Business

Apple Cuts App Store Fee for Small Businesses; Spotify Calls It 'Window Dressing'

Apple
Courtesy of Apple

Apple

Apple has announced a new program for small businesses that operate within its App Store, lowering the commission on sales that the conglomerate will take from 30% to 15% for businesses that make less than $1 million per year, the company said in a press release today (Nov. 18).

The new program will launch Jan. 1, and Apple says it will help "the vast majority of developers who sell digital goods and services on the store," particularly amid a pandemic that has squeezed businesses at all levels and in all sectors. It will apply to existing developers who made up to $1 million in 2020 across all their apps, as well as new developers; if a developer in the program passes $1 million in post-commission earnings during the calendar year, the 30% rate would apply for the rest of the year. If a developer surpasses $1 million in a year and then falls below that threshold in the future, they can return to the lower rate the following year.

“Small businesses are the backbone of our global economy and the beating heart of innovation and opportunity in communities around the world," Apple CEO Tim Cook said in a statement. "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. The App Store 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.”

While Apple has framed this as a benevolent move to help small businesses and developers in challenging circumstances -- which it no doubt would -- it also comes amid a nearly two-year-long antitrust battle that’s playing out in the European Union, after Spotify filed a complaint with regulators in 2019 alleging anticompetitive practices with regards to Apple’s App Store commission fees, among other issues. One of the central issues of the complaint says that Apple takes a 30% commission when users of Spotify’s free tier upgrade to its premium version, which Spotify has to cover itself in order to avoid passing that fee on to the consumer, while if Spotify doesn’t use Apple’s payment system Apple limits the company’s (and similar companies’) ability to communicate with its users.

At the time of the complaint, Spotify CEO Daniel Ek said that Apple’s practices "purposely limit choice and stifle innovation at the expense of the user experience -- essentially acting as both a player and referee to deliberately disadvantage other app developers." (Most memorably, he compared them to playing ping-pong "blindfolded while we change the rules throughout the game.") Spotify, Netflix and others had been encouraging users to sign up for their services through ways other than the App Store in order to avoid those fees for the better part of a year prior to that complaint, while friction between Spotify and Apple over the issue had been brewing for some time prior to that. Apple, for its part, fired back at Spotify's "misleading rhetoric" at the time, saying that "it’s not just the App Store that they’re trying to squeeze -- it’s also artists, musicians and songwriters."

More recently, this past August, Fortnite creator Epic Games joined Spotify in its battle against Apple over that same issue, after Apple removed Fortnite from its App Store when Epic introduced a way to purchase in-game offers without using Apple’s payment system.

Spotify today issued a statement regarding Apple’s new lower fees for its small business program.

“Apple’s anti-competitive behavior threatens all developers on iOS, and this latest move further demonstrates that their App Store policies are arbitrary and capricious," a Spotify spokesperson said in a statement in response to Apple’s announcement. "While we find their fees to be excessive and discriminatory, Apple’s tying of its own payment system to the App Store and the communications restrictions it uses to punish developers who choose not to use it, put apps like Spotify at a significant disadvantage to their own competing service. Ensuring that the market remains competitive is a critical task. We hope that regulators will ignore Apple's ‘window dressing’ and act with urgency to protect consumer choice, ensure fair competition and create a level playing field for all.”

Reps for Apple did not respond to a request for comment as of press time.

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