as they do not charge their users.
"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," Tim Cook, Apple chief executive, said Wednesday.