By John Gruber
Atoms: We are not selling shoes this time…
James Batchelor, writing for GamesIndustry back in 2018, when Epic decided to try launching Fortnite on Android without going through the Play Store:
The company’s CEO Tim Sweeney tells GamesIndustry.biz that this is in part to build “a direct relationship with all our customers”, but that the decision is also “motivated by economic efficiency” — namely avoiding the need to pay Google a 30 per cent cut of all revenue generated by the game.
“The 30 per cent store tax is a high cost in a world where game developers’ 70 per cent must cover all the cost of developing, operating, and supporting their games,” he explains.
“There’s a rationale for this on console where there’s enormous investment in hardware, often sold below cost, and marketing campaigns in broad partnership with publishers. But on open platforms, 30 per cent is disproportionate to the cost of the services these stores perform, such as payment processing, download bandwidth, and customer service.”
Fortnite, as a fully-supported-by-Android download outside the Play Store, wasn’t successful, and Epic begrudgingly put Fortnite back in the Play Store four months ago. So I think a fair reading of Sweeney’s argument is that he’s OK with Xbox, PlayStation, and Nintendo requiring a 70/30 revenue split because they deserve it, because they invest in hardware, sell hardware at or below cost, and provide marketing campaigns that help publishers get their games in front of users. Google’s Play Store doesn’t earn that same 30 percent cut for some reason, even though (a) Google sells very little Android hardware itself, (b) the handset makers that do sell Android hardware generally do so at or below cost, and when Epic tried going direct to users on Android they didn’t do well and determined they needed to be in the Play Store.
Not a great argument, in my opinion. I’d say the saga of Fortnite for Android specifically shows that Google’s Play Store does serve a role very much analogous to that of dedicated game console platforms. You can certainly argue that none of them deserve 30 percent of revenue, or that none of them should allow alternative payment services, but it doesn’t hold water to say that Xbox, PlayStation, and Nintendo’s rules are fine but Google Play Store’s are not.
That’s from 2018, and leaves out the other mobile app store: Apple’s. Here’s Tim Sweeney from just two months ago, after being asked on Twitter why he demands Apple allow iOS apps to process payments directly but not Xbox, PlayStation, and Switch:
Consoles are unique in that the hardware is sold at or below the cost of manufacturing, and is subsidized by software sales, whereas iOS and Android are insanely profitable for Apple and Google from just hardware sales and ads.
So I don’t have a problem with the concept of console platform fees. Consoles could ultimately benefit from richer store ecosystems though. What if some day you could purchase a game once and own it on all platforms that support the game, PC, console, and mobile?
In the same tweet in which he says “I don’t have a problem with the concept of console platform fees” he explains exactly why he has a problem with console fees. Xbox, PlayStation, and Switch fees are 30 percent1 and mandatory. Also, this doesn’t sound so much like a benefit to console makers as it does a benefit to console players and, well, to game publishers like Epic. The pro-consumer argument is perfectly valid, but it applies every bit as much to game consoles as to app stores.
As for the main thrust of his “game consoles are different” argument, it is undeniably true that Apple makes a lot of money from iPhone and iPad hardware sales. And Google effectively makes most of its money, across its entire business, from ads. But “Apple makes enough money from hardware and Google makes enough money from ads” does not a compelling argument make, unless you’re a pretty hardcore anti-capitalist, and Tim Sweeney does not exactly seem like an anti-capitalist. And in terms of the law, it seems generous to even call it dubious. It tastes like weak sauce even by the standards of sauce obtained from The Weak Sauce Store.
Even though Microsoft itself just got itself into an Xbox-related high-profile controversy with Apple regarding its iOS App Store policies, I suggest not holding your breath waiting for Microsoft (let alone Sony or Nintendo) to file a friend of the court brief for Epic, or even to offer Epic a word (or tweet) of encouragement. If Epic registers a significant win against Apple and Google in this fight, the game consoles are likely next.
How do we know the big three game consoles charge 30 percent? Here we can turn to the report Apple commissioned from economists at Analysis Group last month, leading up to Tim Cook’s testimony at a congressional antitrust hearing. Here is that report’s Table 2, “Commission Rates for Select Video Game Digital Marketplaces”:
|Xbox||30% (15% for non-video game subscriptions)|
|Steam||30% for sales below $10 million
25% between $10 and $50 million
20% above $50 million
The footnote next to the “30%” for PlayStation and Nintendo reads: “Commission rate from third-party sources, not disclosed by the marketplace.” Which I take to mean that Sony and Nintendo don’t even reveal this figure publicly. This whole aspect of console gaming is something the console makers don’t really want to talk about. ↩︎