Apple will cut its app store commissions in half for most developers beginning next year amid an intensifying debate about whether the iPhone maker has been using the fees to unfairly fatten its profits and stifle rivals competing against its own music, video, and other subscription services.
FILE - In this June 16, 2020, file photo, the sun is reflected on Apple's Fifth Avenue store in New York. Apple will cut its app store fee in half from 30% to 15% for most developers beginning Jan. 1, the biggest change in its commission rate since the app store began in 2008. The fee reduction will apply to developers who made up to $1 million from the app store in 2020, which is the “vast majority” of developers in the store, Apple said. (AP Photo/Mark Lennihan, File) THE ASSOCIATED PRESS
Apple will cut its app store commissions in half for most developers beginning next year amid an intensifying debate about whether the iPhone maker has been using the fees to unfairly fatten its profits and stifle rivals competing against its own music, video, and other subscription services.
The concession announced Wednesday will lower Apple's commissions for in-app subscriptions and other purchases from the 30% rate that has been in place since 2008 to 15%, effective Jan. 1. But the discount will only apply to developers with app store revenue up to $1 million annually — a threshold that excludes the makers of some of the most popular apps downloaded on iPhones, iPads and other Apple devices.
That group includes two of Apple's fiercest critics, music streaming service Spotify, and Epic, the maker of the popular Fortnite video game.
Both those companies have helped spur increasing scrutiny of Apple's app store practices among lawmakers and regulators in the U.S. and Europe. Apple sells music streaming and video services that have been helping to offset a slowdown in iPhone revenue in recent years.
The app store commissions feed Apple's services division, which saw its revenue climb 16% to nearly $54 billion during the company's last fiscal year ending in September. Only iPhone sales generate more revenue for Apple than services.
Apple is framing its fee reduction as a way to help most of the companies that make the roughly 1.8 million apps in its store during the tough economic times brought on by the pandemic. About 98% of the app developers generate less than $1 million in revenue annually, according to the mobile analytics firm SensorTower.
But the reduced commission probably won't leave much of a dent in Apple's revenue. That's because the small developers in line to qualify for the cut only contribute about 5% of Apple's app store revenue, based on SensorTower's estimates.
That's probably one reason investors seemed unfazed by Apple's forthcoming fee cut. The company's shares were up slightly during early afternoon trading.
Spotify scoffed at Apple's lower commissions as “window dressing" designed to discourage regulators from cracking down on its practices. “This latest move further demonstrates that their app store policies are arbitrary and capricious," Spotify said in a statement.
Epic is continuing to pursue a lawsuit it filed against Apple earlier this year in an effort to win the right to sell products within its apps without having to pay Apple's fees.