An Open Letter to Tim Cook Regarding the App Store 70 / 30 Revenue Split

Hi Tim:

I’ve got an idea for you. I think it would be a big win for independent developers targeting Apple platforms, and by extension a big win for Apple, if the App Store revenue split used a tiered rate. (Hopefully you agree that a thriving ecosystem of independent developers is an important competitive advantage for Apple.) It would cost Apple some money, but the cost should be relatively low, especially when considering the impact it could have on the vibrancy of Apple’s developer community.

A bit of background: I am the co-founder of AnyList. Our sole product is a highly rated shopping list and recipe organization app for iOS. Formerly, I was a software developer at Apple from 2005 - 2010.

Over the past year, several independent developers have written about the revenue generated by their apps on the App Store, including the developers of Unread, Overcast, Dash, and Desk. I think their writings provide a reasonable picture of financial life on the App Store for independent developers. I think it’s safe to say that most independent developers are generating annual revenue in the tens of thousands to low hundreds of thousands of dollars range.

On the other end of the spectrum, common sense dictates that a small number of top grossing apps generate the lion’s share of App Store revenues, and folks like Charles Perry have conducted analyses that confirm this.

Looking at the numbers reported by independent developers, I think it’s safe to say that Apple’s 30% cut of App Store revenues can have a big impact on their success or failure. For an independent developer, the difference between their gross revenue and their net revenue after Apple’s 30% cut could very well be the difference between being able to work full-time building for the App Store or not. At $100K in net revenues per year, you may be a successful independent developer. At $70K in net revenues per year, your spouse could be telling you to get a day job.

Therefore, please consider changing the App Store 70% / 30% revenue split to a tiered rate, where Apple takes less of the developer’s first revenues. For example, perhaps Apple could take nothing from the first $100K in annual revenue for a developer, and 30% after that. Or maybe Apple could take 10% from the first $100K, 20% from the next $100K, and 30% after that.

This change would be a shot in the arm for Apple’s independent developers, and would allow more people to work full-time on creating software for Apple platforms.

The cost to Apple should be relatively low, I believe. The tier thresholds can be set low enough that all of the top grossing apps in the App Store are still effectively at a 70% / 30% split.

This proposal is self-serving, so feel free to be skeptical, but I truly do think this would be a smart move for Apple.

Best,

Jeff Hunter
Co-Founder, AnyList