Apple to reduce its cut from in-app purchases as it faces new lawsuit from Fortnite maker

Apple has announced it will reduce the cut it takes from every in-app purchase by half for developers that make up to US$1m (A$1.37m) per year, as the company faces a new lawsuit from the makers of Fortnite over the practice.

Apple currently takes a 30% commission on paid apps and for sales made within apps running on iOS on iPhones and iPads.

On the day Epic Games announced it was challenging Apple in the Australian federal court over the removal of the popular online video game Fortnite for attempting to bypass this payment system, Apple announced smaller developers would only have to pay 15% rather than 30% from 1 January next year.

Existing developers who made up to $1m for all of their apps in 2020 will automatically get the cut rate. Those who made more than $1m the previous year, but then go below the threshold in a subsequent calendar year, will qualify for the following year.

Fortnite maker Epic Games sues Apple in Australia for App Store ban

Read more

If a developer passes the threshold in a year, the 30% charge will apply for the remainder of the year once it has been passed.

Apple would not say how much revenue it would forgo as part of the change, but said of the 1.8m apps in the App Store where Apple takes a commission, the majority would qualify for the discount. Apple said in 2019 transactions through apps on iOS were worth US$519bn (A$710bn), with 85% of that going to third party developers and businesses.

The new discount would not apply to Epic Games, which is forecast to make $5bn in 2020 in total – not just through the Apple app store.

On Wednesday, Epic Games announced court action in Australia over the fees charged by Apple for in-app purchases. In the court filing, Epic Games said Apple was misusing its market power by preventing rival payment systems being built, meaning it was affecting the profits for Epic and leading to higher prices for Apple users.

Epic Games’ chief executive, Tim Sweeney, said Apple was stifling competition by limiting in-app purchases.

“This is much bigger than Epic versus Apple – it goes to the heart of whether consumers and creators can do business together directly on mobile platforms or are forced to use monopoly channels against wishes and interests,” he said.

In a statement, a spokeswoman for Apple pointed to a US judge’s comments in a ruling against Epic seeking a preliminary injunction in October where she described Epic’s payment bypass as “deceptive and clandestine”. The spokeswoman said Epic’s actions were expressly about violating App Store guidelines designed to protect customers.

“Their reckless behaviour made pawns of customers, and we look forward to making this clear to Australian courts,” she said.

In June, the European Commission announced an antitrust investigation into whether Apple’s app store was in violation of EU competition rules, following a complaint from music app Spotify, and an e-book distributor.

Australia’s competition watchdog has also announced an investigation into the market power of the app stores run by Apple and Google.

Apple denied the announcement was attempting to head off any potential changes in regulation of the app store.