November 30, 2020
Apple has announced a new program that will benefit small business app developers. The new program is called “App Store Small Business Program”. This program will reduce the fee app developers have to pay on iOS from 30% to 15% and will officially launch on January 1st, 2021.
Why the Change?
Lawmakers worldwide focused on Apple’s business practices and profits as it related to the installation of apps by users on its products including Ipads and Iphones. Over the last 16 months, The United States House Judiciary Subcommittee on Antitrust investigated competitive practices at several large companies including Apple.
The Committee recently issued a report noting that Apple has a monopoly on the distribution of software. The committee noted in their report that this has enabled Apple to earn large profits from App developers. If any of the recommendations listed in the report eventually become law, Big Tech companies such as Apple will be forced to change their business practices, more specifically, the distribution of apps on its platforms.
Although executives at Apple disagreed with many of the conclusions contained in the report, they decided to implement a new program to assist small business app developers.
Who can qualify for this program?
Small Business developers who made less than one million dollars in 2020 will qualify for this program. If your business makes over 1 million dollars across all of your apps your commission payment will remain at 30%. An added benefit of the program is that if you made over one million dollars in 2020 but fall below this threshold in 2021, you are eligible to reapply.
Apple is also allowing new developers who do not currently have apps the ability to qualify for this program. However, if at any point those new developers exceed the one million dollar threshold, they will have to pay the standard 30% commission fee.
One stipulation to the program is that once your business reaches over one million dollars at any point in the year, you will then owe the normal 30% commission. Should your revenues decrease below one million dollars during the year, you are unable to take advantage of the lower commission and will have to wait until the following year to see if your business will requalify.
How can the App Store Small Business Program benefit you?
During 2020, businesses worldwide were affected by the COVID-19 pandemic. Schools and Universities went virtual, restaurants were forced to offer curbside and delivery options only and other businesses had to find ways for their employees to work virtually while maintaining efficient operations.
A majority of these businesses turned to apps to conduct their business in this new virtual world. Previously, Apple would charge a commission fee on virtual classes, conferences and other digital events. However, these fees have now been suspended. For those small businesses, having this fee waived has the potential to keep their earnings under the one million dollar threshold and not have to pay the 30% commission.
Another benefit of this program reflects back on the recent House Judiciary Subcommittee report. The report also referenced how Apple would promote its own in-house developed apps when users would search downloadable apps, excluding apps developed by smaller businesses. The report also discussed how Apple executives would review apps from other developers in an effort to find reasons to remove them from the app store, especially those apps that would directly compete with apps similar to those developed by Apple engineers.
As a result of this issue being brought to light, one company whose app was removed, went to the media to expose how their app was removed from the App store due to being in direct competition with Apple. Their app was eventually reinstated by Apple. The exposure of practices that give an advantage to Apple, will allow for small businesses that develop apps to remain competitive and not be subject to unfair scrutiny by Apple executive staff.
With the launch of this new program, Apple’s CEO, Tim Cook, stated “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”.
As the new “App Store Small Business Model” is implemented, it will be interesting to follow the impacts it will have. Hopefully those businesses who qualify for the program will see a positive financial benefit in the future as a result of savings in paid commission. Call Wizard Digital Marketing today to learn more about how we can help your business benefit from this new initiative.