By Tim Higgins 

Apple Inc. is halving the commission it charges smaller developers that sell software through its App Store, a partial concession in its battle with critics over how it wields power in its digital ecosystem.

Starting next year, the iPhone maker said Wednesday, it will collect 15% rather than 30% of App Store sales from companies that generate no more than $1 million in revenue through the software platform, including in-app purchases. The fee will remain 30% for developers whose sales through the App Store, excluding commission payments, exceed $1 million -- meaning the reduction won't affect such vocal Apple opponents as videogame company Epic Games Inc.

Apple's 30% take has been at the heart of complaints this year from other tech companies and some users over how it manages the vast digital world of people who use iPhones, iPads and other Apple devices. Critics have charged that Apple's share is too large, is unfairly levied against different companies, leaves customers footing the bill and leads to workarounds by some developers to avoid the fees.

Congress, the European Union, the Justice Department and the Federal Trade Commission are investigating Apple and other tech companies on antitrust grounds.

The Cupertino, Calif., company has said its fees help fund a system that allows users to download third-party software safely on more than 1.5 billion devices globally. Last year, according to Apple, the App Store ecosystem facilitated $519 billion in world-wide commerce, more than 85% of which went to third parties. Apple's fee is in line with what rival app stores run by Alphabet Inc.'s Google and others charge.

Epic Chief Executive Tim Sweeney called Apple's move a calculated effort to sow division among app creators.

"Apple is hoping to remove enough critics that they can get away with their blockade on competition and 30% tax on most in-app purchases. But consumers will still pay inflated prices marked up by the Apple tax," he said.

Apple said the lower fees would affect the "vast majority" of app developers that use its App Store, but didn't specify a number or percentage. Apple has said 85% of apps in the App Store don't charge users, and therefore their developers pay it nothing.

Apple will roll out comprehensive details of its "App Store Small Business Program" early next month and implement the changes starting Jan. 1, it said. Developers new to the App Store will qualify, along with those under the $1 million limit in 2020. Developers that qualify for the reduced fees but then exceed $1 million during the year will be hit with the normal rate once they clear that threshold.

"We're launching this program to help small-business owners write the next chapter of creativity and prosperity on the App Store, and to build the kind of quality apps our customers love," Tim Cook, Apple chief executive, said Wednesday.

Apple has tussled over its commission with a range of app-based companies, including Netflix Inc. and Spotify Technology SA, but its most prominent battle has been with Epic, maker of "Fortnite." In August, Epic rolled out a way to make in-game purchases that prevented Apple and Google from collecting the 30% cut they charge in their software stores. Both Apple and Google kicked the game out. Epic, in turn, sued.

Epic has framed its fight as opposing a system that suppresses competition and inflates prices. Apple has said Epic is simply seeking to avoid paying for the "tremendous value it derives from the App Store." In a court filing, Apple said "Fortnite" has been downloaded through the App Store almost 130 million times since 2018 and that Epic has earned more than $600 million from its relationship with Apple.

In October, Epic won a public-relations boost when a House subcommittee investigating Big Tech accused Apple of wielding anticompetitive power that harms rivals and benefits itself. In particular, the subcommittee report questioned the size of the App Store fee.

"Apple's ban on rival app stores and alternative payment processing locks out competition, boosting Apple's profits from a captured ecosystem of developers and consumers," the report said.

Apple disputed the findings and earlier this year released a study it commissioned from Analysis Group that found App Store fees were in line with those of its closest competitors, such as Google Play.

The 30% fee dates back to the inception of the App Store in 2008, a year after the iPhone was introduced.

Write to Tim Higgins at Tim.Higgins@WSJ.com

 

(END) Dow Jones Newswires

November 18, 2020 07:56 ET (12:56 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
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