Guide to receiving payments through your mobile app

Dennis Lee Partner

Ludovico Lugnani Solicitor

Key takeaways:

Standard Commission Rates: The Apple and Google app stores generally charge a 30% commission on in-app purchases, with a reduced rate of 15% after the first year for subscriptions.
Reduced Commission: Developers with annual revenues below a specified threshold are eligible for a reduced commission rate of 15%.
Exemptions: Certain app categories, such as reader apps, multi-platform services, and enterprise services, can qualify for exemptions from standard commission rules.

In the dynamic world of mobile applications, understanding the intricacies of app store commissions can be a daunting task for developers and businesses alike. This article aims to provide a high-level overview of the standard commission rates for in-app purchases and the available exemptions, helping you make informed decisions about your app’s monetisation strategy.

Understanding standard commission rates

Both the Apple App Store and the Google Play Store typically charge a standard commission of 30% on in-app purchases. This rate applies to various types of in-app sales, including subscriptions, non-consumables (such as unlocking a full game or a premium edition of an app), and consumables (such as in-game currency). For subscriptions, there is a notable reduction in commission after the first year, dropping from 30% to 15%.

Notably, developers with lower annual revenues can benefit from a reduced commission rate. Both app stores offer a reduced commission rate of 15% for developers who earn less than a certain threshold in annual revenues. Currently, this is set at $1 million in annual revenue in the Apple App Store or Play Store.

The commission rates across the two app stores are outlined in the following table:

Commission Type	Apple App Store	Google Play Store
Standard Commission	30%	30%
Subscription Commission	30% for the first year, then reducing to 15%	30% for the first year, then reducing to 15%
Reduced Commission	15% for developers making less than $1 million annually in iOS app store sales (Apple App Store Small Business Program)	15% on a developer’s first $1 million in Play Store revenue every year

Commission rates exemptions

Both app stores provide certain exemptions from the standard commission structure. These exemptions vary but generally include scenarios such as reader apps, multi-platform services, and enterprise services.

The following exemptions provide opportunities for certain types of apps to reduce or bypass standard commission fees, subject to the terms of each app store:

Reader apps: Apps that primarily offer digital content (eg, books, music, magazines). These apps may allow users to access content purchased outside the app, reducing reliance on in-app purchases subject to standard commissions.
Multi-platform services: Services that operate across multiple platforms (eg, web, mobile) can offer users access to content or subscriptions purchased on other platforms to avoid in-app purchase commissions.
Enterprise services: Apps sold directly to organisations for their employees or students may qualify for exemptions. This category includes professional databases and educational tools, where in-app purchases are not the primary revenue model.
Person-to-person services: Apps facilitating real-time services between individuals (like tutoring or medical consultations) can use payment methods other than standard in-app purchases.
Goods and services outside the app: If an app facilitates the purchase of physical goods or services consumed outside of the app, alternative payment methods can be used, circumventing standard commissions.
Free stand-alone apps: Companion apps to paid web-based tools (e.g., cloud storage, email services) are often exempt from the in-app purchase requirement, provided there are no purchases within the app.
Advertising management apps: Apps solely for managing advertising campaigns across various media types can use payment methods other than in-app purchases for transactions.

Legal landscape and ongoing investigations

In June 2020, the EU Commission initiated an investigation into Apple’s app store rules, spurred by Spotify’s complaint that Apple’s requirement for developers to use its in-app purchase system for paid digital content was unfairly impacting competition in music streaming services.

As of February 2023, the EU Commission revised its stance, no longer challenging the mandatory use of Apple’s in-app purchase system but continuing to object to the anti-steering obligations that limit developers from guiding users to alternative subscription options outside the app.

Furthermore, Apple is under investigation by the UK’s Competition and Markets Authority (CMA) for potential breaches of competition law related to its in-app payment system practices. This investigation, initiated in March 2021, has been delayed, with no definite decision date.

The outcomes of these investigations by the EU Commission and UK CMA might compel Apple to alter its guidelines regarding in-app purchases by 2024. Additionally, ongoing class action cases in the UK could have broader implications, potentially affecting Google’s similar policies if Apple is required to amend its guidelines.

Beyond the App Store’s commission

The App Store framework is complex, and solely from the perspective of in-app purchases, the applicability of exemptions varies depending on several factors, including the type of app, its primary function, and the nature of the transactions it facilitates. Understanding these nuances is critical for ensuring compliance and optimising your app’s revenue potential.

Our comments above only focused on factors relevant to facilitating in-app sales, but there are other terms and conditions that you would need to be aware of and ensure that you comply with when signing up to the App Store’s standard terms.

More specific advice may be required en route to publishing your mobile app. Contact your specialist technology lawyers Dennis Lee and Ludovico Lugnani for an initial consultation.