Apple App Store ‘Tax Cut’ for Small Developers Slammed by Spotify, Epic Games

Todd Spangler
·4-min read

Apple announced that it will reduce its take of App Store fees for small app developers by half — to 15% — starting in January. The tech giant positioned the move as helping small businesses grow during difficult economic times. But Spotify and Epic Games, two of the biggest critics of Apple’s App Store, complained it was just window dressing designed to justify its unfair practices.

Under Apple’s new terms, starting Jan. 1, 2021, existing developers who $1 million or less in 2020 for all of their apps will qualify for the 15% reduced commission. The App Store’s standard cut is 30%.

Epic Games CEO Tim Sweeney called the program an attempt at “gerrymandering the community with a patchwork of special deals.” This summer Epic, creator of popular game “Fortnite,” sued Apple over the 30% commission on in-app purchases and its policy that bars outside payment methods. Apple kicked “Fortnite” off the App Store after Epic tried to offer a 20% discount to in-game currency for customers using direct payment.

“By giving special 15% terms to select robber barons like Amazon, and now also to small indies, Apple is hoping to remove enough critics that they can get away with their blockade on competition and 30% tax on most in-app purchases,” Sweeney said in a statement Wednesday. “But consumers will still pay inflated prices marked up by the Apple tax.”

He added, “This would be something to celebrate were it not a calculated move by Apple to divide app creators and preserve their monopoly on stores and payments, again breaking the promise of treating all developers equally.”

Spotify also blasted Apple’s “tax cut,” saying it illustrated the fact that the company’s App Store policies are “arbitrary and capricious.” The reduction of App Store fees to 15% for small developers does nothing to level the playing field to ensure Spotify can compete fairly with Apple Music, the music streamer alleged.

“Apple’s anti-competitive behavior threatens all developers on iOS, and this latest move further demonstrates that their App Store policies are arbitrary and capricious,” a Spotify spokesperson said in a statement.

Spotify continued, “While we find their fees to be excessive and discriminatory, Apple’s tying of its own payment system to the App Store and the communications restrictions it uses to punish developers who choose not to use it, put apps like Spotify at a significant disadvantage to their own competing service. Ensuring that the market remains competitive is a critical task. We hope that regulators will ignore Apple’s ‘window dressing’ and act with urgency to protect consumer choice, ensure fair competition, and create a level playing field for all.”

Spotify, like other companies including Netflix, avoid Apple’s App Store 30% fee by preventing users from paying for subscriptions through its iOS app.

Match Group, whose dating apps include Tinder, Match, OkCupid and OurTime, weighed in on Apple’s announcement as well. “What more evidence of Apple’s anti-competitive and monopolistic behavior does anyone need?” the company asked rhetorically.

“If a developer falls into their arbitrarily defined ‘digital goods and services’ category – one Apple either plays in, or could easily play in – they hamstring you by forcing you to use their payment systems: taking 15% off your bottom line AND keeping control over your customers,” Match Group said in a statement. “And if you manage to grow your revenue over $1 million, they then double their cut – arbitrarily – making it even harder for the startup to continue to grow.”

According to research firm Sensor Tower, the App Store fee reduction to 15% will apply to about 98% of developers that pay the company a commission. Those developers represented for less than 5% of App Store revenue last year, Sensor Tower estimates.

In 2019, the App Store generated an estimated $50 billion in gross sales — and Apple kept $15 billion of that.

Apple, in announcing the App Store Small Business Program, said that the fee reduction “comes at an important time as small and independent developers continue working to innovate and thrive during a period of unprecedented global economic challenge.” Apple chief exec Tim Cook called small businesses “the backbone of our global economy and the beating heart of innovation and opportunity in communities around the world.”

“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,” Cook said in a statement. The program will help developers “fund their small businesses, take risks on new ideas, expand their teams, and continue to make apps that enrich people’s lives.”

The App Store’s standard commission rate of 30% remains in place for apps selling digital goods and services and making more than $1 million in proceeds, defined as a developer’s post-commission earnings.

According to Apple, there are current 1.8 million apps on the App Store, available to the users of more than 1.5 billion Apple devices worldwide.

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