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Apple Announces ‘Small Business’ App Store Program

Today Apple announced that beginning January 1st, 2021, developers can apply for a new App Store program specifically designed at small businesses. Here is how it will work:

If you make less than $1m in a calendar year, Apple will take a 15% cut, instead of the usual 30% cut. If you make $1m or more in a calendar year, Apple will continue to take the standard 30% cut. This is across ALL of your apps for a particular developer.

Here is how Apple is defining the rules of the program:

The vast majority of developers on the App Store who sell digital goods and services will qualify for the Small Business Program.

* Existing developers who made up to $1 million in proceeds in 2020 for all their apps, as well as developers new to the App Store, can qualify for the program and the reduced commission.
* If a participating developer surpasses the $1 million threshold, the standard commission rate will apply for the remainder of the year.
* If a developer’s business falls below the $1 million threshold in a future calendar year, they can re-qualify for the 15% commission the year after.

While there will likely only be a small number of developers who will fall into the making of $1m one year and less than that the next, it still can be a significant difference, particularly if you have a spike in sales for one year, but they falter the next. It should be noted that a vast majority of developers will fall into the 15% commission rate, but there will be some that do not.

On the surface, this seems like a good thing. However, I am not entirely sure. I will likely apply for it, because 15% commission is better than a 30% commission, but in the long run it will not likely make a material difference, as my app sales have not been super robust.

I am going to quote John Gruber’s post on this, because he sums it up quite nicely

Let’s say a new developer enters the program (and thus qualifies for the 15 percent commission) and their apps are on pace to generate $1.2M in sales. At 15 percent, $1.2M in revenue would generate $1.02M in earnings — putting them over the threshold, so their entire earnings the next year would face a 30 percent commission. If their sales remain flat the next year, the same $1.2M in revenue would earn them only $840K at 30 percent. They’d have to generate $1.5M in revenue to earn the same profit that $1.2M in sales brought them the year before. Basically, if the end of the year draws near and a developer in the Small Business Program has revenue approaching $1.2M, they’re incentivized to pull their apps or reduce their prices to keep from going over the threshold.

We will not know all of the full details until December, but it is good to see Apple is looking to adapt the App Store, but I doubt it is because they wanted to, it is likely due to regulatory pressure coming down the pike.

Source: Apple, DaringFireball