Apple announced the App Store Small Business Program last year, which allows small developers to pay a reduced commission for each sale made through the App Store. While it may seem like the company is giving up a significant amount of money, new estimates from analyst firm Sensor Tower show that Apple’s revenue is expected to decrease by only 5% with the program.
The research first obtained by CNBC reveals that both Apple and Google, which also announced a similar program on Tuesday, are unlikely to be affected by cutting the fees they charge developers. Sensor Tower argues that developers behind popular apps will continue to pay the 30% commission to the App Store and Google Play since most of them make a reasonable amount of money per year.
To be eligible for Apple’s and Google’s programs, developers must have earned less than $1 million in revenue in the previous year. While this helps many small developers, those responsible for successful apps already earn much more than this. “The companies that make the most from the store will still pay close to 30% of digital sales,” says the firm.
A 5% reduction is nothing when we consider the revenue that comes from services like the App Store, which runs into billions of dollars. Sensor Tower suggests that both companies have only given up this fee because they know that it will not hurt revenue.
Apple reported $54.76 billion in services revenue in fiscal 2020, or about 19% of its total sales. App Store fees are only one part of Apple’s services business, which includes subscriptions, warranties and other products. If Apple’s program had been in place for 2020, Sensor Tower estimates that it would have missed out on $595 million, or about 2.7% of its estimated $21.7 billion in App Store fees in 2020.
At the same time, the analyst firm believes that announcing programs like the App Store Small Business Program gives a good impression that these companies are finally trying to help small developers. This comes at a good time since Apple and Google have been accused of anti-competitive practices due to the way they manage their respective app stores.
As highlighted by CNBC, Epic Games CEO Tim Sweeney pointed out on Twitter that by making small developers happy with the reduced 15% commission, most of them feel “less inclined to fight,” while those who are responsible for the real revenue will continue to pay 30%.
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