Apple Inc. (AAPL) Slashes App Store ‘tax’ For Loyal Customers

Apple Inc. (AAPL) Slashes App Store ‘tax’ For Loyal Customers
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Apple Inc. (NASDAQ:AAPL) takes a 30% cut when someone sells an app, subscription or other product through the App Store, and this has been happening since App Store’s inception seven years back, but it will soon change. Now, the company has decided to lower the commission it charges on the App Store, but on a condition that if an app succeeds at retaining a subscriber for over a year, then the revenue split will be 85/15.

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Apple making big change to App Store

For the existing apps with users older than a year, the change will be immediately applied, potentially providing an injection of extra revenue for many companies. For example, Spotify boasted having 20 million subscribers at the same time last year. Assuming just half of those subscribers are paying, then this change would potentially present an extra subscription revenue of around $15 million per month for Spotify.

Apple Inc. (NASDAQ:AAPL) will introduce another significant change to the App Store subscriptions. Until now, apps only in certain categories such as media and entertainment content were allowed to charge subscription fees, but soon all the apps will be able to offer such an option. This serves as an effective way for Apple to encourage high-end productivity apps onto the iOS.

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John Gruber, a technology writer and a long-time Apple watcher, wrote, “This could be the change that makes the market for professional-calibre iPad apps possible. I think this is terrific news both for developers and users.”

Risks associated with such changes

There is a risk associated with opening up subscriptions to every type of app, i.e. Apple might create a frustrating environment that is irritating for users accustomed to the simple model of paid or free apps. Also, the subscriptions will naturally encourage quality compared to one-off payments, and this will bring about a shift in the challenge developers face. From convincing people to pay once, they will now have to convince them to keep paying again and again.

Apple Inc. (NASDAQ:AAPL) has several plans for its store, and the revenue split change is just one piece. Apple’s App Store with 1.5 million apps is second only to Google’s Play Store. The apps that seek to gain new users will face difficulty in discovery, and will have limited possibilities for promotion within the store other than becoming an Apple ‘featured app.’

Soon, enough ads will start appearing at the top of searches made in the App Store. Those ads will be relevant to the search in question, along with carrying the mark of a paid-for position.

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