Earlier last week, Apple announced news for the smaller software development businesses, which sparked joy. Small developers who earn less than one million dollars in revenue per year will have their commission cut on the Apple App Store to only 15%.
50% less than their current commission structure for smaller developers, 30% of all the revenue generated through the AppStore; This has got to spark some positive development in innovation & cutting-edge emerging technologies.
App Store? Why Is It Important for software development businesses?
Now a little about the Apple AppStore. What is it, and why is it so important?
Introduced back in 2008, the AppStore is Apple’s gateway to provide additions to their products’ app line-up. It allows users to download programs that run on their devices. These can be the following:
- Productivity based.
- Photo & Video based.
- Entertainment based.
- Social Networking based.
- Music based.
- Lifestyle based.
Anything you would be interested in could be in the AppStore as a free or paid purchase. The Apple App Store credits itself on being the most secure and the Safest App Store on the market, currently offering just under 2 million applications for the public. Figures say over half a billion people visit the Apple AppStore every week to download new mobile applications for the iOS devices.
AppStore apps are created by both large & smaller mobile application developing businesses. Hence, the commission cut is so significant, but below we will detail why this is a win for smaller mobile application developing businesses.
The initiative sparked changes due to the current pandemic & its toll on smaller businesses. Currently standing, 28 million small companies or developers have signed up for the initiative. Still, it is untold exactly how many will be accepted or how many will get rejected to be a-part of the incentive.
Recent reports have drawn attention to Apple’s revenue just from the AppStore alone. This figure was a staggering 50 billion in sales in 2019; Small businesses & developers making up only 5% of that.
The commission cut down to 15% from the original 30% aims to provide small software development businesses with more profitability, which is expected to spark an increase in development or have newer companies join the Apple AppStore. As a result, these measures are expected to increase Apple’s App Store revenue during these pandemic times.
When can software development businesses expect this change?
The full effect of this incentive will start from New Year Day, January 1st, 2021. Small software development businesses will be asked to apply to join the program, which will then be evaluated & proceeded accordingly. Apple has not disclosed the full procedure or requirements, but they’re expected to be released soon.
However, Apple made clear that if any company that joins the incentive surpasses the million-dollar threshold in revenue in 2021 will be automatically removed with a notice to follow. If the company sees a reduction in income once again, below the million dollars, they can re-apply for the incentive & be accepted.
The entire initiative is, as mentioned, to “boost” the small software development business’s economy. Tim Cook, CEO of Apple, stated that small businesses are “the backbone of the global economy and the beating heart of innovation.”
He also extended exactly how vital small businesses are to the economy & Apple in particular by releasing the following statement:
“The AppStore 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 program 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.”
Controversy & More Controversy
What this incentive also underlines is the growing cost of software development in terms of staff & equipment. Due to the cut, smaller businesses will have many more opportunities to hire more staff, buy better gear or grow on capital, expanding their operations. Consequently, smaller software development companies will have an easier time staying in business even during these tough times.
All these changes have become necessary after Apple was under scrutiny from multiple larger mobile application development companies such as Spotify, Facebook and Epic Games. Both larger & smaller development companies have been complaining about Apple’s non-competitive business nature when it comes to the commission structure, in fact so much that it is now being disputed in court.
Spotify on Wednesday had commented on Apple’s commission structure & payment method by stating that “Apple punishes anyone who does not use their payment systems & structure of operations by putting them in a significant disadvantage.”
Controversy with the change of commission structure doesn’t just end with external clients and continues with Apple. Apple warned investors that “changes to the commission structure will affect revenue.” They also extended out with a statement, “the company’s financial condition and operating results could be materially adversely affected.”
Positivity Is Key
Three key points stand out from the rest when it comes to the current commission works introduced by Apple:
- Existing developers who made one million dollars worth of revenue in the App Store can qualify for the small business program.
- If a small business that makes over the million dollar threshold is in the program, the regular 30% commission applies for the rest of the year.
- Once a business makes under one million dollars in revenue, they can re-qualify & enter the program incentive.
These are just three main key points that Apple has listed; however, that is not all that’s good about the introduction of this small business program.
Small businesses will be provided access to business suites, development tools, programming languages, secure payment interfaces & more than 250,000 APIs provided by Apple themselves. These are to help boost productivity, creativity & sales for small businesses. These will drive innovation up, providing a chance for niche businesses to innovate their technologies & to bring up new trends that the world has not seen yet.
It is no wonder why small businesses are delighted with Apple’s new incentive program. Cutting commissions down from 30% to 15% allows smaller mobile application development businesses to compete with the Apple AppStore giants in sales.
It also provides them with more leverage to create & explore newer technologies for the future to come. As Apple said, smaller businesses are the backbone of the economy. We say smaller niche businesses are the backbone of innovation.
Without smaller businesses in niche areas, less innovation occurs, meaning technology stands at a halt. For those thinking of developing for the iOS AppStore, from New Year’s onwards, it may be worthwhile as prices drop, everything is given to you to start and build up a mobile app empire.
Big Kitty Labs is one of the leading software development companies in Columbus Ohio that has been developing applications, websites, and software for over 10 years. Contact us for free discovery and consultation on your next project!