The Amazon Appstore has also joined Apple and Google in reducing commissions for small app developers. However, it has an appealing twist.
It is an alternative place for users to download Android applications.
Last year, Apple announced its Small Business Program. Under the program, Apple reduced its cut of sales to 15% for all but prominent developers (1). It was a clever move by the Cupertino-based tech giant to reduce antitrust pressure.
Google also did the same earlier this year, in a fairer way. And, now, Amazon has come up with a new twist.
The History
Apple has been facing scrutiny from antitrust authorities for some time now for its 30% commission for developers on in-app purchases and app sales (2).
The tech behemoth made its first concession in 2016 when it dropped its cut on in-app subscriptions to 15% in the year. After that, however, the dramatic shift came with its so-called Small Business Program.
While Apple billed as something aimed for small developers, in reality, however, over 98% of developers would benefit. So the company effectively switched to a 15% cut as standard, with a higher 30% being applied to only the prominent developers. And since the latter generated most of the revenue, it had a limited impact on the income of the Apple App Store.
While Google did the same, unlike Apple’s all-or-nothing approach, it gave everyone the 15% rate for the first 1 million USD revenue.
Now, let’s talk about the Amazon Appstore Commission.
Amazon Appstore Commission
According to reports, Amazon is also cutting its commission for developers earning less than 1 million USD a year, but it offered two possible rates (3).
Instead of cutting 15%, Amazon reduces it to 20% while also offering a way to cut the commission rate to 10%.
According to reports, the Amazon Appstore has announced that it will be reducing its commission of developers revenue from 30% to 20% for those that earn less than 1 million USD in revenue per year.
The new terms Amazon called the Amazon Appstore Small Business Accelerator Program would also offer developers with AWS promotional credit equivalent to 10% of the developers’ revenue if they earn less than 1 million USD in revenue a year.
If a developer decides to use AWS, Amazon Web Services to host their servers and websites, as long as those bills amount to 10% or more of their Amazon Appstore revenue, their effective cut rate on app sales will be only 10%. A brilliant move indeed!
Here is a summary of the Amazon Appstore Small business Accelerator Program:
- The revenue cut applies to app developers making less than 1 million USD in revenue in the previous calendar year. The program will come into effect in Q4.
- Amazon is looking to attract more developers to its app store, which trails the competition in its app numbers.
- According to Statista data (4), in Q1, Amazon Appstore had over 466k apps compared to 3.5 million apps for Google Play and over 2.2 million apps for Apple App Store.
- Notably, App Store commissions have made several headlines this year with its 30% tax under an antitrust legal battle with Epic Games, the Fortnite creator. We believe Amazon’s new accelerator program can be an excellent move to beat Google and Apple’s monopoly.
Similar to Apple’s Program, Amazon’s is also something developers have to apply for and can get kicked out of and apply the following year again if their revenue ever exceeds 1 million USD. In contrast, Google is giving developers an extra 15% of their first 1 million USD (5, 6).
Palanidaran Chidambaram, Amazon Appstore Director, stated in an announcement (7), “
by helping small businesses to get started AWS via credits, we are making it easier for them to create and grow their app business.”
“AWS offers developers easy access to a broad range of technologies for rapid innovation and develops nearly anything they imagine,”
he added.
More About Amazon Appstore
Well, we know that app stores make the lifeline of our smartphones. These stores offer us a huge range of apps that cater to our varied needs. From food delivery to flight booking to a simple reminder app, these app stores offer us everything.
However, when we talk about app stores, two prominent names always pop up. One is Google Play Store, and another is the Apple App Store. Both these stores contribute to 90% of the total available apps in the market (8).
But, there are other emerging stores between these two giants, including Windows Store, Indus OS, and Amazon App Store.
Amazon is not limited to e-commerce and cloud computing. It has stretched its arms in the Android apps as well. The giant kicked off its journey in this space in March 2011, and the Amazon Appstore was readily available in almost every nation.
When Amazon unveiled its first Kindle tablet during the same period, it solely relied on Amazon Appstore and came pre-installed on the product. Moreover, the apps available on the platform can better integrate with the device’s user interface, and it even allows HTML 5 apps on its platform.
At the moment, North America and Europe contribute to the major part of the Amazon Appstore market. Even though downloads are not much compared to prominent platforms, the sales rate is still high enough.
While Amazon Appstore is pretty similar to Google Playstore, one thing which gives it an upper hand is its app publishing guideline. Notably, Amazon has strict restrictions against offensive content like pornography, gambling, and it also complies well with local government restrictions. Ultimately, it helps the store offer higher sales.
Another major differentiating point is its displayed app content. Each app in the Amazon Appstore comes with relevant keywords, videos, and app screenshots. These elements are offered to attract more users. And to make things more interesting for developers, it also offers discounts for AWS and other schemes.
It is also worth highlighting that the Amazon Appstore is not limited to only Amazon Fire devices. Even though it may take a bit of work, users can install the Amazon Appstore on virtually any Android device and offer a nice alternative to Google Play Store.
However, the process needs users to enable the ability to install apps from unknown sources, a practice that Google highly discourages.
In the past years, Amazon made some major changes to its App Store and even introduced Amazon Coins, a virtual currency, an alternative way to purchase free or discount apps. Users can either earn coins by finishing in-app tasks or purchase them with real money. The more they purchase, the more they save, with up to 25% (9).
It is easy to see why Amazon Appstore has an added advantage over the Google Play Store. However, when we look at them with sheer numbers, Google Play Store surely beats Amazon App Store.
Now back to app stores commissions.
Critics Arguments
The changes to app store cuts came when tech behemoths witnessed increasing regulatory scrutiny over their business’s nature (10), which several app publishers such as Spotify, Epic Games, Basecamp, and others have argued are anti-competitive.
Epic Games is also suing Apple over its App Store fees, and in response, both Apple and Google have lowered their commission fees for smaller businesses as a goodwill gesture. And the one that would not significantly impact their revenue.
Last week, Fanhouse argued in its rally against Apple, an app designed to profit creators and not developers, may make more than 1 million USD and still may not afford a 30% cut. According to Fanhouse, it paid 90% of its earnings to creators and accused Apple of demanding 30% of them (11).
Apple is, at present, fighting a huge lawsuit against Fortnite that touches on whether its 30% fee is fair; part of the tech giant’s argument is that 30% has long been the norm. However, according to critics, organizations like Apple are taking far more for their offerings than a payment processor should.
And moves like these from Google, Apple, Amazon, and Microsoft indicate that there is significant pressure across the industry to reconsider the 30% cut if only to sheer the talk away from alternatives that may drastically impact more profits.
The Broader Issues
While the commission rate change announcements are certainly good news for independent, smaller developers, it still does not address broader issues about these tech giants’ excessive power and abusive exercises.
Likely, critics and regulators will not be happy about it.
Why?
First, these new terms only cover small developers and maintain their monopoly over the app economy. The Apple App Store’s biggest critics, including Spotify, will not see any benefit.
According to Sensor Tower, less than 5% of its sales come from developers that make less than 1 million USD to indicate how insignificant it will be for Apple’s App Store overall revenue (12).
Moreover, these announcements do nothing to address Apple’s anti-competitive practices that are not related to its fees. For instance, Epic Games filed a lawsuit against the tech giant for the right to use its payment system and its store on devices with Apple’s iOS.
Epic Games has also filed a similar suit against Google, and authorities are exploring the matter (13).
Apple may face larger financial consequences from more serious antitrust efforts which are underway. Last year in October, a United States House antitrust committee report alleged that Apple abuses its App Stores’ monopoly power by offering preferential treatment to its own products, harming competitors and industry innovation.
During the same month, the United States Department of Justice’s antitrust division also stated that the distribution agreement under which Google pays Apple billions of dollars yearly to make its search engine the default option on Apple devices was exclusionary and violated antitrust laws.
And, these commission fee reductions are not resolving these issues.
Why Does it Matter?
Competitors circling Google and Apple have now started courting creators and developers, getting pretty frustrated with the cuts these tech giants charge in their app stores. Amazon’s recent move, for instance.
Google and Apple tightly control the payment mechanism for in-app purchases and transactions. It is a key way for developers to monetize their apps, especially since it has become tougher to target audiences with customized ads within smartphone apps because of the privacy changes in the industry (14).
Facebook is already making its move to court more creators on its platform. In recent months it waged war with Apple’s new privacy policies and started aiming for its App Store policies as well.
Mere few hours before Apple’s annual WWDC, Worldwide Developer Conference, Mark Zuckerberg, CEO of Facebook, announced (15) that the social media platform would keep fan subscription events, online events, badges, and upcoming independent news offerings “free for creators” till 2023.
Zuck further added, taking a toll on Apple, “even when we do introduce a revenue share, it would be less than 30% that Apple and others take.”
Apart from Amazon and Facebook, other tech giants such as Microsoft have also come out swinging.
Satya Nadella, the Microsoft CEO, reportedly stated that app stores, including its Windows Appstore, should cut their commission charges over time (16).
The software maker recently cut the commission it charges to 12% on PC games it sold via its Windows Appstore. According to reports, it is also planning to cut its Xbox commission fees as well. However, it appears that the company has decided against it since Nadella had noted that consoles need higher commissions since Microsoft sells them at a loss.
Notably, Microsoft is holding an event later this month, on 24th June, to talk about Windows’s future. Reportedly, it also includes several business model changes in addition to new features and designs. Their event announcements could also involve putting pressure on Google and Apple by announcing changes to its Windows Appstore commissions and policies.
The Bigger Picture
The commission fees these tech giants take from most transactions that occur in their app stores have become a flashpoint for creators and developers, especially in gaming.
Earlier this month, David Baszucki, CEO of Roblox, told HBO that if Google and Apple cut their app store commissions, he would be happy to give back the money to the creators (16).
Previously, developers used to keep shut about their troubles with app stores since they could kick them out anytime. However, since Apple’s face-off against Epic Games, for a weeks-long trial over its monopolistic policies, the scrutiny of these app stores has hit a high point.
Spotify, Match Group, and several others have also come out against their practices, supporting Epic Games. More developers have started speaking out now since they know they will not be alone.
Let’s summarize the entire app developers community’s sentiments with Sahil Lavinia, founder of Gumroad’s quote to The Information (17),
“The creator economy would be ten times larger today if app stores’ commissions were 3% instead of 30%.”
While 30% was relatively low when Google Play and App Store were merged, according to critics, the staying power of that number is a piece of evidence that competition has slowed down.
Even though such cuts have become common among app stores, they are not written in stone.
These tech giants, including Amazon, Google, and Apple, have made changes at the margins for smaller developers and recurring subscriptions. And we can’t wait to see more developments in this direction as regulators, and the industry put more pressure.
Sticking Point
Tech giants announcing a cut in their commission fees have got a rather mixed response. A mixture of anger and praise with a sprinkling of cynicism.
Historically, app developers have been at the mercy of the big tech giants, with stringent and arbitrary, at times, rules imposed on them.
One of the most significant obstacles for any application entering the market is sustainable business growth and revenue. And the massive commission cuts are a big hurdle that impacts most app businesses’ ability to generate profit.
The cynicism around these announcements stems from their timings – when tech firms are under scrutiny for their app store practices. And the fact that reducing cut for small developers has little impact on their revenue.
Small businesses will see it as a good move and feel that it would tamp down anti-competitive rhetorics (18). However, major developers like Epic Games, Match Group, and Spotify are not happy.
While the commission cutting announcements would certainly help smaller, independent developers, tech giants will continue to face scrutiny from regulators and critics, claiming that these announcements are conveniently timed to divert attention from ongoing legal disputes that these tech companies are tied up in.
We believe that the initiatives by the tech companies are an attempt to get both regulators and developers onside after several confrontations. Perhaps, these programs will not only lower commission rates but also the temperature of regulators and critics at the same time.
Nonetheless, these tech giants are big with nowhere to hide. No matter what decisions they made, there will always be those they can do no wrong, while the opposition grapples with seeing it ever doing anything right.
For tech companies, among the biggest in the world, with hundreds of billions of dollars in revenue, it seems to be a nice problem to have.
