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The Associated PressNovember 19, 2020 9:33:06 AM IST
Apple will cut app store fees in half for most developers starting next year amid an increasingly heated debate over whether the iPhone maker has been using the fees to unfairly fatten up its profits and stifle to rivals who compete with their own music, videos and other subscription services. The concession announced Wednesday It will reduce Apple’s fees for in-app subscriptions and other purchases from the 30 percent rate that has been in effect since 2008 to 15 percent, effective January 1.
But the discount will only apply to developers with app store revenue of up to $ 1 million a year, a threshold that excludes manufacturers of some of the most popular apps downloaded to 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 video game Fortnite.
Representative image.
Both companies have helped stimulate greater scrutiny of Apple’s app store practices among lawmakers and regulators in the US and Europe. Apple sells music and video streaming services that have helped offset the slowdown in iPhone revenue in recent years.
Commissions from the app store feed Apple’s services division, which saw its revenue rise 16 percent to nearly $ 54 billion during the company’s last fiscal year that ended in September. Only iPhone sales generate more revenue for Apple than services.
Apple frames its fee reduction as a way to help most of the companies that make an estimated 1.8 million apps in its store during tough economic times brought on by the pandemic. About 98 percent of 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 an impact on Apple’s revenue. That’s because small online developers to qualify for the cut only contribute about 5 percent of Apple’s app store revenue, according to SensorTower estimates.
Moody’s analyst Raj Joshi predicted that the commission reduction will reduce Apple’s annual revenue by less than 1%, while buying the company more goodwill from app developers and perhaps regulators as well. “The move will alleviate the risks to some extent from the increasing global regulatory scrutiny of the App Store’s pricing and business model,” Joshi said.
That’s probably one of the reasons investors didn’t seem concerned about Apple’s upcoming rate cut. The company’s shares fell 1 percent to close Wednesday at $ 118.03.
Spotify mocked Apple’s lower fees as “a showcase” designed to deter regulators from cracking down on its practices. “This latest move further demonstrates that its app store policies are arbitrary and capricious,” Spotify said in a statement.
The Match Group, which owns popular online dating sites, also lashed out at Apple in a statement questioning how much the reduced fees would help. “If you manage to increase your revenue above $ 1 million, then you double your cut, arbitrarily, which makes it even more difficult for the startup to keep growing,” Match said.
Epic is continuing 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 fees.
Meanwhile, a group called the Coalition for App Fairness, a Washington-based nonprofit, is calling for a “fair deal” in the way tech giants run their app stores. Its members include Epic, Spotify, online dating app maker Match Group, and other members like Tile, Basecamp, ProtonMail, and European media industry associations.
And European regulators are investigating Apple’s mobile app store and payment platform over concerns that their practices distort competition, part of the EU’s battle against dominance by big tech companies.
Apple CEO Tim Cook called the rate reductions a win-win for everyone involved.
“We are launching this program to help small business owners write the next chapter of creativity and prosperity in the app store,” Cook said in a statement.
More details on the reduced fees will be released next month.
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