The Upcoming Apple Tax Set to Disappoint Developers
Apple is adjusting the fees for apps to work on third-party app stores in Europe to increase diversity and activity. Initially, this fee structure seems beneficial as apps sold through third-party stores don’t have to pay Apple a cut of sales. However, after a million downloads, apps must pay Apple 50 euro cents for each new download after the first million and 50 euro cents per user per year.
Third-party app stores also have to pay Apple 50 cents per user per year, and they don’t get the free first million installs. Developers can choose to stay within Apple’s App Store or free themselves from Apple’s revenue cut and restrictive rules, but they must pay a heavy upfront fee. Spotify, for example, could potentially make up the 50 euros each year by converting free users to paying ones via third-party stores.
The fee is especially hard on smaller apps since many apps do not charge users up front (or ever), so they could quickly lose a lot of money. An app that goes viral can easily get over 1 million downloads. This could be very bad for social apps like Clubhouse or BeReal, which became popular very quickly. These apps would have made millions of dollars from their sudden popularity and would continue to make millions of dollars while people use their apps.
A company needs to set up its app store, and developers need to direct their users to that store. It is hard for Apple’s apps to move users from one store to another. If developers really want to avoid Apple’s fees, they will have to find a way to make it convenient for users to use another store.
Amazon does not pay Apple a cut of sales made through its app right now, so Apple’s 50-euro fee structure may stop competitors. Apple would need to pay tens of millions of dollars in fees in order to open an app store. They could only be stopped if their new store did well.
Critics have complained about Apple’s practices, with Epic CEO Tim Sweeney referring to them as “junk fees” and Spotify CEO Daniel Ek teasing whether it was worth bothering with the new scheme.
