Apple’s green light on NFTs, nuanced

After years without a clear policy, Apple explicitly positions itself in favor of including NFTs in the apps and games in the AppStore. Let’s break down what that means for Apple developers, and the ecosystem in general.

I am slowly noticing how big actors in the game industry are positioning themselves for NFT usage. Some are hesitant, like AAA studios, others are taking it one step at a time. In this case, Apple made an update in their policies that will likely cause a huge change in the mobile industry.

Being in the game industry for a decade, and now acting as a Product Manager in a Web3 start-up, I can give you highlights and offer some opinions about how this Apple update might impact the scene.

What Apple says

Let’s go straight to the source of this statement. This is an excerpt from the Policies Changelog, available here:

Revised 3.1.1: “Apps may not use their own mechanisms to unlock content or functionality, such as license keys, augmented reality markers, QR codes, cryptocurrencies and cryptocurrency wallets, etc.”

Added to 3.1.1: “Apps may use in-app purchase to sell and sell services related to non-fungible tokens (NFTs), such as minting, listing, and transferring. Apps may allow users to view their own NFTs, provided that NFT ownership does not unlock features or functionality within the app. Apps may allow users to browse NFT collections owned by others, provided that the apps may not include buttons, external links, or other calls to action that direct customers to purchasing mechanisms other than in-app purchase.”

After a careful review of all the history log, there is not a clear policy regarding NFTs before now. What is more, they never banned NFT usage in the app store. We have some practical cases like Skyweaver, or Vessel games that use NFTs in their games now. The landmark comes from the fact that now Apple explicitly allows NFTs in the AppStore with some constraints, as we will see in a minute.

At first glance, we can get this information from the updated policies:

• Apple allows for the publishing of games where NFTs are sold. Among other things, developers can embed a marketplace for trading with their assets.
• Apple forces a fee on all the transactions of goods in the store, regardless of their nature (being NFTs or not). Redirecting the user to pay through other methods is forbidden. It is not something new, but in this context is a clear reference to cryptocurrencies in exchanges.
• We can use NFTs acquired either in the game or elsewhere, but we cannot use them for unlocking features, replacing an in-app purchase. More on this below…

Analysis of Apple’s cut and its bright side

As every developer knows too well, Apple’s cut for every purchase is 30%. Whether this is expensive or not is a debate largely discussed since the AppStore became the major (only?) distribution channel for games on the iPhone. In any case, please consider what developers get for this percentage of their revenue:

• Distribution: hosting games in the AppStore. Its uptime is unparalleled.
• Features in the AppStore: this is (or at least was) the holy grail for developers in order to drive installs. Imagine what could exist in a fresh new NFT category in the store, without relevant competitors like Scopely, King or Social Point waiting on the bench to plunge into the Web3 space.
• Discoverability in the store: as the first-stop for players, the algorithm will work in developers’ benefit, if it is a great game.
• Extra security layer provided by Apple: on one hand, the review process is well known for preventing non-legit games from being submitted. On the other hand, downloading a game with Apple’s seal of approval gives users extra confidence. And let’s face it, most of the Web3 games are struggling with legitimacy issues like scams, rug pulls, etc.
• Revenue: as with any other game, you can expect revenue from IAPs and ads. These are additional revenue streams that can balance what the dev is not getting from NFT purchases.
• Access to the entire Game Center and similar features that come out-of-the-box from Apple.
• Access to a wider audience: since the players must pay in fiat (the only accepted kind of currency for Apple), devs’ access is extended to an audience that is not necessarily crypto-savvy.
• Access to all the existing tools and features that can be used in a regular f2p game like analytics, mediators, a/b testing for the store, ASO, biometrics, built-in camera usage…

That being said, from my perspective, what Apple should include in this fee to make it more enticing might include:

• Create a method for performing withdrawals, which allows players to sell the items and get a profit. The cut here is unpredictable.
• Provide a wallet. It is ok if it is custodial on the first attempt, but it would streamline the process by several orders of magnitude.
• Customer service for wallet usage, FAQs on its website, and in general, solving questions about this new technology.

Why blockchain?

At this point, you might be wondering, “why should I care about crypto at all if everything is wrapped around Apple payments?” Let’s rephrase the question: “What if you do it without the blockchain?”. You would purchase a regular asset (or coins or whatever), but you wouldn’t own the assets. If you own them, you can:

• Trade with them out of Apple.
• Collect them just for the pleasure of doing it, like with my Pokédex.
• Sell them when we are tired of playing the game.
• Impact the governance if the game allows it.
• Interoperate with the asset in another game when the technology is able to.

So the main benefit for us the players is ownership and interoperability (when available).

The not-so-bright side

As discussed before, there are reasons to feel optimistic about this. Apple is validating the significance of NFTs. However, there are some downsides that need to be evaluated before getting fully on board with the crypto space in the AppStore:

• The need for an ERC20 token is at the very least questionable since the player will be operating with fiat all the time. So if the project relies heavily on a cryptocurrency, devs will need to either keep out of the AppStore or rethink their business model.
• A 30% cut could be too much for an indie developer. But being completely honest, all Web3 projects I know are forecasting way more than 30% profit. Please consider all the benefits this cut provides and redo the numbers.
• On a more philosophical note, one could argue that relying so much on Apple is against any crypto manifesto, especially when it comes to decentralization and trustless spirit. Actually, if we look closely, we could even notice some monopolistic traits.
• Current policies are deliberately unclear. So, as it always happens, developers won’t know if their game is eligible to be listed in the AppStore until passing the review process. Unfortunately, we can expect frustration from developers and not everyone will be able to be there.

And last but not least, what I find more limiting: NFTs cannot be used for unlocking features or functionality. What I understand is that Apple prevents in-app purchases from being replaced by owning NFTs. It means that some use cases are totally banned (unlock levels just by owning an NFT); others fall in a grey area (like ticketing); and a very limited number of practices are allowed, like vanity items in the shape of NFTs or pure collectible items. One way or another, the allowed use cases cannot be known until you as a developer submit a game, and passes the review process.

Apple didn’t explain the policy changes, so it is hard to understand the reasons behind it. One could think that they want to avoid pay-to-win tactics, or unbalance the game economies. But my gut says that Apple is following a less prosaic approach and they just want to prevent paying for features or content out of the AppStore.

Despite the rationale of this decision, the future is not as dark as it could seem, and there are ways to be policy-compliant and unlock new features thanks to NFTs, at the same time. Apple is short-sighted in its statement, since they only see NFTs as either a) collectible items or b) tokens that provide access to something. But, what if NFTs are not static anymore? Players could acquire them, with no value in the game, and add this value depending on the actions they take. Like in a regular game, but using the NFT for storing all the progress and at the same time, owning it. This is what dynamic NFTs, like Living Assets, do.

Therefore, there are ways to overcome the limitations, and finally step into the mobile gaming channel!

Future

Looking ahead, the future looks mostly optimistic, and I expect some changes for the actors of the mobile industry.

For Apple, what I expect is:

• A special and dedicated category for NFTs, like it is doing for other games.
• Features of NFT games, especially at the beginning. Criteria for choosing the titles is unclear, but presumably they will be tempted by visually good-looking games with enticing gameplay. I don’t believe “Most profitable assets” would be a top factor, at least at the beginning. So if a game is exploiting that, I don’t envision it as an eligible title for being featured there.
• Probably, a change in the nomenclature, adopting equivalent terms like Digital Assets. Reddit proved that there is interest in digital ownership, but they ran away from the NFT term.
• An avalanche of already-existing Web3 games that live out of the AppStore (websites, for instance), are attracted by this new audience, and will be ported to the platform.
• A method for performing withdrawals in the secondary sales. It is complicated because they are not a bank, but since Apple Pay is quite mature, they can come up with something easily.
• In the long-term, digital ownership will become a commodity since Web3 boundaries will blur even more. Like Paid Games and Free Games (f2p, actually) listings in the store disappeared long ago, we won’t see a differentiation between Web3 or non-Web3 games in the long term.
• Apple will now feel even more pressure for accepting alternative payment methods, especially now after Epic is winning some battles about it.

And obviously, it won’t come as a surprise if Google makes a similar statement in the following days, too!

My additional thoughts for developers, regardless of their size:

• New and profitable game design challenges: Monetizing NFTs is an exciting and uncharted area that goes beyond the state-of-the-art in the monetization of in-app purchases. How amazing is creating a new area of design?
• Related to the previous point, LiveOps goals will be very different from the current ones, since involving NFTs in a secondary market is something unexplored.
• In general, this is a great opportunity for studios to distribute the games in the AppStore, following the Red Sea/Blue Ocean strategy. In particular, since big studios are not planning to enter this area anytime soon, there is a clear advantage for small/mid-sized studios.

And finally, there are other actors that will be impacted by this decision, in one way or another, like whitelabel marketplace solutions that can offer their solution to mobile games. Or in general, any SDK or solution oriented to NFT games, like Freeverse.io, able to provide a fully working SDK for Unity with dynamic assets that will comply with all the policies needed to submit games in the AppStore.

The bottom line: the future is bright for any mobile game developer, under some constraints. However, we won’t see the real picture until this new category of games settles in the AppStore. Considerations will include:

• Which games Apple approves and those which it doesn’t
• If players will genuinely be interested in Web3 games en masse
• If these games will be profitable for developers,
• How publishers will react to this change…

All these questions remain unanswered, but I cannot wait to see what the future holds. Regardless, this is an interesting space to watch.