Apple is slashing some App Store fees amid battle with ‘Fortnite’

November 18, 2020 

Following months of criticisms over its hefty fees, Apple announced plans to slash its App Store commissions in half — but only for apps that pull in less than $1 million a year.

The iPhone maker said Wednesday that smaller app developers will automatically receive the new rate beginning Jan. 1. Apple’s previous policy — the crux of a high-profile legal battle with the maker of ultra-popular video game ‘Fortnite’ — was to slap a flat 30-percent tax on all in-app purchases and subscriptions.

The Cupertino, Calif. tech giant framed the cuts, which it dubbed the “App Store Small Business Program,” as a way for smaller developers to “continue working to innovate and thrive during a period of unprecedented global economic challenge.

But the new fee structure arrives as Apple is accused by developers and politicians of exerting monopoly power over its App Store, which is the only way to get software onto its iPhones and iPads.

And it has larger developers crying foul, claiming that Apple is merely trying to get the regulatory bullseye off its back.

The Coalition for App Fairness — which is pushing for legislation to force Apple to cut its steep fees said in a statement that “developers want a level playing field from Apple, not a symbolic gesture.” It also argued that “the vast majority of developers who generate livable revenue through their apps won’t benefit from this change.”

Indeed analytics firm Sensor Tower has found that while the bulk of iOS developers, or 97.5 percent, pulled in less than $1 million in 2019, they only made up 4.9 percent of the App Store’s revenue.  

Apple’s app fees took center stage earlier this year, when it kicked ‘Fortnite’ out of its store after developer Epic Games introduced a payments tool that would have allowed it to circumvent the 30 percent fee for in-app purchases.

The companies are now embroiled in a high-stakes lawsuit, with Epic asking for “injunctive relief to allow fair competition in these two key markets that directly affect hundreds of millions of consumers and tens of thousands, if not more, of third-party app developers.”

Epic CEO Tim Sweeney said in a statement that Apple reducing fees for small businesses was “a calculated move” designed to divide app creators, and that it breaks “the promise of treating all developers equally.”

“By giving special 15 percent 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 percent tax,” Sweeney added.

Sweeney’s clash with Apple has resulted in Epic leading a crusade that’s gained support from big tech companies that rely heavily on the App Store for their business.

Spotify, whose music streaming service competes with Apple Music, responded Wednesday by calling Apple’s policies “arbitrary and capricious” and urging regulators to act.

“We hope that regulators will ignore Apple’s ‘window dressing’ and act with urgency to protect consumer choice,” the company said.

Tinder’s parent, Match Group, slammed the move as “evidence of Apple’s anti-competitive and monopolistic.”

“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 percent off your bottom line AND keeping control over your customers,” Match said. “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.”

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