App developers have been complaining for years that the App Store has become an untenable place for them make money. Selling an app for 99 cents and then never seeing any subsequent revenue from the users (who of course expect free updates) is not profitable, some say. Developers have leaned on in-app purchases to make up the difference, but Apple is instituting two big changes to help level the playing field for developers and put more money in their pockets at the same time.
In a rare sit-down interview with The Verge, Apple marketing chief Phil Schiller explained that developers will now have the option to sell subscriptions to customers for any of their apps. This could drastically change the landscape of the App Store ecosystem and the expectations of iOS users that are used to paying a few bucks for an app, or at most $9.99 if they’re really committed.
In return, developers will get a larger share of revenue — if they manage to keep customers long-term. Under the current revenue-sharing model, developers get a 70 percent cut, while Apple gets the remaining 30 percent. Under the new rules, that split will still stay in place if developers decide not to deploy app subscriptions. But if developers do offer subscriptions, and customers stick around for at least a year, Apple’s cut drops down to just 15 percent.
In the end, it’s a win-win for everyone. While Apple might seemingly be taking a hit by halving its cut of revenue, it stands to gain in the long-run with continued revenue from subscriptions instead of a one-time purchase. As for developers, they have an incentive to continually update their apps and provide an enjoyable experience for users to keep them around long enough to qualify for the larger 85 percent slice of the revenue pie.
In addition, developers will be able to choose from over 200 subscription price points according to The Loop, with customers being able to change their subscription level at any time. If a developer raises the price on a particular subscription tier, customers will be notified in advance to have them authorize the new price or cancel altogether.
The second big change coming to the App Store has to do with ads. Indie developers have complained that it’s hard for their apps to get discovered as they have to duke it out with major developers with deeper pockets. So Apple is rolling out Search Ads, which will allow developers to pay to have their apps positioned more prominently in search results. Apple claims that these ads will respect user privacy and will be fair to all developers. And it also gives Apple a new revenue stream for the App Store.
Overall, these are some much-needed changes to the App Store and are sure to please developers that have been raising their pitchforks in protest. As for actual iOS users, it remains to be seen how they will react to subscriptions and search ads.