The Impacts of Platform Commission Reductions on Mobile App Revenue and Market Competition: An Empirical Study of Apple’s Policy

Abstract: Platform commission policies have long been a critical revenue-sharing arrangement for platform owners and their complementors, balancing value creation and appropriation within the platform. However, app developers, as key complementors of mobile platforms, have increasingly criticized high commission fees, leading to conflicts and regulatory scrutiny that have harmed both platforms and developers. Lowering commission rates has emerged as a potential solution to alleviate these tensions; however, it reduces the platform’s revenue share, and its impact on app revenue performance remains largely unexplored, especially under market competition dynamics. Leveraging a commission reduction policy implemented by the Apple App Store as a quasi-experiment, this study employs difference-in-differences analyses to investigate the effects of lower commission rates on in-app purchase revenues and competition dynamics within the mobile app market. The findings reveal that the policy positively impacts an app’s in-app purchase revenue, with its effectiveness varying based on market concentration, new entry, and app competitiveness. Specifically, the policy’s benefits for the app revenue growth are diminished when market concentration is higher or the number of newly release apps is greater, while lower-ranked apps experience stronger positive effects. In addition, the policy significantly impacts the dynamics of market competition, leading to increased market concentration and encouraging new entries. This study adds to the mobile platform governance and platform pricing literature. It highlights the desirable consequences of such policies and its contingency, offering insights into evaluating and designing commission policies to foster a vibrant platform ecosystem.