Bite of the Apple: App Store Commissions

When Apple and Fornite went to war in the great battle over commission costs, Apple was left with super-expensive egg on its face. It didn’t look good for the richest company in 5 galaxies to tighten the thumbscrews on a brand from whom they’ve made $360 million in app revenue and in-app purchases over the past 3 years.

And I have no doubt they felt it, because they’re nothing if not absolutely meticulous about public image. If you do a Google search for “Apple greed commissions,” you get 5,130,000 results. A search for “Apple suing people” yields 14,400,000 results.

Just saying.

By total coincidence, this week they introduced the App Store Small Business Program, a first-of-its-kind plan that will halve the exorbitant, 30% commission costs for app developers who make under $1 million a year.

The program begins the first of January, when developers will be allowed to apply for the program. I’m not the only person who wondered why Apple didn’t choose to just auto-enroll small developers, but fraud, in a crowded ecosystem of 2.2 million apps, is a real thing.

Eligibility will be determined by 2020 proceeds. If a developer goes above the $1 million threshold, their commission rate will automatically raise to the standard 30%; if they drop back down below it in a future year, they can re-apply for the program.

I mean, Fortnite is out. And so are most other game developers of any note. But for small, indie, niche devs, this is actually a great thing.

I was about to rhetorically ask if Apple is doing this out of the good of their golden hearts or to improve their image, but my comments in the first paragraph probably make it pretty clear what I think.

Big Wins for Little Guys

Brant DeBow and I talked about this at length, both with a tone of sort of grudging respect for Apple. They’re wonderfully clever. They make noises about being it in for the little guy, and there’s no question that for most indie developers, this is a huge win. But they’re a massive, money-making behemoth, and this feat of largesse is really only going to cost the App Store about 2% of its total profit.

Look, we’re not mad about it. We’re happy for the smaller developers who’ll benefit from this change. And those are generally the developers we care the most about here at BiTE, because they make the truly great stuff and are largely served pretty well by Apple’s platforms.

For instance, Overcast by Marco Arment is a fantastic app that is never going to be on Windows or other platforms, that monetizes exclusively through Apple. It probably won’t make a ton of cash, but keeping half of the share? That’s a big win for an indie dev.

Some people are positively disgusted, in a way that’s a bit baffling until you understand what they’ve already been through with Apple.

Frankly if you’re surprised by the fact that Apple is still making a boatload of money, I’d question if you really understand how American capitalism works.

But as Brant pointed out, the DDHs of the world are objecting to any Apple interference in the customer/developer relationship. Their main complaint is not owning the entire customer relationship. I get it. Giant, restrictive middlemen are a bummer. But they’re also par for the course when you’re selling your product in a store. Otherwise you’d just hawk it from a cart on the sidewalk.

Which, of course, doesn’t work with apps. Something something “antitrust.”

Speaking of, that something something “antitrust,” and the fact that the House Judiciary Committee this fall reported that Apple, along with Facebook, Google, and Amazon, enjoy anti-competitive "monopoly power,” is a big reason the Small Business Program suddenly exists.

Apple isn’t ever going to leave the store as it is — a sprawling wonderland of apps of every description — without wielding power and wielding it in some kind of overbearing ways. That’s the nature of this particular beast.

Hey, You Guys

Back in June, the App Store threatened to remove email service Hey’s app if Hey didn’t begin offering an in-app subscription and start sharing a cut of their revenue. Hey is a pay service, but you can only sign up on their website, denying the App Store that sweet 30%.

What Apple did do with Hey was to require them to either have a free product, or fork over the 30%.

By the way? DHH is the CTO of Basecamp. Basecamp makes Hey. So you can see why he’s so het up. I’d be.

Apple has given a few developers a pass on the commission rules, and a few streaming video providers are allowed to bypass the 30% fee when selling individual items like movie downloads.

Apple could broaden existing exemptions, by allowing developers who don’t want to take any payments within the app, and who they trust could bring customers all on their own, to have an app that requires a login and makes it explicit that users have to leave the app and go to the developer’s website to pay.

As it stands, the App Store has a rule that developers can’t tell people to go to your website to sign up. So you just sit there. With a login box…. What to do next? Sorry, App Store says we can’t tell you. You have to call Netflix on the actual phone (remember those?) for them to be able to tell you to sign up.

So will developers and consumers leave the App Store in droves over these weird strictures (which is, incidentally, the name of my punk band)? Of course not. First of all, where are they going to go?

Second, Apple will still win, because the user experience of approving an In App Purchase to pay with your credit card, which is already in the system, will always beat jumping through a series of hoops.

Apple provides something more than credit card processing, and therefore they deserve some premium. But let that happen in the market because real users reject hoop jumping, not because you’ve outlawed it in an imperious attempt to control every facet of the relationship.

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