Epic’s battle with Apple over App Store revenues appears to be having an effect. Apple says that it intends to cut the standard 30% revenue split for apps and in-app purchases down to 15% starting on January 1st, in an initiative it’s calling the App Store Small Business Program. But there’s a catch: only developers earning less than $1 million a year qualify.
Apple proudly claims that this will mean higher profits for most of the developers on the App Store, who will need to qualify for the Small Business Program based on revenues in the previous year starting with 2020. If a developer earns more than $1 million across all their apps, the standard 30% rate will apply for the remainder of the year. If the developer earns less than $1 million in a calendar year, they’ll qualify for the lower rate starting the next year.
App analytics firm Sensor told the New York Times that approximately 98% of current App Store developers would qualify for the smaller 15% cut. But those 98% of developers actually bring in less than 5% of the total revenue of the App Store. Per App Annie, today’s top grossing apps on the App Store are, in order:
- Player Unknown’s Battlegrounds
- Pokemon Go
- Candy Crush Saga
The biggest earners on the App Store all come from fairly massive companies, or else their revenue easily surpasses $1 million once they start to become popular. The App Store, and its Android equivalent the Play Store, are incredibly lucrative, and they’ve attracted some of the biggest publishers on the planet.
To put it bluntly, while the great majority of app developers will qualify for this smaller split, Apple will still reap the financial benefits of the 30% split on all the apps that actually drive its profits. The Small Business Program is inarguably a boon for smaller developers, but on the scale of apps that actually matter, it looks a lot like a publicity stunt. In Apple’s announcement, it says:
In 2019 alone, the App Store ecosystem facilitated $519 billion in commerce worldwide — with over 85 percent of that total accruing solely to third-party developers and businesses of all sizes.
Importantly, it doesn’t say how many of those billions came from the 98% of developers who earned less than a million dollars each. According to Sensor, it’s less than $26 billion. Which would mean that Apple is dropping about $13 billion of revenue here, assuming every qualified developer applies to the program and remains below $1 million in App Store revenue.
There’s no way that a company like Epic, maker of the now-banished Fortnite, could qualify under these terms. While the Small Business Program might go a long way towards mollifying regulators looking at an anti-trust case, it won’t stop Epic or the more vocal movers and shakers in the app publishing world from pushing for a more lucrative split, or for a way to get apps on iOS without Apple’s oversight.