What Apple’s Recent App Store Policy Changes Mean for the Gaming Industry
Apple opens the gate for game-streaming services and more — will game developers enter?
Last week, Apple announced in a blog post that it is changing its app review policy for in-app experiences, especially pertaining to streaming games. Effective immediately, apps containing games, “mini-apps,” and chatbots, can now be submitted as a single app for review.
Previously, Apple had required companies to submit every single game offered through a cloud gaming service for review as a standalone app, so as to ensure that they fit with Apple’s standards. This policy had effectively made it not only inconvenient but also costly to run a game streaming service as an app on Apple devices. Thus, popular game streaming services like Xbox Cloud and GeForce Now were only accessible on iOS via a web browser.
As part of the sweeping changes Apple made to the iOS platform and the App Store in order to comply with the EU’s Digital Markets Act (DMA), which seeks to regulate the practices of large online platforms that act as “gatekeepers” in the digital marketplace, this opening-up of the App Store stands out because it is a global policy, compared to other changes that only apply to the EU markets.
In theory, this change marks a remarkable shift for those in the cloud gaming business, which could then have knock-on effects for advertisers as well. Besides the obvious beneficiaries like Microsoft and Nvidia, who can now bring their respective game streaming apps to the iPhone, this decision would theoretically also impact companies like Meta, which attempted to run a standalone Facebook Gaming app before shutting it down in 2022, and Netflix, which has been increasingly expanding into mobile and cloud gaming in recent months. Given that all these services have ad-supported games to various degrees or, in Netflix’s case, sell ad-supported subscriptions, more users for these cloud gaming services will also mean more eyeballs for advertisers. At first glance, it would seem like a no-brainer opportunity for the gaming industry to jump on.
In reality, however, things are much more complicated. Following Apple’s announcements last week, multiple executives, including Epic Games CEO Tim Sweeney and Spotify’s CEO Daniel Ek, have publicly criticized the new App Store policies, especially a new “Core Technology Fee” that is being imposed on all developers selling apps through third-party app stores in the EU; It will require developers using third-party app stores to pay €0.50 for each annual app install after one million downloads. Apple will also still take a 17 percent commission from the developers who choose to use third-party payment processors. Ek says Apple’s solution is a “masterclass in distortion” as it presents app developers with a choice of sticking to the current terms or having to switch to a “convoluted new model” that initially may look attractive, but actually may come with higher fees.
Interestingly, Microsoft-owned Xbox, despite being a clear beneficiary of the change, is also unhappy with the new policies. On Monday, Microsoft’s Xbox president Sarah Bond posted in a tweet that “Apple’s new policy is a step in the wrong direction.” Given that Microsoft has been reportedly working on a new Xbox mobile store in anticipation of the DMA, Apple’s new fees would make it far less profitable for Microsoft to challenge Apple and Google’s mobile gaming store dominance. To be clear, this yet-to-materialize Xbox mobile store is distinct from the Xbox cloud gaming service, which may still show up in the App Store one day soon. Still, the reality remains that it’s been over a week since Apple’s announcements, and no cloud gaming providers have reacted to Apple’s acceptance of cloud gaming services.
While Apple’s policies aim to comply with the DMA, the criticism from these major industry players suggests a perception that these policies do not fully embrace the spirit of the legislation. Despite the obvious gains, cloud gaming providers like Microsoft seem to be cautious about committing to a platform where regulatory compliance and fair competition are in question.
As previously mentioned, Netflix’s gaming expansion could get a significant boost should they seize the opportunity and become a first-mover. Yet, judging by its refusal to allow its app on the Vision Pro headset, and its historically minimal participation in Apple’s ecosystem (no integration with TV OS beyond a standalone app, for example), Netflix has a few bones to pick with Apple as well.
Then again, there is no viable alternative to reach the iPhone users, who outspend Android users on in-app purchases by over 60% on average. For the stakeholders in cloud gaming, this policy change opens a door to potentially expanding their player base to a high-value audience, and it should not be missed simply out of spite for the other questionable App Store policies.
This policy change also came at a rather worrisome time for the gaming industry. A recent survey by the Game Developers Conference (GDC) found that game developers are very worried about potential layoffs amid the increasing use of generative AI. 84% of the respondents said they were somewhat or very concerned about the ethics of using generative AI.
Ironically, even OpenAI, leader in the Generative AI marketplace, is likely also unhappy with this change. Recall that the policy change, while primarily aimed at games, also applies to chatbots. Given that OpenAI just recently launched a GPT store for third-party chatbots (aka GPTs) built on its own LLMs, this new app store policy would ensure that, should ChatGPT decide to bring these third-party GPTs to iOS users within its app, they would have to pay Apple the regular commission fees on in-app purchases for each GPT that users buy.
For OpenAI and other players in the generative AI race, Apple’s policy changes introduce additional considerations. The inclusion of chatbots and “mini-apps” under the new policy means that any foray into the iOS app market with AI-driven products will necessitate navigating Apple’s commission structure, potentially affecting the pricing and profitability of AI applications. This could influence the strategies of AI companies considering how best to deploy their technologies on a platform as significant as iOS.
In conclusion, the juxtaposition of Apple’s policy change with the broader concerns of the gaming industry highlights a complex interplay of opportunities and challenges. The balance between accessing a valuable user base and managing the costs and complexities introduced by Apple’s new DMA-era policies will be a major factor in shaping the future landscape of cloud gaming (and AI services) on iOS devices. The industry’s response to these changes so far has been mostly critical, but they are likely to evolve as companies assess the trade-offs between expanded access and the financial imposition of Apple’s approach.
