Apple Cuts the Little Guys a Break. Will It Be Enough?

Last week, Apple (NASDAQ:AAPL) unveiled a new program that was clearly designed to address the ongoing antitrust criticisms that it is receiving. Dubbed the App Store Small Business Program, qualifying developers that earn $1 million in annual revenue or less can enjoy a commission rate of just 15%, or half of the normal 30% cut that the Mac maker takes on digital sales.

Is the move too little, too late?

Blue iPhone 12 and 12 Mini

Image source: Apple.

How the program works

Apple has faced backlash for its standard 30% cut, particularly in the context of small, independent developers that don’t make as much money as the richest company on Earth. As long as the developer generated $1 million or less in gross proceeds in the previous calendar year, the developer is eligible for the reduced rate.

The program goes into effect on Jan. 1 of next year, so a developer’s 2020 proceeds will determine eligibility for next year. The Cupertino tech juggernaut will use a developer’s earnings after deducting Apple’s cut to determine the developer’s proceeds. As soon as a developer hits $1 million in proceeds, the normal 30% cut will apply “for the remainder of the year.”

The company says that the new program will help “the vast majority” of developers on the App Store, without elaborating or providing specific metrics. Mobile analytics specialist Sensor Tower estimates that the change will affect 98% of developers on the platform, according to The New York Times. However, those small developers represent less than 5% of App Store revenue, so Apple isn’t really giving up all that much in terms of absolute dollars.

Playing more defense

The company has spent much of 2020 defending itself from allegations of anticompetitive behavior. Apple backed a study earlier this year that showed that its 30% commission is comparable to other digital platforms such as gaming consoles.

Last month, the House Judiciary Committee released findings following a 16-month investigation. Lawmakers argued that the App Store represents a monopoly on iOS software distribution, and Apple pushed back aggressively on the findings, preferring to define the relevant market as broadly as possible to minimize its market share.

Apple has been making a series of small concessions in an effort to alleviate concerns, such as recently allowing users to change the default apps for certain functions on iOS. The new program is yet another incremental concession intended for the same purpose, but it might not be enough to quell criticisms. In fact, Apple’s most vocal critics — including Spotify and Fortnite maker Epic Games — are already railing against the change, arguing that the $1 million threshold is arbitrary and creates a new tiered system that developers must now navigate.

Epic CEO Tim Sweeney pointed out that Apple’s higher 30% cut will still apply to most in-app purchases, which theoretically leads to higher prices. That’s important because lawmakers and regulators often focus on the ultimate impact on consumers when evaluating allegations of anticompetitive behavior.

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