Other companies like Spotify and people within the development space echoed this sentiment, saying that this was a "clever" tactic from Apple to give a little ground and maintain the ability to call developers hitting that $1 million threshold complaining about wanting a better commission rate greedy. However, the number of developers coming under the eligibility criteria of the new programme has not yet been revealed. The App Store mall Business Program will launch on January 1, 2021.
Epic Games and Spotify, united in their fight against Apple, each released statements on Wednesday slamming the iPhone maker following news of its new App Store fee reduction for developers making less than $1 million per year. Should a developer passes the $1 million threshold, the standard 30 percent commission will apply for the year. Earlier this year, Apple also loosened restrictions on some cloud-gaming apps and email services, charging a fee to fewer developers. Meanwhile, it is important to note that the developers eligible to avail the reduced commission rate will be required to enrol for the benefit. The 50% cut, which applies to the small developers that generate just 5% of App Store revenue, translates to a 20 basis points impact on revenue and a $0.03 impact on earnings-per-share.
"Small businesses are the backbone of our global economy and the beating heart of innovation and opportunity in communities around the world", Apple CEO Tim Cook said. Apple has not said what percentage of developers will be affected by this price cut, but it will likely be many of its 28 million registered app providers.
In August, U.S. -based Epic Games, the developer behind popular online game "Fortnite", took legal action against Apple, alleging uncompetitive practices in how it runs the App Store, including its rigid commission system. That's compared to the total of $43.9 billion in revenue that all 23 million developers generated. But those deals weren't announced publicly.
As for subscriptions, developers who are eligible for the program will pay a 15 percent commission on subscriptions, even during the first year. In advance of Cook's appearance, Apple published a study that claimed its 30 per cent cut is normal for the industry or lower than some app stores. The App Store is one of several products and offerings that make up the services unit, but is the biggest revenue driver, according to Toni Sacconaghi, an analyst at Sanford C Bernstein. This was 24.7 percent more year-over-year from the $26.3 billion (roughly Rs. 1,95,100 crores) generated during the same period in 2019.
The app store commissions feed Apple's services division, which saw its revenue climb 16 percent to almost $54 billion during the company's last fiscal year ending in September.