Apple chops App Store fees for small businesses in face of mounting criticism

Apple will lower its App Store fees for businesses that make US$1 million or less in annual revenue, as part of a 'Small Business Program' aimed at addressing mounting criticism over its stringent payment policies.

The iPhone maker unveiled the 'App Store Small Business Program' on Wednesday (November 18) in a newsroom post that talked up how small businesses have been the "driving spirit" of the App Store, which hosts 1.8 million apps worldwide.

Under the programme, businesses that accrue US$1 million or less in the previous calendar year on a post-commission basis (after Apple's current fees) will only be charged a 15% commission on in-app purchases, as opposed to the standard 30% fee.

"The savings mean small businesses and developers will have even more funds to invest in their businesses, expand their workforce, and develop new, innovative features for app users around the world," Apple said in the newsroom post.

Developers will have their eligibility reassessed on an annual basis. The reduced fee will also apply to new developers launching their apps for the first time.

The new programme will launch on January 1.

It's unclear what proportion of the 1.8 million apps on the App Store will be eligible for the programme. Apple said it will benefit the "vast majority" of developers who sell digital goods and services on the store.

Apple CEO Tim Cook commented: "Small businesses are the backbone of our global economy and the beating heart of innovation and opportunity in communities around the world. We’re launching this programme 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."

"The App Store has been an engine of economic growth like none other, creating millions of new jobs and a pathway to entrepreneurship accessible to anyone with a great idea. Our new programme carries that progress forward—helping developers fund their small businesses, take risks on new ideas, expand their teams, and continue to make apps that enrich people’s lives," Cook added.

Several companies did not share Cook's enthusiasm about the programme. Spotify, which has filed an antitrust complaint against Apple with the European Commission, said in a statement that the move "further demonstrates that their App Store policies are arbitrary and capricious".

"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 said.

The 30% fee that Apple charges on all in-app purchases has been a sticking point for developers for several years now. But criticism has mounted in recent months after a high-profile legal case between Apple and Epic Games in August threw the issue into the public spotlight. The world's major news organisations joined together in August to dispute Apple's app store practices, and the fees are being investigated in a broad probe on app store practices by the Australia's competition regulator.

Epic Games CEO Tim Sweeney called the 'Small Business Program' 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".

"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 to press.

(This article first appeared on CampaignAsia.com)