Apple Slashes App Store Affiliate Commissions

Apple stunned the wider development community on Monday with an emailed announcement that it has decided to slash commissions for App Store affiliates from 7 percent to 2.5 percent, starting May 1.

The cuts apply to all apps and in-app content, Apple said. However, they do not apply to commissions for movies, music, books and TV, which will remain at 7 percent.

The company will continue to pay commissions on Apple Music memberships as well.

Apple directed affiliates to read the Commissions and Payments page on its Affiliates Resources site for more information on the new policy.

Big Cut, Short Notice

Both the extent of the cuts and the brief notice provided — they go into effect next week — are surprising, and have given rise to speculation that the policy change may be part of a larger shift in Apple’s recent revenue picture.

“It is interesting that they’ve kept the 7 percent intact for higher-value digital content,” said John Jackson, research vice president at IDC.

“The connection is not terribly clear, but presumably Apple wants to drive more revenue from subscriptions and higher-value content in general, so this may be a move to bias affiliate-driven traffic in those directions,” he told the E-Commerce Times.

Apple Senior Vice President Phil Schiller last year revealed plans to shift toward a new subscription model for developers. The plan centered around changing the 70/30 revenue share model to favor developers who attracted subscribers. If a customer remained a subscriber for a year, Apple would slash its 30 percent share to 15 percent, thus boosting the developer’s take.

It’s been rumored that Apple plans to announce the share model change this June at its 28th annual Worldwide Developers Conference.

Apple did not respond to our request to comment for this story.

Digital Content Push

During Apple’s fiscal first quarter conference call, executives noted the shift toward services as the core piece of the company’s growth. They also noted that the App Store was shattering records.

Year-over-year revenue growth was up 43 percent, and revenue more than doubled that of Google Play during the 2016 calendar year, said Apple CFO Luca Maestri.

“As disappointed as affiliates will be with the news, the move makes sense from Apple’s perspective,” said Karol Severin, an analyst at Midia Research.

“Apple is managing incentives for affiliates based on what it wants to push,” he told the E-Commerce Times.

The affiliate program’s initial purpose was to get the App Store off the ground, Severin said, but now it is Apple’s best-performing content play.

Developers will not feel any direct impact from the new policy, which does seem driven by the shift toward a subscription model, suggested Jack Kent, director of operators and mobile media at IHS.

“The move will have a much bigger impact on third-party review sites and aggregators that have used the referral program to drive incremental sales,” he told the E-Commerce Times. “In the early days of the App Store, these sites would have helped drive traffic, but now the market is more mature, and so these will have less of an impact on the overall app market.”

David Jones is a freelance writer based in Essex County, New Jersey. He has written for Reuters, Bloomberg, Crain's New York Business and The New York Times.

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