Apple, Under Antitrust Scrutiny, Halves App Store Fee for Smaller Developers--Update
November 18 2020 - 8:11AM
Dow Jones News
By Tim Higgins
Apple Inc. is halving the commission it charges smaller
developers that sell software through its App Store, a partial
concession in its battle with critics over how it wields power in
its digital ecosystem.
Starting next year, the iPhone maker said Wednesday, it will
collect 15% rather than 30% of App Store sales from companies that
generate no more than $1 million in revenue through the software
platform, including in-app purchases. The fee will remain 30% for
developers whose sales through the App Store, excluding commission
payments, exceed $1 million -- meaning the reduction won't affect
such vocal Apple opponents as videogame company Epic Games Inc.
Apple's 30% take has been at the heart of complaints this year
from other tech companies and some users over how it manages the
vast digital world of people who use iPhones, iPads and other Apple
devices. Critics have charged that Apple's share is too large, is
unfairly levied against different companies, leaves customers
footing the bill and leads to workarounds by some developers to
avoid the fees.
Congress, the European Union, the Justice Department and the
Federal Trade Commission are investigating Apple and other tech
companies on antitrust grounds.
The Cupertino, Calif., company has said its fees help fund a
system that allows users to download third-party software safely on
more than 1.5 billion devices globally. Last year, according to
Apple, the App Store ecosystem facilitated $519 billion in
world-wide commerce, more than 85% of which went to third parties.
Apple's fee is in line with what rival app stores run by Alphabet
Inc.'s Google and others charge.
Epic Chief Executive Tim Sweeney called Apple's move a
calculated effort to sow division among app creators.
"Apple is hoping to remove enough critics that they can get away
with their blockade on competition and 30% tax on most in-app
purchases. But consumers will still pay inflated prices marked up
by the Apple tax," he said.
Apple said the lower fees would affect the "vast majority" of
app developers that use its App Store, but didn't specify a number
or percentage. Apple has said 85% of apps in the App Store don't
charge users, and therefore their developers pay it nothing.
Apple will roll out comprehensive details of its "App Store
Small Business Program" early next month and implement the changes
starting Jan. 1, it said. Developers new to the App Store will
qualify, along with those under the $1 million limit in 2020.
Developers that qualify for the reduced fees but then exceed $1
million during the year will be hit with the normal rate once they
clear that threshold.
"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,"
Tim Cook, Apple chief executive, said Wednesday.
Apple has tussled over its commission with a range of app-based
companies, including Netflix Inc. and Spotify Technology SA, but
its most prominent battle has been with Epic, maker of "Fortnite."
In August, Epic rolled out a way to make in-game purchases that
prevented Apple and Google from collecting the 30% cut they charge
in their software stores. Both Apple and Google kicked the game
out. Epic, in turn, sued.
Epic has framed its fight as opposing a system that suppresses
competition and inflates prices. Apple has said Epic is simply
seeking to avoid paying for the "tremendous value it derives from
the App Store." In a court filing, Apple said "Fortnite" has been
downloaded through the App Store almost 130 million times since
2018 and that Epic has earned more than $600 million from its
relationship with Apple.
In October, Epic won a public-relations boost when a House
subcommittee investigating Big Tech accused Apple of wielding
anticompetitive power that harms rivals and benefits itself. In
particular, the subcommittee report questioned the size of the App
Store fee.
"Apple's ban on rival app stores and alternative payment
processing locks out competition, boosting Apple's profits from a
captured ecosystem of developers and consumers," the report
said.
Apple disputed the findings and earlier this year released a
study it commissioned from Analysis Group that found App Store fees
were in line with those of its closest competitors, such as Google
Play.
The 30% fee dates back to the inception of the App Store in
2008, a year after the iPhone was introduced.
Write to Tim Higgins at Tim.Higgins@WSJ.com
(END) Dow Jones Newswires
November 18, 2020 07:56 ET (12:56 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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