Microsoft shook up the PC gaming industry this week with the announcement it was cutting the fee required from game sales in the Windows store. On the surface, a happy move, with Microsoft matching the 12 percent cut that Epic Games is taking, and putting more pressure on Valve, which still takes a 30 percent cut on most Steam purchases. But the cut is also a tactical move: Microsoft wants to help pressure Apple, and this week’s changes could play into bigger battles in the app store starting next week.
Microsoft’s announcement came a few days before a large court proceedings between Epic Games and Apple, and as the EU found issues with Apple’s policies – the company claims it has a “dominant market position for the distribution of streaming music apps via the App Store.” Microsoft quietly supports Epic Games ’action against Apple, and isn’t too quietly calling for regulators to investigate the App Store. If either effort is successful, Microsoft’s software business will directly benefit, as well as its ambitions for cloud gaming.
Epic founder Tim Sweeney has a long history at Microsoft, and has only recently aligned their interests. Sweeney famously lashed in Microsoft’s efforts to control the Windows software ecosystem in its store and the Universal Windows Platform (UWP) initiative. Microsoft has since walked behind this, and the company’s more open model for HoloLens detection Sweeney shares the stage along with software manufacturer support and Epic Games ’commitment for Microsoft’s mixed reality headsets.
Apple’s App Store, which is at the center of the current lawsuit, has been a particularly painful point for Microsoft. After disappearing on iOS and Android with it Windows Phone efforts, Microsoft has been fighting its own battle against Apple’s App Store for years. Then touching the App Store with its own Windows store policy changes last year, Microsoft will take any opportunity possible to help force favorable billing, especially if the time is right. The software maker tried to launch the SkyDrive (now OneDrive) app for iPhones in 2012, but failed locked in a battle with Apple a more than 30 percent revenue cut for in -app cloud storage purchases. This is a test for Microsoft’s real cash cow – Office on iOS.
Microsoft is also struggling to launch its xCloud streaming service on iOS, where it wants to keep the 30 percent cut it makes on game purchases and in-app transactions on cloud versions of Xbox games. Apple still blocks services like xCloud or Stadia, and Microsoft needs to create a web version to make the restrictions work.
While Microsoft has not submitted any formal complaints about Apple, the company’s chief legal officer Brad Smith, allegedly met with the House Judiciary Antitrust Subcomm Committee last year to give the panel about concerns around the App Store and its fees. This is about the same time that Apple has commissioned a study who argued its 30 percent reduction was an industry standard. It’s hard to look at Microsoft’s PC gaming fee cut this week and not see it as a proper time push that will help highlight the difference between PC and mobile app stores.
Microsoft’s Windows app store isn’t a huge revenue driver for the company, and it already is 15 percent cut in apps ahead of PC game changes. Gaming is the most useful part of any app store, but a large number of game developers do not currently publish their games in the Windows store. Microsoft makes the cut at 12 percent business sense if it, or even Epic Games, wants to use the changes to argue for an App Store overhaul elsewhere. It also helps advance Microsoft and Epic Games ’narrative that PCs and smartphones are general purpose computing platforms with more equitable app store models.
Microsoft also announced this bill change, which won’t start until August, without any solid promises about improving the ailing Windows store. It feels fast, with no obvious benefit to consumers in ways that matter, like cheaper games or an overhauled store. The bill cut also doesn’t apply to Xbox console games, and the timing feels like it’s also designed to prepare for future questions on the Xbox 30 percent cut of PC positioning differently.
Microsoft has previously defended its 30 percent cut for digital game sales on the Xbox. “Game consoles are specialized devices that are optimized for a particular use,” said Rima Alaily, deputy general counsel at Microsoft, last year. Alaily argued that the “business model for game consoles is very different to the ecosystem around PCs or phones,” because Microsoft subsidizes hardware and consoles that are “larger in number in the market. of PCs and phones. “
But while Microsoft has become more protected with the 30 percent cut collected on the Xbox, Epic Games seems happy to leave it in place. An Epic Games executive revealed in a court deposit this week that the company never sought to negotiate to Microsoft to avoid using its commerce engine on the Xbox. “We are a significant revenue generator for all three platforms [Xbox, PlayStation, Switch], probably in the top five, you know, revenue sources for them, ”admits Joe Kreiner, Epic’s vice president of business development. “So they have an interest in giving a promotion Fortnite. We received significant store placement that we didn’t have to pay for. “
Both court filings have already been revealed Fortnitecash cash is PlayStation, not iOS, so there’s little incentive for Epic Games to ask which platforms are making the most of its money, and receiving special marketing deals.
As with its success, the PC store fee change wondering the timing announced the same week of The EU has accused Apple of App Store antitrust violations. While Friday’s announcement from the European Commission focused on streaming music apps to the App Store, the commission is also investigating additional, separate cases in ebooks and in the App Store in general.
European commissioner Margrethe Vestager also revealed that the commission is looking at Apple’s policies regarding games in the App Store. “We’re also developing interest in the gaming app market,” said Vestager, responding to a question about the money involved in gaming apps in the App Store. “Those are really early days when it comes to talking.”
Next week’s case between Epic Games and Apple will begin a battle for the future of the App Store that will last longer than a season in Fortnite. The battle lines have been drawn in many directions, and Microsoft is sitting on the sidelines patiently hoping that the war on the app store will suit its wants.