Archive for November 18, 2020

Wednesday, November 18, 2020 [Tweets] [Favorites]

App Store Small Business Program With 15% Fee

Apple (MacRumors, Hacker News):

Launching January 1, 2021, the industry-leading new App Store Small Business Program is designed to accelerate innovation and help propel your small business forward. The program has a reduced commission rate of 15% on paid apps and in-app purchases, so you can invest more resources into your business and continue building the kind of quality apps your customers love.

[…]

  • If a participating developer surpasses the $1 million threshold, the standard commission rate will apply for the remainder of the year.
  • If a developer’s business falls below the $1 million threshold in a future calendar year, they can re-qualify for the 15% commission the year after.

This doesn’t address any of the structural issues with the App Store, which I think are far more significant than the fee percentage, but it’s certainly a welcome change. It’s smart for Apple because most of the public complaints about the fee come from smaller developers, but almost all of the App Store revenue comes from mega-successful apps. So Apple can help a large number of developers at a small cost to itself. And now most developers are no longer on the same side as the likes of Epic, at least with respect to the fee.

Note that even 15% is still quite a bit higher than other full-service payment processors.

John Gruber:

These odd incentives could be eliminated if Apple applied the commission more like marginal tax rates, where you never lose money by earning more income. I would suggest tweaking these rules so that each year, developers who qualify for the program would get the 15 percent commission until they reach $1M in revenue, then get charged 30 percent for sales over that threshold. Let developers stay in the Small Business Program even as their sales grow.

I wish it worked more like tax brackets, so that everyone paid 15% on the first $1M. That would help mid-sized developers.

We won’t know the details until December, but I think this system where developers need to apply and get approved to enter the program is just about a vetting process to prevent fraud (e.g. a developer with 10 apps setting up 10 different shell companies to try to get them all commissioned at the 85/15 split).

Previously:

Update (2020-11-19): Michael Love:

The thing about this is that there’s really no way for them to tell, or even really to lay out a clear definition of ‘shell company’ if they had perfect information; you’d have to start arguing about beneficial owners and at what point these companies are actually the same.

Subsidiaries are one thing, but how can they stop me from starting another software company to sell another app I’ve made? It’s a different company with a different name; ownership details would be easy to conceal if I wanted to.

And even if Apple knew that I was the owner of both companies, why would that necessarily disqualify me from the program? Plenty of people own more than one company; two different businesses making two different products.

Apple itself uses shell companies.

Oliver Reichenstein:

15% is still high, but one can run a business at that margin.

[…]

As great as this is for small developers, and as much as this is a first-class PR move… Apple’s concession doesn’t change the big picture. Small to medium-sized companies (at 1M revenue you are still small) are still held back to grow to bigger companies.

As to why the 15% doesn’t work like taxes, David Barnard:

Sensor Tower estimated that 2% of developers would be impacted. Some have multiple apps, so it’s not a perfect calculation, but 2% of 1.8M apps is 36k. $150k/yr gift to 36k apps is $5.4B/yr in pure profit. No way Apple would give that up.

Craig Hockenberry:

An extra 15% for indies is great news!

Dealing with the customer sentiment that 99¢ software is an expensive one-time purchase would be even better.

Gus Mueller:

This is very good news and I’m happy to see a reduction in fees finally happen.

Can we get upgrade pricing next?

David Heinemeier Hansson:

Quote from Cook is beyond cynical. Written in that faux-care style so beloved by lobbyists. Apple is making smaller app developers growl before Apple (this program isn’t even automatic!), such that the abusive tax on payment processing is lowered from 10x to 5x the market rate.

[…]

It also further undermines the fantasy that “App Store rules are the same for everyone!”.

[…]

The root of the issue is the monopoly claim that Apple must process all payments, own all customer relationships.

Jack Nicas:

Tim Sweeney, Epic’s chief executive and another of Apple’s toughest critics, also accused Apple of trying to divide developers. By charging smaller companies less, “Apple is hoping to remove enough critics that they can get away with their blockade on competition and 30 percent tax on most in-app purchases,” he said in a statement. “But consumers will still pay inflated prices marked up by the Apple tax.”

David Heinemeier Hansson:

BUT WHAT DO YOU WANT FROM APPLE!? Simple:

1) The choice to use a different payment processor, so we can have competition. Monopoly platform can’t mean monopoly payments.

2) The right to tell customers that our software is for sale, without linguistic contortions.

Thomas Tempelmann:

To be fair, the real problem for us devs is not that we pay Apple too much, it is that Apple leaves us no choice and has the last word over what we can deliver to an iDevice and possibly soon also to a Mac.

Loren Brichter:

If you ever wonder how old dinosaur companies got fat and started to rest on laurels, you’re watching it in real time with

It’s super frustrating because the hardware is so freaking good, and the strategy should be so freaking obvious.

Tanner Bennett:

The thing everyone is overlooking is that big players still get a better deal than we do. Why do small businesses get only 15% up to $1M while Amazon gets 15% up to infinity?

Tom Conrad:

Scoop: Apple to charge 0% fee for first $1T in revenue from developers who choose to monetize through advertising or via the sale of real world goods and services.

Francisco Tolmasky:

I don’t know why people focus so much on the dev perspective. As a customer, that 15-30% doesn’t materialize into anything worthwhile for me. That 15-30% would make a bigger difference going to new features on that app than towards “AppStore improvements” that never happen.

15-30% on can be the difference between being able to afford a 2 person team or a 3 person team. That could translate to dedicated support for the app vs. the engineers having to split time answering emails. Just from a cold business perspective this is bad for customers.

Brent Simmons:

I’ve been saying it should be 5% for a long time already. 👍

Steve Troughton-Smith:

If other platforms do start adjusting their rates to 15% to match Apple’s terms, it just showcases Apple’s outsized influence and power (direct or indirect) over the entire industry

Ryan Jones:

Once you think of it, the mechanism of “lower fee on $XM” is so obvious.

✓ EXACTLY the right incentives - new apps and creativity

✓ Apple gives up ~nothing (i.e. all the revenue comes from high end)

✓ Users get more better apps

I’m just glad Apple realized it too. Phew.

It makes a lot of sense, but I don’t know why it took Apple so long. This is the same pattern that eSellerate was using when I first started selling Mac apps in 2002.

John Luxford (via Hacker News):

Phones are general computing devices, and as such, should not be maintained as closed ecosystems. This doesn’t benefit users, many of whom are also developers themselves, because it limits our freedom on both sides of the equation. General computing platforms should be protected from such predatory practices by manufacturers through strong government regulations.

[…]

I’ve seen many comments on sites like Hacker News and MacRumours that this isn’t a problem users should care about and that developers should essentially stop whining or take their software elsewhere. But this also limits the choices users have, and it limits the types of apps they get to benefit from. This limitation won’t be felt directly, because you don’t feel the absence of something you never knew you could have. You don’t know what you don’t know.

Update (2020-11-20): Steve Troughton-Smith:

Apple’s rate drop, giving us 21% extra profit on App Store income, just barely compensates for inflation from 2008 to today money (which is just under 21% on USD). If you sold the same app at 99c from then to now, you’re only now earning as much as you were receiving in 2008 😅

Update (2020-11-23): Ken Harris:

Yet another reason not to price an App Store app at $0.99.

For an app priced at $10, and you have control over increments of 10%. At $20, increments are 5%, etc.

Beyond tier 50, you lose precision again. It’s like IEEE754. You want to stay in the middle of the range!

Update (2020-11-24): Apple:

Since Apple announced its new App Store Small Business Program, developers are sharing their positive reactions to the news. Under the new program, which launches January 1, 2021, the vast majority of developers who sell digital goods and services on the App Store can qualify for a reduced 15 percent commission. From focusing on their apps full time, to growing their teams, experimenting with features, and even launching new apps, developers are ready to write the next chapter of innovation and creativity on the App Store.

Update (2020-11-30): Jesper:

Seen from one perspective, Apple heard the feedback from developers and launched the program with clear and pure intent to build a better relationship with them. Seen from almost every other perspective, it is one in a series of ploys intended to protect, tooth and nail, a monopoly from being taken from them – a monopoly which ostensibly provides a marketplace for the enjoyment of developers and users, but which consistently serves themselves above any other party.