Comment & Opinion

Why the 70:30 App Store revenue split is doomed

Why the 70:30 App Store revenue split is doomed

This article was originally published on July 17th 2018. In light of the news of the new Epic Games store offering an 88/12 royalty split (it's expected to start selling Android games in 2019) and now Discord promising a 90/10 share in favour of developers, we've republished this piece on why time may be up for the 70/30 App Store split.

At a time when most mobile developers couldn’t get their games published, and even if they could, their revenue was eaten by operators and publishers, the promise of a 70:30 revenue share from a store anyone could distribute through was a pipe dream.

10 years on, however, it’s no surprise a mobile games sector that’s generating over $50 billion annually is now less certain Apple and Google’s $20 billion take is an appropriate share of the rewards given their risk profile.

Change but not for games

Of course, over the years there have been some changes. Both app stores are now more generous to app developers who monetise through subscriptions, but this 85:15 split isn’t something most games developers can access.

Games, even games-as-a-service, are just too lumpy in terms of their new content delivery and retailing dynamics than can be easily encapsulated in a simple Netflix-style fixed monthly charge.

Adding further insult, the new fee structure for the Microsoft Store offers developers up to 95 per cent of revenue, but this is only for “consumer applications (not including games)”.

The mobile game sector is now less certain Apple and Google’s $20 billion take is an appropriate share of the rewards given their risk profile.

Despite this, however, Microsoft’s move is significant as it shifts its standard split to 85:15, with the 95 per cent share offered for developers who generate their own sales by deep linking to the Microsoft Store rather than generating sales through the store via search etcetera.

This sort of approach is welcome because it highlights the ways in which app stores are used and the value they add (or don’t) to deserve their revenue share.

Broadly put, the majority of users use the store itself for discovery, hence the important of regular promotions such as weekly features. Yet, especially in the case of games, developers who spend time cultivating their own communities and driving their own download traffic, should surely be rewarded for their efforts beyond what can be earned from general affiliate links.

Of course, in the case of free-to-play games, there’s no upfront revenue to split, but given how much effort Apple spends highlighting paid games it’s somewhat surprising it hasn’t taken advantage of such a move, which would generate headlines as well as materially improving the lot of small indies who are currently struggling across all games platforms.

Change is coming

And aside from this particular opportunity, the 70:30 split seems increasingly monolithic and anarcronistic.

As Epic’s announcement of its new 88:12 split for the Unreal Engine Marketplace demonstrates, the cost of generating considerable goodwill is marginal, even assuming it’s in some way underpinned by Fortnite’s success.

Equally, without overstating my current obsession with blockchain gaming, most prospective app stores and game distribution channels in this sector are highlighting their ‘better than 70:30’ splits to attract developers.

Indeed, many are offering 100 per cent of revenues to developers in the hope of generating their cut from resales and item trading, and that’s before you get into smart contracts, which offer the potential for incredibly sophisticated royalty share options; something Microsoft is already using for Xbox games.

Certainly unlikely but in this context it’s not unthinkable we’ll see a wider unbundling of app store services supported by blockchain technology.

This could see much more flexible revenue shares depending of whether a user came directly through the store or via a series of affiliate links, not to mention their status within, say, an app store’s VIP program, and what payment system they’re using.

Blue sky for the present, but whichever way you cut it, the days of 70:30 seem numbered. If nothing else, in the current environment, no platform holder can seriously justify taking 30 per cent no matter how large their reach.

The only uncertainty is who will make the first move and who gets trampled in the resulting crush.

Contributing Editor

A Pocket Gamer co-founder, Jon is Contributing Editor at PG.biz which means he acts like a slightly confused uncle who's forgotten where he's left his glasses. As well as letters and cameras, he likes imaginary numbers and legumes.

Comments

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Greg Quinn CEO/Lead Developer at Meltdown Interactive Media
Put a $50 submission fee on all apps, cut down on the sheer volume of crap, I'd rather have that than a % cut.
Rene Boutin Supreme Leader at SPORE Productions
If the 30/70 split is "archaic" and it changes, I hope the small indies realize it will not change in their favour.

The most likely outcome of a percentage split where Apple takes less will be them charging monthly fees to developer/publishers for services that are currently "included". In much the same way as the big analytics and cloud services companies charge and scale based on usage, so will the cost of doing business with Apple's App Store.

All those other stores offering a "better deal" do so to attract content, not because the bean counters figured out its the fairest sustainable split. They are burning through investment money to increase their portfolios and valuations. When that becomes unsustainable, they will change.

Any indie developer/publisher who argues against 70/30 needs to look at the value they are getting. What would it cost them to:
- Build and operate a secure app distribution system (and all the support that requires)
- The cost of taking online payments, micro-payments, tracking and securing in-app purchases
- Customer support (though admittedly this one is a bit iffy)
- TAX REPORTING -- What would the cost be in accounting fees for you to calculate, collect, report and remit taxes to over 150 different countries each with their own tax reporting laws and requirements? (hint: thousands and thousands of dollars yearly)
Ric Moore
In free-to-play this wont necessarily help because it means devs will have more to spend on advertising which means cpi goes up. It would merely be taking away part of Apple’s cut and giving it to Facebook (or whichever ad network). The ad networks already take a lot more than 30% of most developers revenue.