Round table: Will Apple's tax change the situation in the mobile market?
At the end of January, Apple announced a number of innovations in iOS. These include support for third—party stores and payment systems. However, those who want to use the new functionality will have to pay for each installation. We talked about the innovation with experts from Skich and INFUSION GAMES.
What do you think about Apple's plans to charge money for installations in Europe from those who want to use alternative stores and payment systems within iOS?
Sergey Budkovsky, CEO at Skich
These actions directly contradict the antimonopoly project. I think this will last for a relatively short time, as the emerging players in the new alternative store market, along with Epic Games, will continue to put pressure on Apple, which, as we see, is bearing fruit.
Nikolay Shubin, co-owner of INFUSION GAMES
Like any corporation, Apple is trying to adapt to the updated legislation within the framework of the Digital Markets Act. My position at the moment is neutral here: Apple probably wants to charge this fee as compensation for providing infrastructure, security and management of the app store, even when using alternative stores and payment systems. Consensus on pricing will eventually be found, Apple has historically accounted for about a quarter of revenue in the European market, which is half of revenue in their key market, the United States.
Will such a norm stop teams that are very interested in using alternative solutions within iOS?
Sergey Budkovsky, CEO at Skich
No, because a completely new market is opening here and it will be visited primarily by those developers for whom the App Store does not work in terms of features and virality of their products. As for games, here we will be able to see more studios, genres and products with unique game mechanics that are looking for new ways of distribution.
Nikolay Shubin, co-owner of INFUSION GAMES
I am a supporter of the free market and pure capitalism: if the developers do not have a converging economy, then the store will not be in demand. We must not forget that the end user always pays, that is, if the price of the service (applications, games, subscriptions) is lower with a comparable degree of quality, convenience and security, then this will create competition, which is just fine. But, unfortunately, launching this process requires a little bit of European socialism. Let's see where this all leads to.
In what business scenario would a $0.50 fee for each installation over the initial million downloads not be a problem for the company?
Sergey Budkovsky, CEO at Skich
First of all, developers of midcore/hardcore games can find their benefits here, since they are aimed not at CPI but at ROI. Alternative distribution sites will be able to provide them with access to those paying whales.
It is core players who most often face the problem of finding a new game and they are the ones who most often prefer alternative search methods. It will be most difficult for developers using advertising monetization to publish in alternative stores, but there are also those who will not be confused by this commission, for example, developers of games with adult content.
Nikolay Shubin, co-owner of INFUSION GAMES
If it is primitive, then there will be no problem when the ratio of CPI + €0.50 to LTV is less than one in all installations over a million per year. If it is a little more correct, then you need to take into account the delta between the 30% commission of the AppStore and all commissions on the alternative site (including 10% Apple commission for small businesses or 17% for others), and add another 3% Apple commission on third-party payments + the commission of the payment itself. And if it is absolutely correct, then it will also be necessary to take into account the difference in the cost of labor for integration, the weighted average cost of money over time, the delay in payment, legal aspects, various risks and a bunch more, but it is not interesting to consider all this until there is no consensus. The biggest unresolved issues, in my opinion, are:
- Where, with such requirements and the proposed commission from Apple, can profits come from an alternative store? I don't see any margin, there are almost no benefits.
- What should I do with reinstalling the application? Did they take those guys from Unity to Apple after they were fired?
I think that this will be one of the most pressing issues of the regulator and the subject of the greatest controversy.
What else is confusing about Apple's new rules?
Sergey Budkovsky, CEO at Skich
While there are no precedents, it is difficult to say exactly how alternative stores will be installed and operated under Apple's control
Nikolay Shubin, co-owner of INFUSION GAMES
As far as I know, at the moment it is unclear, in fact, whether this change will suit European regulators. And since this is an open question, I am confused by the uncertainty, because Apple's restrictions and control over new stores can cause competition problems, especially if the new rules do not provide sufficient freedom for developers and competing companies.
Will the new rules change the situation in the mobile distribution market? How exactly and why?
Sergey Budkovsky, CEO at Skich
Undoubtedly! Alternative stores can influence the development of mobile gaming in the same way that Spotify once influenced the development of the music industry. Thanks to Spotify, many new genres and artists have appeared that do not need additional promotion by labels and producers. I am sure that new game mechanics, genres and new studios are waiting for us, which will be able to find their audience thanks to alternative distribution platforms.
Nikolay Shubin, co-owner of INFUSION GAMES
Personally, I think such experiments with the market are generally good, although I am still skeptical about the proposed implementation. With a good consensus, the introduction of new rules can change the dynamics of the mobile distribution market, giving users more choice and stimulating competition among app stores. But did the giant often come out of such situations with heavy losses?
I want to remind readers about the deliberate division of Apple's European headwaters in Ireland into two companies — for sales and for the operating system, which allowed them not to pay about €13 billion in taxes on earnings from intellectual property licenses in the European Union. After several years of trials, in 2020, Apple was able to win, but three months ago the proceedings resumed. I suggest you keep an eye on the whole picture and stock up on popcorn, the year 2024 will be very interesting!
