Microsoft rocked the gaming computer industry this week by announcing it was reducing the fee it charges from selling games in the Windows Store. At first glance, this is a welcome move, as Microsoft corresponds to the 12% reduction that Epic Games makes, and puts more pressure on Valve, which still makes a 30% discount on most Steam purchases. But the cut is also a tactical move: Microsoft wants to help Apple, and changes this week could play a role in the bigger battles for app stores starting next week.
Microsoft’s announcement comes days before a huge lawsuit between Epic Games and Apple, and just as the EU found problems with Apple̵
Epic founder Tim Sweeney has a long history with Microsoft and their interests have only recently leveled off. Sweeney broke Microsoft’s efforts to control the Windows software ecosystem with its store and the Universal Windows Platform (UWP) initiative. Since then, Microsoft has been doing most of this, and the company’s more open HoloLens model has seen Sweeney share the scene with software maker and promise Epic Games support for Microsoft’s mixed-reality headset.
Apple’s App Store, which is at the heart of the present case, is also a particularly painful place for Microsoft. After losing to iOS and Android with its Windows Phone efforts, Microsoft has been fighting its own battles against Apple’s App Store for years. After hitting the App Store last year with its own changes to the rules for Windows stores, Microsoft will use every opportunity to help impose bargains, especially if it’s on time. The software maker tried to launch its SkyDrive app (now OneDrive) for the iPhone back in 2012, but went into battle with Apple for a 30% reduction in revenue for cloud storage in the app. This was a test for the real money cow of Microsoft – Office for iOS.
Microsoft is also struggling to launch its xCloud game streaming service on iOS, where it would like to keep the 30 percent discount it makes on game purchases and in-app applications in cloud versions of Xbox games. Apple is still blocking services like xCloud or Stadia, and Microsoft had to create a web version to circumvent the restrictions.
Although Microsoft has not filed any formal complaints about Apple, the company’s chief legal officer, Brad Smith, met with the Judicial Protection Subcommittee last year to brief the panel on concerns about the App Store and its fees. This was at the same time as Apple commissioned a study claiming that a 30% reduction was the industry standard. It’s hard to look at Microsoft’s reduction in fees for gaming for PCs this week and not see it as timely pressure to help highlight the mismatch between PC stores and mobile apps.
Microsoft’s Windows App Store is not a big revenue engine for the company, and it has already reduced applications by 15% before these changes to computer games. Games are the most lucrative part of any app store, but currently a large number of game developers don’t publish their games in the Windows Store. This makes Microsoft a 12 percent reduction in reasonable business if it or even Epic Games wants to use the changes to argue for a major overhaul of the App Store elsewhere. It also helps advance the story of Microsoft and Epic Games that personal computers and smartphones are general-purpose computing platforms with fairer app store models.
Microsoft also announced this change in the fee, which begins only in August, without any solid promises to improve its sick Windows Store. It feels hasty, with no obvious benefit to consumers in important ways, such as cheaper games or major repairs. The fee reduction also doesn’t apply to Xbox console games, and the time seems to be set for preparing future Xbox 30% discount issues by positioning your computer differently.
Previously, Microsoft defended its 30% discount on sales of Xbox digital games. “Game consoles are specialized devices optimized for a specific use,” said Rima Alaili, deputy general manager at Microsoft, last year. Alaily claims that “the business model for gaming consoles is very different from the ecosystem around PCs or phones” because Microsoft subsidizes hardware and consoles “are significantly less on the market than PCs and phones.”
But while Microsoft is more secure than the 30 percent cut collected on the Xbox, Epic Games seems happy to leave it in place. The CEO of Epic Games revealed in a court ruling this week that the company never tried to negotiate with Microsoft to avoid using its commercial Xbox engine. “We are a significant revenue generator for all three of these platforms [Xbox, PlayStation, Switch], probably in the top 5, you know, sources of revenue for them, ”admits Joe Krainer, Epic’s vice president of business development. “So they have a personal interest in promoting Fortnite. We get a significant placement in the store, for which we do not have to pay. “
The same court declaration revealed this FortniteThe Cash Cow is a PlayStation, not an iOS, so Epic Games has little incentive to question the platforms where it earns most of its money and gets special marketing deals.
Fortunately, the curious change in the fee in the personal computer store was announced in the same week in which the EU accused Apple of violating the antitrust rules in the App Store. While the European Commission’s announcement on Friday focused on apps for streaming music on the App Store, the commission is also investigating additional, individual cases for e-books and the App Store as a whole.
European Commissioner Margrethe Vestager also revealed that the commission is reviewing Apple’s policies regarding games in the App Store. “We’re also interested in the gaming app market,” Vestager said when asked about money for gaming apps on the App Store. “It’s really the early days when it comes to that.”
Next week’s lawsuit between Epic Games and Apple will begin a battle for the future of the App Store that will last much longer than a season in Fortnite. The battle lines have been drawn in different directions, and Microsoft is sitting patiently on the sidelines, hoping that the war in the app store is going the way it wants.