Wow. That's amazing. That's a 20% increase in revenue for those eligible. I'm guessing they decided the increased value of their products from more smaller developers creating apps for the platform is greater than the lost revenue.
If I understand correctly though, since it's a hard cutoff it creates this gap between 1m and ~1.2m where you're actually worse off by making more money pre-tax.
From the annoncement: "If a participating developer surpasses the $1 million threshold, the standard commission rate will apply for the remainder of the year."
But next year the commission rate will be 30% and if the earnings that year are below $1m the business will be only eligible for the reduced commission year after that.
Right, but will they be eligible the year after? If not, then this still means that not surpassing the threshold could increase their revenue in the long run.
You are almost correct - it goes by the prior years income, but based on the 30% cut. Meaning if you sold 1m in products you would still be in the 15% bracket next year. You would need ~1.43m in sales to be "Moved up" the next year (It gets more complicated with subscription revenue already having a 30/15 cut depending on the user's subscription length.) It works out to this (Using 1m in sales as the cutoff to simplify the numbers):
Year 1:
999k --[-15%]--> 849k (This year doesn't trip the "limit"
Year 2:
1000k --[-15%]-->850k (Limit is tripped, next year is 30%)
Year 3:
999k --[-30%]-->699k (Fell below the limit, next year is 15% again)
Basically if you are close to the limit at the end of the year, you should immediately stop all advertising/marketing spend to ensure you don't go over the peak :)
I'm not really sure why they did it this way as it really screws over people that are just at the 1m/yr mark, vs a progressive system that would "just work."
Or maybe this is just PR with a clear but maybe oversimplified statement...
Yet they have 2 full year to see how it goes and work around all the edge case. I bet nobody except professional haters will complain if they soften the rules in 18 months.
Giving Apple the benefit of the doubt here (which is a significant caveat), I'd like to think that they modelled out various scenarios and looked at growth rates to know that the year 3 scenario you envisage rarely occurs.
Or, they could've just picked $1 million because it's a nice round number and looks good in a press release.
As some of these platforms/markets mature, and the policies managing them... running a platform gets similar to running a country. Progressive taxation. Loopholes or anti-loopholes in this case. MSFT basically has an IRS.
No.if I understand correctly, Apples own article says that you pay 15% if eligible, and when you cross 1million, you pay 30% for the remainder of the year, ie no back payments.
That would be dangerous, because imagine being under 1million all year, and in December you make 1 dollar too much - suddenly you would have to pay Apple a lot of money you may have already spent. You never pay Apple though, they just keep their cut.
it's exactly like the freelancer tax brackets in Italy. Everybody jumping through hoops (and or not declaring stuff) to remain under the threshold of 60k/year (was 30k/year). Otherwise tax rate doubles.
[1] https://en.wikipedia.org/wiki/Progressive_tax (See the Computation section for how the higher rates only apply to the higher portions of a person's income, with their lower portions taxed less.)
While it is quite nice, maybe they did it to look better in the antitrust investigation. They are still forcing devs to use their in-app purchases within iOS apps, forbidding 3rd-party payment processors. And iPhone 12 is no longer repairable by swapping parts between devices [1], Safari is still the only web engine on iOS. Finally after many years they are slowly starting to support royalty-free VP9 codec across the OSs but on the other hand are starting to use proprietary M1 chips to further lock in their users.
> I'm guessing they decided the increased value of their products from more smaller developers creating apps for the platform is greater than the lost revenue.
My guess is that creating apps for the App store is actually far less profitable than Apple wants us to believe. That is, unless you are a large publisher.
I'd really like to see the distribution here, I wouldn't be surprised if there is a huge income gap.
Everyone I personally know who _made bank_ from iPhone and Android apps over the past 11 years did so by being paid to make the apps for other people who thought they had a great idea for an app...
"In a gold rush, you don't get rich by digging for gold - you get rich by selling shovels"
The relevant sentence seems to be "If a participating developer surpasses the $1 million threshold, the standard commission rate will apply for the remainder of the year." (emphasis mine)
Apple takes the comission as you go, so it sounds like they take 15% of each sale until you hit $1M, and then 30% for every sale after that.
The next year they'd take 30% right from the start though, so a good year followed by a bad one would be unfortunate.
That is correct, but then the next year you start at 30%. So if you make slightly less next year you will end up earning less money that year since it is all at the 30% cut (And then the following year will fall back down to 15%)
If I understand correctly though, since it's a hard cutoff it creates this gap between 1m and ~1.2m where you're actually worse off by making more money pre-tax.