When Apple first launched the iPhone, and later the App Store, it was a significant moment for the nascent mobile games industry. For just a 30% revenue share, it offered an easily accessible marketplace open to millions of consumers worldwide, and publishers no longer had to rely on partnerships with mobile operators.

The App Store, and later Google Play, spawned multi-billion dollar companies like Supercell, Mixi and GungHo Online Entertainment - and later many more inside of the games industry and out. Mobile gaming became by far the largest segment by revenue and reach. Market intelligence firm Newzoo reported that industry hit a peak of $93.2 billion from worldwide player spending in 2021, accounting for 52% of the entire global games market.

But Apple is steadfastly falling out of favour with the industry it helped create. Questions have arisen over what exactly it does now, more than 15 years after launching the App Store, to continue justifying its 30% fee. Big publishers like Spotify and Epic aren't mincing their words when it comes to Apple's policies.

So what happened?

Privacy changes

In the name of privacy, Apple’s App Tracking Transparency policies have shaken the foundations of the entire mobile games industry. The sector was built on user acquisition - and being able to find the users most interested and likely to spend. But following Apple's changes, publishers have struggled to adapt.

In the years since this policy change, mobile games market revenue has shrunk for the first time ever - which can also be attributed to a post-pandemic return to normality - to $90.5 billion in 2023. That's a far cry from the $116.4 billion Newzoo had predicted for 2024 revenue.

And out of the fires, Apple has built its own ads business (or robbed the mob’s bank, as Eric Seufert puts it on Mobile Dev Memo). And as publishers seek to grow in a challenging market, Apple has refused to buckle to pressure on its own revenue share.

That was one of the key first steps in souring relations with the industry.

Epic battle

Epic’s lawsuit - and the removal of Fortnite from the App Store and Google Play for breaking payment rules - played a key role in kicking off global regulatory action into Apple’s influence in the mobile market.

Apple has steadfastly made attempts to maintain the status quo, fighting regulatory battles across the world, including in Japan, South Korea and the Netherlands.

But some of Apple’s most recent actions in the US and the EU have really got publishers’ backs up.

Epic’s two years+ court battle came to a climax in January when the Supreme Court declined to take on its case with Apple. While Epic lost on almost all counts, the San Francisco-based 9th U.S. Circuit Court of Appeals did rule that Apple should allow publishers in the US to link to external payment methods on the web.

But just hours after publishers and payment companies popped their champagne bottles, Apple crashed the party with its new policy: it’ll still charge 27% on those external transactions if made within seven days after tapping an in-app link. It should be noted that third-party payment providers can charge around 5% in fees, meaning publishers could be no better off, or worse off, using alternative payment systems.

As we previously explained, links to external payment platforms can only be displayed on “one app page the end user navigates to (not an interstitial, modal, or pop-up), in a single, dedicated location on such page, and may not persist beyond that page”. Meanwhile, Apple can leave a warning message that states “Apple is not responsible for the privacy or security of purchases made on the web”.

“Essentially, 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,” Ampere Analysis games research manager Louise Wooldridge told PocketGamer.biz following the news.

“The status quo will not be disrupted by the ruling.”

Tom Hammond, CEO of live ops engine Userwise, offered similar thoughts: “It really means that nothing is going to change.

“Studios will still slowly try to move players off platform. More games that are successful will launch as web versions, like Huuuge Games is doing to fully integrate payment providers/web shops.

“But in the short-term, we stay as status quo until more regulation is appropriately forced on Apple and Google.”

Brett Nowak, CEO at product insights firm Liquid and Grit, said: “This development intensifies the contentious relationship between certain developers and Apple. It sheds light on Apple's perspective in this relationship.

“Unless Apple provides more value to justify their 30% commission, developers will continue to test ways to lower this fee, either through legal means or innovative product strategies to increase their connection with players.”

Driving publishers away?

Others we spoke to were also less than enamoured by Apple’s policy change to adhere to the court’s ruling. Ben Cousens, chief strategy officer at fintech company ZBD labelled the move as “nothing more than a token gesture to appease the law”.

“It really makes one cynical to think this is the best outcome and shows we need better regulation,” he said.

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. Lu stated if issues between publishers and Apple aren’t 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."

"Weakens everyone"

Payments companies, hot off celebrating the ruling, were predictably less than enamoured. Over the last few years, companies like Xsolla and Appcharge have steadily cropped up, supporting publishers with launching their own web shops, where they can take a much more significant revenue share. They just have to get players to find them outside of the App Store ecosystem.

Chris Hewish, interim CEO at games commerce firm Xsolla, said the court’s ruling was the “right decision” and that it was “wrong” that publishers were restricted in having free and open communications with their players.

“In my opinion, any plan to monetise and restrict communications between games and players outside of the app ecosystem is a sad thing that weakens everyone,” he said.

“Fortunately, this ruling and the App Store restrictions don’t keep developers from linking out of their games to share a broader ecosystem with their players. Game developers can now inform and guide their players to a larger world of community and content beyond just buying things, where they can share all sorts of information without paying those fees.

“I understand these fees only apply if players are steered directly to a purchase.”

Jonas Martins, director of video gaming and media at payments company Worldline, said while the ruling has proven to be a “small step”, it was still a “step in the right direction”.

“While the current fee for in-app links is relatively high, the decision puts an end to anti-steering policies and will provide a number of benefits to developers,” he said.

Apple takes on the EU

On the frontlines 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 - that ensures a “fairer business environment” for all companies. The 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 (read our opinion piece here). Publishers can opt-in to new rules that drop its 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”.

“Disrupt their toll-booth operation, and they'll ensure you regret it,” he said.

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”.

Speaking to PocketGamer.biz, Nadir Garouche, senior user acquisition manager at publisher Sandsoft, was critical of the new core technology fee.

“This recurring CTF, levied for every subsequent update, could see developers shelling out €0.50 per user for years, regardless of their app's active use,” he said.

“It's a puzzling equation that significantly impacts lifetime value (LTV), leaving many questioning the true beneficiaries of these new terms. It's certainly not game developers."

Jens Lauritzson, CEO of games distribution platform Flexion, said the App Store and Google Play favoured “command and control”, which he called the antithesis of a free market.

“The consequence is a mobile games industry that has become stuck in the mud,” he stated.

“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. I may exaggerate, but this is how many game developers see things.”

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 changes we’re announcing today comply with the Digital Markets Act’s requirements in the European Union, while helping to protect EU users from the unavoidable increased privacy and security threats this regulation brings," said Apple Fellow Phil. Schiller.

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.