When Apple initially launched the iPhone and later the App Store, it marked a significant moment for the emerging mobile games industry. For just a 30% revenue share, it offered a marketplace accessible to millions of consumers worldwide. Publishers no longer had to rely on partnerships with mobile operators.
The App Store, and later Google Play, gave rise to multi-billion dollar companies like Supercell, Mixi, and GungHo Online Entertainment, and many more within and outside the games industry. Mobile gaming became the largest segment by revenue and reach. Market intelligence firm Newzoo reported that industry reached a peak of $93.2 billion from worldwide player spending in 2021, accounting for 52% of the entire global games market.
However, Apple is losing favor with the industry it helped create. Questions have arisen over what exactly it does now, over 15 years after launching the App Store, to justify its 30% fee. Big publishers like Spotify and Epic are vocal about their objections to Apple’s policies.
Privacy Changes
In the name of privacy, Apple’s App Tracking Transparency policies have disrupted the entire mobile games industry. This sector was based on user acquisition and targeting interested and likely spending users. But with Apple’s changes, publishers have found it challenging to adapt.
In the years since this policy change, mobile games market revenue has declined for the first time ever – which can also be attributed to a post-pandemic return to normality – to $90.5 billion in 2023. This is a far cry from the $116.4 billion Newzoo had predicted for 2024 revenue.
Out of the fires, Apple has built its own ads business (as Eric Seufert describes it on Mobile Dev Memo, “robbed the mob’s bank”). Meanwhile, as publishers navigate a challenging market, Apple has refused to lower its revenue share.
This was one of the significant initial steps in souring relations with the industry.
Epic Battle
Epic’s lawsuit and the removal of Fortnite from the App Store and Google Play led to global regulatory action into Apple’s influence in the mobile market.
Apple has adamantly maintained the status quo, fighting regulatory battles across the world, including in Japan, South Korea, and the Netherlands.
But Apple’s recent actions in the US and the EU have further angered publishers.
Epic’s court battle came to a climax when the Supreme Court declined to take on its case with Apple. Although Epic lost on almost all counts, the San Francisco-based 9th U.S. Circuit Court of Appeals ruled that Apple should allow publishers in the US to link to external payment methods on the web.
However, just hours after the ruling, Apple announced a new policy, still charging 27% on those external transactions made within seven days after tapping an in-app link. Third-party payment providers can charge around 5% in fees, meaning publishers could be no better off, or worse off, using alternative payment systems.
Whilst Epic did technically ‘win’ the ability to redirect to third-party payment methods, the core reason why any company would seek to do so has been nullified.
Louise Wooldridge, Ampere Analysis
Various industry insiders expressed skepticism about the impact of the ruling, with some feeling that it would not change the status quo in the short term.
Privacy vs. Regulation
Others we spoke to were also less than enamored by Apple’s policy change to adhere to the court’s ruling. Ben Cousens, chief strategy officer at fintech company ZBD labeled the move as “nothing more than a token gesture to appease the law”.
It’s only a matter of time that those issues drive both developers and players away from the App Store if they remain unsolved moving forward.
Qi Lu, Supernova Games
Qi Lu, CEO at Supernova Games, said the ruling didn’t make much difference to developers, but questioned how Apple might enforce the new policy. He stated that if issues between publishers and Apple are not resolved, the situation could ultimately drive them away.
“I think we all understand that gaming platforms’ positioning has an advantage, and I think both sides – developers and platform – are now trying to find a new balance for all and hopefully this can provide a healthier ecosystem,” said Lu.
“To be honest, we also know the mobile games industry has suffered platform discovery and distribution issues for a long time. Even without the payment issue, it’s only a matter of time that those issues drive both developers and players away from the App Store if they remain unsolved moving forward.”
Increased Scrutiny in the EU
In the European Union, Apple adopted entirely new tactics in the face of the Digital Markets Act. The new regulations aim to create a framework for gatekeepers – large online platforms, of which Apple is one. These rules include preventing consumers from linking to businesses outside their platforms (other billing systems and web shops).
Apple’s response was a departure from its previous changes proposed to regulators. Publishers can opt-in to new rules that drop the revenue share to 17% – or 10% for some developers – rising by 3% if publishers use Apple Pay. It has also officially allowed the introduction of third-party marketplaces.
However, Apple has introduced a new ‘core technology fee’ in the EU, which charges €0.50 for each first annual install per year over one million downloads for installs from the App store and/or an alternative marketplace, in perpetuity. The fee is reminiscent of Unity’s controversial Runtime Fee, which received widespread criticism from the games industry, though publishers have the option of sticking with their existing terms.
Apple’s announcement received strong criticism – largely from would-be rivals and the biggest publishers on its platform. Epic Games CEO Tim Sweeney called the new rules “a devious new instance of malicious compliance” and “hot garbage”, while Spotify CEO Daniel Ek said the new business terms were a “masterclass in distortion”.
It’s like some sort of Soviet-era steel plant. Innovation has been stifled, game developers struggle to stay enthusiastic and creative under the yoke of authority, and users are sometimes poorly served.
Jens Lauritzso, Flexion
Meanwhile, the European Games Developer Federation said it was “highly disappointed in Apple’s new anticompetitive fee structure”, and Xbox president Sarah Bond called the move “a step in the wrong direction”.
For its part, Apple said that it is “committed to protecting the privacy, security and quality of the iOS user experience… within the DMA’s constraints”.
The European Union has yet to respond to Apple’s new business terms and whether they do, in fact, comply with the law and spirit of the DMA. While cracks are showing in the status quo of Apple’s 30% revenue share, the debate and regulatory back and forth appears likely to continue for a long time yet.
In the meantime, the world’s biggest publishers are already fleeing to web shops and away from Apple’s clutches.
You can learn more about the latest trends in the mobile games industry and discuss the latest development with peers at Pocket Gamer Connects San Francisco on March 18th to 19th. The event will also be hosting a ‘Web Store Wizardry’ track, which will see speakers discuss the opportunities in off-platform monetisation. Interested in learning more? Register here.
