Is Cook merciful? The 30% "Apple tax" was cut in half. Netizens: This is using the "rich tax" to support the common people

Author | Bei Shuang

Apple, which has always been tough, suddenly lowered its stance.

On the evening of November 18th, Beijing time, Apple announced a new policy: the commission rate for developers in the Apple App Store will be reduced from 30% to 15%.

As soon as this news came out, it caused quite a stir in the industry.

APP Store is Apple's second largest core business, generating revenue of about $50 billion in 2019, second only to iPhone revenue. In addition, the 30% "Apple tax" has always been a focus of controversy in the industry, and Apple has also suffered a lot of lawsuits, but has remained unmoved.

But yesterday, Apple suddenly took the initiative to lower the App Store's commission rate, and directly cut it in half.

What is the intention?

Any preferential policy has a threshold, and Apple is no exception.

To benefit from this policy, you must be a small business or independent developer with annual revenue of less than $1 million.

According to Apple's official statement, they plan to launch a new App Store Small Business Program, which aims to boost digital commerce and App innovation, create new jobs, and help small and independent developers continue to bring excellent software to Apple users.

The first step of this plan is to reduce the App Store's commission rate. The specific thresholds are as follows:

• All existing developers whose total revenue from all apps in 2020 is less than US$1 million, as well as new developers joining the App Store, can participate in this plan and enjoy a 15% reduction.

• If the developer's total App revenue exceeds US$1 million, the standard 30% rate will be charged.

• If the developer's business revenue falls below $1 million in a future calendar year, they will be eligible for the 15% commission again in the following year.

This is undoubtedly a favorable policy for small businesses or independent developers.

开发者在苹果商店推出任何APP都需要交纳一定比例的佣金，这部分佣金也被成为“苹果税”。此次下调15%费率，将显著提高他们的收益。

It is reported that Apple App Store has more than 28 million developers and 1.8 million apps. Although Apple did not disclose how many of them will be eligible, according to analysis by Sensor Tower, it is estimated that about 98% of developers can qualify for the low commission rate.

Raj Joshi, a senior credit officer at Moody's, also said:

“Apple’s announcement that it would halve its commission rate for developers with revenues of less than $1 million is positive news.”

It is worth noting that this is not the first time Apple has reduced its commission rate for developers.

In 2016, it allowed developers who enjoyed subscription services through the App Store for more than one year to retain an additional 15% of the revenue. This policy is still in place and is open to all developers and large companies on the platform.

In comparison, this tax cut is obviously more powerful and is specifically aimed at independent developers and small businesses.

The reason for this was made clear by Apple CEO Tim Cook, who said,

Small businesses are the backbone of our global economy and the pulse of innovation and opportunity in communities around the world. The App Store has been a unique engine of economic growth, creating tens of millions of new jobs and paving the way for anyone with a great idea to start a business.

Our new approach continues that progress, helping developers fund small businesses, bold new ideas, scale their teams, and continue to create apps that enrich people’s lives.

It is reported that the policy will officially take effect on January 1, 2021, and Apple will release more details about the policy in December.

So, is Apple, which claims to be "everything for developers", really giving up profits?

The answer is obvious: no.

Last month, Apple said in its annual filing with the U.S. Securities and Exchange Commission that lowering its App Store commission rate could hurt the company's financial performance. The App Store generated $14.55 billion in revenue in the quarter ended September, accounting for 22% of the company's revenue during the period.

If taxes are reduced for all companies on the platform, it will indeed put a lot of pressure on Apple's financial performance.

But its premise is that it is only effective for developers or companies with annual net profits of less than 1 million, and the impact on profits brought by these people is minimal.

According to Sensor Tower, in 2019, 93% of Apple's App Store revenue came from the top 1% of developers, while developers with less than $1 million in revenue accounted for only 5% of its total revenue. From this, it can be inferred that although small businesses account for 98% of the 1.8 million apps, their impact on revenue is not significant.

And once these businesses have revenues exceeding $1 million, it will revert to the original 30% tax rate.

It seems that Apple aims to use "small profits" as leverage to tap into a larger application market.

From the 1% revenue source and the 98% share of small businesses, it can be seen that the current App Store ecological market has already shown a serious two-tier differentiation. The main market is monopolized by some giant companies, and it is difficult for larger small businesses to have room for development and survival.

Although Apple's profit cut is a small amount, it is undoubtedly very attractive to independent developers and small businesses. It may stimulate more developers to create small but exquisite high-quality apps, adding vitality to the entire App Store ecosystem.

More importantly, Apple's move may further help it ease the pressure of antitrust investigations.

In recent years, Apple has been one of the main targets of antitrust regulators, especially its App Store's high tax rate of 30%, which has been criticized by the industry.

In October of this year, the House Judiciary Antitrust Subcommittee released a report clearly emphasizing that Apple's App Store has generated "extraordinary profits." It is understood that in 2019, the App Store ecosystem facilitated $519 billion in commercial transactions worldwide, of which more than 85% of transactions went to third parties.

Antitrust regulators have not yet responded, but Apple's move has angered many large companies.

As soon as Apple's App Store charging policy was announced, it was severely criticized by major companies such as Microsoft, Spotify, Match Group and Epic Games.

These companies are not included in its low commission rate policy. Take Epic Games as an example, its "Fortnite" game app alone has an annual revenue of more than $1 billion in Apple's App Store.

They allege that Apple's charging policies deprive consumers of choice and drive up the prices of apps.

Among them, Tim Sweeney, founder of Epic Games, said,

Apple's move is simply to dispel monopoly criticism and allow them to get rid of their blockade of competition. By imposing a 30% tax on most in-app purchases, consumers will still pay the increased prices due to Apple's tax.

Epic Games is a world-renowned game company. Its "Fortnite" has more than 350 million users and is one of the most popular games in the world. According to the 30% commission ratio, Apple has made hundreds of millions of dollars from this game alone.

In August this year, Epic Games publicly challenged Apple because it was dissatisfied with the high proportion of "Apple tax". It sold "Fortnite" directly to players, bypassing the built-in payment platform of Apple App Store.

In response, Apple directly deleted the offending app from the App Store. Less than an hour later, Epic Games formally filed a civil monopoly lawsuit against Apple in the U.S. District Court for the Northern District of California.

This is not the first time that Apple has received such lawsuits. Many companies, including Spotify, Basecamp, Tile, and ProtonMail, have filed lawsuits against Apple over the App Store's fee ratio. They even set up the "Coalition for App Fairness" to jointly protest against Apple's App Store revenue sharing system.

However, none of these actions caused Apple to adjust its commission rate. This time, Apple lowered its commission rate for small businesses, which they believe must have ulterior motives. For example, Spotify directly claimed:

Apple’s anti-competitive behavior threatens all developers on iOS, and its latest move is further proof that their App Store policies are arbitrary and capricious.

We hope regulators will look beyond Apple’s tokenism and take urgent action to protect consumer choice and ensure a level playing field for everyone.

It is worth noting that Apple App Store’s 30% commission rate is not the highest in the industry.

Google Play also takes 30% of the revenue, but some other third-party application platforms have already exceeded this ratio. For example, Tencent’s mobile game platform, in its online game joint operation cooperation model, takes 60% from the developer and 40% from Tencent.

In contrast, Apple is the only one at the center of public opinion. Some analysts believe that "it may be because the proportion of paying users in Apple's App Store is much higher than that of Android users, and the revenue earned by game companies from this channel is very considerable, so it has a greater impact on revenue."

Regardless of the reason, Apple's App Store commission rate has been criticized and has attracted investigations from antitrust regulators.

But judging by how Apple has responded to the numerous lawsuits, it does not seem to be planning to make concessions.

For Apple, if it makes an exception and adjusts the commission rate for large enterprises, it will not only bring huge economic losses, but will also threaten the business barriers that have been built over a long period of time.

Some netizens believe that the lawsuits filed by Epic and other companies have aggravated the tax model. They lowered the commission rate by 15% to appease "public anger" and then continued to collect heavy taxes from the "rich."

What do you think of Apple's move?

Reference link:

• https://www.theverge.com/2020/11/18/21572302/apple-app-store-small-business-program-commission-cut-15-percent-reduction?scrolla=5eb6d68b7fedc32c19ef33b4
  

• https://techcrunch.com/2020/11/18/epic-games-founder-tim-sweeney-likens-fight-against-apple-to-fight-for-civil-rights/
  

• https://new.qq.com/rain/a/20201119A00KUY00
  

• http://finance.sina.com.cn/chanjing/gsnews/2020-09-14/doc-iivhuipp4232405.shtml