Whatever may be the eventual outcome, the ongoing legal disputes between Epic Games, Apple and Google should prompt developers to carefully evaluate how they distribute and sell their smartphones games to grow their player base and maximize revenue in the future. And that could include revisiting direct carrier billing (DCB) payment options with mobile network operators (MNOs) that already have access to subscriber bases with millions of potential customers.
The attraction of the Apple App Store and Google Play Store for games developers is obvious – they contain more titles than any other source and consequently attract the highest volume of visitors. As an effective method of game distribution, they are obviously unparalleled in scale and effectiveness in terms of monetization.
In August 2020, Android was estimated to be the OS that powered just over 74% of all smartphones, and iOS 25% according to Statcounter. Sensor Tower’s Q2 2020 Store Intelligence Data Digest report calculates that combined worldwide App Store and Google Play downloads grew by 32% in the three months ending June 2020 compared to the same quarter in 2019, with Google Play accounting for 68% of the 38bn total (up 35% year on year). Newzoo estimates that mobile games will expand to generate US$77bn of revenue in 2020 (US$64bn smartphone and US$14bn tablet), representing 48% of the total.
But there’s a catch: the 30% cut that Apple and Google take out of every paid transaction – whether the cost of downloading the game or any other form of billable in-game content – can make a serious dent in a game developers revenue, meaning high volume sales are even more important than they would have been otherwise.
Tight controls could stifle innovation
Whether games developers can afford to circumvent App Store and Google Play and still find sufficient volumes of paying customers for their titles is questionable. That is much easier to do with Android that it is with iOS equivalents given the number of alternative app stores curating Android titles already available (Amazon Appstore, Samsung Galaxy Apps and various sites hosting APK sideloads etc). And while some also charge the same 30% fee as Google for billable content (Opera Mobile Store), others are estimated to average just 10%. SlideMe charges developers a payment processing fee of 20% (10% for credit/debit cards plus ten US cents per transaction) for example and allows the buyer to purchase through PayPal, Amazon Payments and mobile carrier billing alongside its SlideME Wallet.
Apple, however, keeps much tighter control over the software that can be downloaded and installed on its mobile devices, insisting that reliability and security cannot be guaranteed any other way. Games for iOS can only be sourced from its App Store, and any refusal to comply with its rules on in-app billing can lead to all of a software developers’ apps being removed from its library as Epic Games found out last month.
The argument began when the Fortnite creator issued an update that allows players to purchase in-game currency (V-Bucks currency) directly from Epic at a 20% discount. The move represented a violation of not just Apple but also Google rules, and they retaliated by removing Fortnite from their respective app stores. That left Fortnite’s estimated 350m players with the game already installed on their iOS devices still able to play, but unable to update to the latest version. The situation is different with Android, with the game still available for installation directly from Epic Games or via the Samsung Galaxy Store for Samsung smartphone users.
Perhaps more significantly, Apple also revoked Epic’s permission to develop tools for iOS and Mac devices, including the Unreal Engine game creation tools that many third-party games developers use to produce their own titles. Microsoft, which has subsequently backed Epic in the debate, is one of many other companies that use Fortnite’s Unreal Engine to develop games for Apple operating systems. Restrictions on the availability of the Unreal Engine could therefore stifle games innovation, particularly amongst smaller, less well-known developers and start-ups without ready access to their own games creation tools.
Major changes on the way
Now looks like the right moment for games developers to re-evaluate their distribution and monetization strategies regardless given the substantial changes that may be in the pipeline. Apple revised its App Store guidelines earlier this month, changing its in-app payment policies to accommodate the catalogues of apps hosted within apps by the range of streaming game services from multiple providers which are now available.
Some of the changes Apple has introduced are designed to explicitly permit Google Stadia and Microsoft xCloud on its platforms, although titles destined for its iPhones and iPads offered by streaming services must also be available independently on the App Store. Each developer must also have an independent relationship with Apple, and each game must use its in-app payment system.
Another major change in the iOS 14 update released on 16th September is that developers must explicitly ask players to agree to share their usage data (location, other apps installed on the iPhone etc.) while some unique advertising identifier has been removed. That could make it more difficult for companies to make money from advertising given that much larger numbers of players are likely to deny permission to track their usage across websites and apps owned by other companies.
Legal battle set to rumble on
In the meantime, the legal battles will rumble on after Epic filed federal antitrust lawsuits against both Apple and Google citing unlawful restrictions and costly, anti-competitive control, with the first hearing against Apple set for 28th September. Google has filed a separate argument asking that its case be considered independently from that of Apple given the differences in the two company’s business models.
Regulators in Washington and Europe are already investigating app store fees as potential examples of antitrust behaviour based on the fact that neither Apple nor Google charge fees for their own apps which compete with those of third parties. Nor is Epic the first company to raise an objection – streaming music service Spotify and software company Basecamp have made similar accusations in the past.
Few companies (if any) other than Epic Games – estimated to have made US$1.8bn of revenue from Fortnite in 2019 according to data reported by SuperData Research – have the muscle to take on the two dominant app stores. But what is right for Epic Games is not necessarily right for other games developers depending on their individual commercial strategies and target audience.
Even so, with the market in a constant state of flux and new titles frequently being added to the mix, games companies need to be aware of all the many different billing and payment options available to them and come to their own conclusions.
 Apple revises App Store guidelines, loosening some in-app payment rules, Reuters, 15th September 2020
 SuperData: Games hit $120.1 billion in 2019, with Fortnite topping $1.8 billion, VentureBeat, 2nd January 2020.