Apple to cut App Store fees for developers

Firm faced criticism for percentage of revenue it takes for purchases

Apple Inc. is cutting by half the fees charged to most developers who sell software and services on the App Store, marking the biggest change to the store’s revenue structure since the iPhone maker launched the service in 2008.

The company is lowering the App Store fee to 15 per cent from 30 per cent for developers who produce as much as $1 million (U.S.) in annual revenue from their apps and those who are new to the store. The change will go into effect Jan. 1 as part of an App Store Small Business Program, Apple said Wednesday in a statement. The company said the new structure will apply to the “vast majority” of developers who charge for apps and in-app purchases on Apple’s devices. The program won’t affect some major apps such as those from Netflix Inc. and Spotify Technology SA.

The Cupertino, Calif.-based technology giant said it’s making the change to help small developers financially and to provide a way for them to invest in their businesses amid the economic struggles caused by the COVID-19 pandemic. Apple has faced ongoing scrutiny from government regulators and criticism from developers about the percentage of revenue it takes for App Store purchases. The company also is engaged in a lawsuit with Epic Games Inc., the maker of the video game Fortnite, over its App Store fees and payment rules.

Alphabet Inc.’s Google also charges similar fees to developers on its Android app store.

Income from app developers has been key to Apple’s growing services business, which reached almost $54 billion in revenue in fiscal 2020. 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. He estimates the App Store alone will bring in $18.7 billion in 2021, about a third of Apple’s total services revenue next year.

Apple has said there are 1.8 million apps in the App Store across all of the company’s platforms and more than 28 million registered developers. The company said earlier this year the store has generated $155 billion for developers since it started.

Since the beginning of the App Store, Apple generally has charged developers a 30 per cent slice of revenue generated by their apps. In 2016, Apple lowered to 15 per cent the cut it takes from subscriptions purchased through the apps for more than a year.