Apple (AAPL) has long been a very PR-sensitive company, and its latest App Store policy change is likely to earn it some goodwill with journalists, regulators and developers alike.
The move is also less costly than what one might think, and could even prove to be a net positive for App Store revenue over the long run.
On Wednesday morning, Apple announced that developers earning less than $1 million in annual App Store revenue will have to pay just a 15% commission on transactions that are required to be processed through the App Store, such as paid downloads and in-app content purchases and subscriptions.
"Comprehensive details" about the initiative, which is known as the App Store Small Business Program, will be shared in December. To date, Apple has typically charged a 30% commission on such transactions to all developers (content subscriptions are a partial exception, with Apple collecting 30% for the first year and 15% for subsequent years).
It's hard to ignore the fact that this policy change is happening just three months after Epic Games -- developer of Fortnite and the popular Unreal gaming engine, and a company generating a lot more than $1 million in annual revenue -- filed an antitrust suit against Apple over Apple's unwillingness to let Epic use its own payments system to handle Fortnite transactions on iOS devices.
One also can't ignore that Apple is now facing antitrust probes from both U.S. and E.U. regulators over its App Store policies. In June, the E.U. said it's concerned about both Apple's insistence on taking a cut of all digital content transactions that occur on iPhones and iPads, as well as restrictions placed on letting developers inform users about alternate payment options, such as the developer's website.
Apple is undoubtedly hoping that its policy change will ease some of the criticism it's getting from both the press and regulators over its App Store rules. And from the looks of things, the top-line impact of the move on App Store revenue won't be all that significant.
App analytics firm Sensor Tower estimates that Apple's policy change will lower commissions for 98% of all developers that are having payments processed via the App Store, but also estimates that those developers collectively accounted for less than 5% of Apple's 2019 App Store revenue.
Likewise, Morgan Stanley's Katy Huberty estimates that the policy change could have a modest $0.03 impact on Apple's fiscal 2021 (ends in Sep. 2021) EPS, and a 0.2% impact on revenue. She adds that the actual fiscal 2021 impact could be smaller, since the change won't go into effect until Apple's fiscal second quarter (March quarter).
For context, Apple appears to have generated more than $50 billion in gross App Store revenue, and perhaps around $15 billion in net revenue, in 2019. And 2020 figures will doubtlessly be higher.
Also: Should Apple's policy change incentivize more developers to create iOS and iPadOS apps, it could serve to boost App Store revenue over the long run -- particularly if a subset of those new developers create hit apps that end up generating much more than $1 million in annual revenue. Ironically, there are some parallels here with Epic's May decision to not charge royalties to game developers using the Unreal Engine until they generate more than $1 million in game revenue.
At the same time, Apple hasn't given any indication yet that it's willing to budge on its current App Store payment rules for larger developers -- whether game developers such as Epic, streaming service providers such as Netflix (NFLX) and Spotify (SPOT) , online dating service providers such as Match Group (MTCH) or anyone else looking to conduct content transactions on iPhones and iPads.
Though it's possible that the company eventually offers a compromise or two here as well, for the moment Apple still seems to be digging in for a long fight with regulators and major developers over its current App Store policies.
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