Apple has announced a notable change to its App Store commission structure today. The company is launching the App Store Small Business Program, which will lower the App Store commission to 15% for developers who earned up to $1 million in proceeds during the previous calendar year.
Apple says that existing developers who earn up to $1 million in a calendar year are eligible for this new App Store Small Business Program. The $1 million number is based on post-commission basis. This means developers are eligible for the program until their proceeds, after Apple takes its cut, exceed $1 million.
For example, if a developer makes less than $1 million in post-commission earnings through the App Store in 2020, they are eligible for the program in 2021. Then, if their post-commission earnings exceed $1 million in July of 2021, they become ineligible for the program effective of that date, and the standard commission rate applies for the remainder of the year.
Finally, if a developer’s business falls below the $1 million threshold in a future calendar year, they can requalify for the program the year after.
This also has implications for subscription applications. Currently, Apple charges a 30% commission on the first year of an in-app subscription. The commission is then reduced to 15% if the customer continues their subscription beyond that time.
Now, for developers eligible for the App Store Small Business Program, Apple is cutting the commission rate for the first year of a subscription to 15%. All subsequent years remain at 15% as well.
In a statement, Apple CEO Tim Cook emphasizes that the App Store has led to millions of new jobs in support of the global economy:
“Small businesses are the backbone of our global economy and the beating heart of innovation and opportunity in communities around the world. 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,” said Tim Cook, Apple’s CEO.
“The App Store has been an engine of economic growth like none other, creating millions of new jobs and a pathway to entrepreneurship accessible to anyone with a great idea. Our new program carries that progress forward — helping developers fund their small businesses, take risks on new ideas, expand their teams, and continue to make apps that enrich people’s lives.”
Today’s announcement is a notable change to the App Store commission rate. Up until today, Apple had largely stood firm at its 30% cut of App Store purchases and in-app purchases, only dropping to 15% during the second year of a recurring subscription. The change comes as Apple faces growing antitrust scrutiny over the App Store business model.
Earlier this year, Apple did announce that it was waiving its commission rate for applications offering paid online events through the end of this year due to the COVID-19 pandemic. It’s unclear if this waiver will continue into 2021, however.
You can read Apple’s full announcement on the Newsroom website. The company says it will provide more comprehensive details of the App Store Small Business Program in early December. The program itself will launch on January 1, 2021.
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