How to Reduce App Store Commission

In this blog post, we interview Andrew Christodoulou, Payment Expert and Business Development Manager at Worldline, to discuss whether lower app store commissions are a myth or reality. You can watch the complete video or read our conversation below to explore this topic.

https://www.youtube.com/watch?v=N7wKRnCPL_8

[Roman from Tenjin]: What does the overview for mobile payments look like in 2024?

[Andrew Christodoulou]: 2024 is interesting, just like every other year. In terms of in-app purchases (IAP) and payments within the App Stores, we had a radical change within Europe with the introduction of the DMA. This legal piece persuaded big tech companies like Apple and Google, that run the major app stores, to change their approach when it comes to in-app payments. So currently, if you’re a company or a developer that publishes games in the EU, you can offer your users third party payment options. This basically means that instead of using the payment options only in the Google and Apple app stores, you can use payment options outside the stores. So you can forward your users outside the app stores to process their payments. This entails a lot of things like lower commissions paid to the app stores and also having the opportunity to keep more of the money internally. 

[Roman from Tenjin]: So your studio or some legal entity needs to be in the EU, right?

[Andrew Christodoulou]: Yes, and you need to have users in the EU. Also, the big focus currently has been on Europe, but there are also other regions that are working on it. You have Japan, South Korea, USA and other regions also working on it. There’s a lot of moving blocks, but currently the focus has been the EU for the past couple of months because that’s the region that changed radically.

[Roman from Tenjin]: Let’s talk about the specific commission amount. In general, it’s like 30%. Maybe we can look at the slide. 

[Andrew Christodoulou]: With a Gatekeeper like the app stores, we have 100% of the amount of transactions. Let’s say you have 10 euros worth of in-app purchases – you get to keep 7 euros and then 3 euros go to fees for the app stores right now. But this is changing with the new structures of in-app payments where you can actually process them outside the app store. But currently this (image above) is what it looks like. But now as more time passes and more tech changes, we are moving to another sphere.

[Roman from Tenjin]: And is this “$38.1B” a real number? 

[Andrew Christodoulou]: Yes. This is an estimation for an average Enterprise company, but it’s just an average amount. 

[Roman from Tenjin]: Is Google Play also affected by this?

Yes, it’s both of the big app stores and other gatekeepers as well. But both these big app stores don’t have the same approach to it. Both of them decided to move in different ways when it comes to charging their fees. 

[Roman from Tenjin]: Let’s start with iOS then, what did they decide to charge?

[Andrew Christodoulou]: Apple stated that they would charge 15% for publishers that earn less than one million USD on IAP per year under the Small Business Program. And also for companies that process outside the store, it’s going to be between 15-20%. 

Then you have Google that also decided to reduce the commission from 30% down to 27% overall. 

Comparing the two, if you look at the bigger picture, you have Apple that is charging 15-20% overall for external in-app payments. Then you have their Core Technology Fee which is 0.50 euros (note that in the video Andrew accidentally said 1.50 euros), and this is dependent on the amount of installs per year. And then you have Google Play Store that charges 27% overall.

[Roman from Tenjin]: So if I am a new developer and I publish on Google Play and have over 1 million installs, the commission will always be 27%, right? 

[Andrew Christodoulou]: Yes, but with the highlight that this stuff is constantly changing. They are not absolute. We don’t know what will be the case next year. Maybe next year again might change. 

A lot of publishers have spoken up against the Core Technology Fee. If you look at that, it sort of hinders growth for a lot of companies. If you look at the calculator that Apple posted on the Apple Developer section of their website, you can actually estimate the fee changes for apps distributed in the EU. If you scroll down this page, you can see the fee calculator where you can get yourself an estimation of how much you end up paying if you choose to go with the old terms where you stay as it is (30% on everything), or the new terms where you process payments with a third party payment processor. 

In the video Andrew goes on to fill in the fees calculator as shown below. The first image shows us the monthly fees when choosing “Today’s capabilities and terms” and the second image shows us what gaming companies would owe to the App Store under the “New capabilities and terms.”

Please note that the images below have been taken at a different date than when Andrew filled out the calculator. Therefore, the numbers under “Estimated monthly fees” slightly differ from what’s shown in the video.

When choosing “Today’s capabilities and terms”:

When choosing ““New capabilities and terms” and option selected: “App Store with IAP”:

When choosing ““New capabilities and terms” and option selected: “App Store with alternative payments”:

Source of images: Apple’s Developer Support Documentation

As you can see in the images above, when you change from “Today’s capabilities and terms” to “New Capabilities and terms,” you see a smaller reduction in monthly fees (equivalent to 460,000 – 390,000 = 70,000 euros) when you choose “App Store with IAP.” However, when you choose “App Store with alternative payments” you see a larger reduction in monthly fees (equivalent to 460,000 – 344,000 = 116,000 euros).

The amount changes significantly just by changing how you process payments. This is a big differentiator. 

Uncover the rest of the conversation in the video.