Microsoft has long argued that the Xbox store should be treated differently than the app store ecosystems based on PCs and smartphones. The software behemoth offers a 30% discount on digital game purchases made through its Xbox Store, similar to what Apple offers on software purchased through its App Store. While Microsoft maintained this business strategy throughout the Epic vs. Apple trial last year, the Xbox manufacturer now suggests that in order to shift the Xbox console business model in the future, it will need to make its Xbox store more open.
Microsoft released a set of app store principles today that are identical to those it laid out two years ago. According to Microsoft President Brad Smith, the principles are aimed to “guarantee that we provide developers and customers of all sizes the greatest possible experience.” The majority of the ideas, however, only apply to the Microsoft Windows Store, not the Xbox Store.
If you’ve ever heard Microsoft speak in favor of Epic, you’ll recognize their case for why the Xbox Store should be treated differently. According to Smith, legislation will be crafted to target app stores on PCs and smartphones, but not game consoles such as the Xbox. “For good reason, new legislation is not designed for specific computing devices like gaming consoles,” Smith explains. “Game consoles, in particular, are sold at a loss to game creators in order to create a rich and viable ecosystem.” The cost is later recouped through the dedicated console store’s sales.”
Microsoft has stated that it does not profit from the sale of Xbox systems alone, but instead “makes money from game sales and online service subscriptions” thanks to a hardware subsidy scheme. For games like Fourteen Days, Call of Duty: Warzone, and other popular free-to-play games that rely on in-game purchases for monetization, this approach is very lucrative. All of these purchases are subject to a Microsoft cut, and we’ve seen the impact Fourteen Days can have on Xbox income alone.
Despite its profitable business model, Microsoft believes it needs to adjust in order to satisfy authorities who are looking into its $68.7 billion acquisition of Activision Blizzard. Smith concedes, “We recognize that we will need to change our business model for the Xbox console store as well.” Seven of Microsoft’s 11 principles will be applied to the Xbox Store today, including treating applications and games equally, being transparent in selling and marketing apps and games, and holding its own apps and games to the same standards as others.
Importantly, one key principle has yet to be implemented to the Xbox Store: on Windows, developers are not required to use their own in-app payment system. “Over time, we’re dedicated to closing the gap on the remaining principles,” Smith adds, but there’s no specific date for when the Xbox Store will be more open.
Microsoft has also committed to PlayStation versions of major Activision Blizzard games such as Call of Duty and Overwatch. That commitment will extend to Nintendo, which appears to be an effort to position Microsoft as a games publisher for Minecraft and existing Bethesda games on Xbox, PlayStation, PC, and Nintendo Switch.
Although it’s unclear when the Xbox Store will be more open, it appears to be a strategic move for Microsoft. According to Microsoft, it is currently developing a “next-gen gaming shop” based on these new concepts. Is it possible that this will involve a reduction in the Xbox store cut? Possibly. This is something it has looked into before. Epic vs. Apple papers The trial revealed that Microsoft intended to drop the Xbox store discount to just 12%, a move that would shake up the console gaming industry.
Instead, Microsoft stunned the PC gaming industry by announcing last year that it would equal Epic Games’ 12 percent cut. It adds to the strain on Valve, which is still demanding a 30% discount on Steam sales and is reportedly putting pressure on Apple.
A comparable move on Xbox would have far-reaching consequences for console price, game development, marketing, and subscriptions in the future. Regulators will undoubtedly want further clarity on these open principles for the Xbox Store, especially as Microsoft moves toward a subscription-based business model with its Xbox Game Pass Programme.
This future business model is crucial, as these principles continue to put pressure on Apple. Microsoft would prefer a future in which it didn’t have to pay Apple 30% of its revenue to obtain Xbox games and Office subscriptions on the more than 1 billion active iPhone and iPad devices. It appears that it is now more willing to adapt its Xbox console business model in order to achieve this.
References;
- https://flipboard.com/@theverge/the-verge-5hobbaa8z/microsoft-hints-it-will-open-up-xbox-store-changing-its-entire-business-model/a-g6J1pMXdQpaYyglvpbBW6A%3Aa%3A43611565-415bb21bed%2Ftheverge.com
- https://www.reddit.com/r/xbox/comments/solm9z/microsoft_hints_it_will_open_up_xbox_store/
- https://www.thurrott.com/windows/262526/microsoft-details-its-open-app-stores-principles-for-pc-and-xbox-consoles
- https://game.wmlcloud.com/microsoft-hints-it-will-open-up-xbox-store-changing-its-entire-business-model/
- https://www.inotab.com/microsoft-hints-it-will-open-up-xbox-store-changing-its-entire-business-model-2681.html