In the aftermath of the Windows Phone era, Microsoft is in a bit of a tough spot, trying to scrape together support from Apple and Google for its mobile computing ventures. From Microsoft Edge and Microsoft Copilot to Xbox Cloud Gaming, both tech giants seem to be putting up roadblocks, unsurprisingly, to impede a major competitor like Microsoft from gaining ground on smartphones.
The latest tug-of-war is playing out on Android, a platform that isn’t exactly creating favorable conditions for third-party developers aiming for success. As a workaround, companies like Microsoft, Epic Games, and even Samsung have been looking into launching their app stores to dodge Google’s fees. Yet, since the vast majority, around 99%, of Android users download apps through Google Play, these alternative stores face an uphill battle in gaining traction. Despite this, the attempts haven’t ceased. Microsoft’s effort to establish an Android app store specifically for Xbox mobile games is currently stalled, pending court decisions in the U.S. about Google’s Android app delivery rules.
In a recent BlueSky post, Sarah Bond shed some light on the situation with Xbox’s mobile app store for Android. She stated, “At Xbox, we’re committed to expanding player choices on how and where they play, including giving them the option to purchase and play games directly from the Xbox app. We’ve set our sights on debuting these features on Google’s Play Store for Android devices in the U.S. first, while other app stores catch up with consumer demand,” Bond pointed out. Not surprisingly, Google is actively countering Microsoft’s aspirations.
Owing to the high 30% transaction fees imposed by Google, Microsoft had to strip the in-app purchase feature from its Xbox Android app to keep its service economically feasible, now accessible via the web at xbox.com/play. A court-granted grace period for Google to file its appeal has resulted in delaying these Android features. Bond noted, “We’ve got the functionality up and ready, waiting to roll out as soon as the court delivers its final verdict.”
Responding through PureXbox, Google asserted, “Microsoft has always had the opportunity to allow Android users to play and buy Xbox games directly from their app – they simply opted not to.” Google claims that the court’s mandates and the rush to implement these could jeopardize Google Play’s ability to maintain a secure user experience. They accuse Microsoft and Epic of downplaying genuine security concerns, claiming their priority lies with an ecosystem that benefits everyone, not just mega-sized gaming companies.
This dispute echoes Google’s previous skirmishes with Epic Games, prompting their CEO, Tim Sweeney, to respond via Twitter, labeling Google’s remarks as “deceitful” and expressing his disdain, saying, “Shame on them. They know full well that their demand for a 30% cut far outweighs the profits from game streaming. They should know because they’ve seen the Stadia project fizzle despite their massive investment.”
Ouch, as they say. So, let’s unpack what’s really happening here.
The heart of the matter is that Google’s statement glosses over why Microsoft and Epic are sidestepping the Google Play system—they’re balking at the hefty 30% cut demanded from software sales. Yes, Xbox, PlayStation, and even Nintendo charge similar fees on their hardware platforms, but these platforms often sell hardware at or near cost, using the cut to sustain the ecosystem. Apple takes a premium on both its hardware and the typical 30% developer cut, effectively double-dipping.
Google, however, doesn’t have a big stake in hardware. Its Pixel phones barely make a dent in global sales, and its Android Pixel tablet line seems to be discontinued. Google’s Android success largely relies on software and services via Google Play while fueling its massive ad network, which has been called a monopoly by the U.S. recently. Google mandates its hardware collaborators to pre-install its apps and services to gain access to Google Play and control over default apps, giving it a competitive edge in data-driven ventures like search and advertising.
This intermediary role irks developers like Microsoft and Epic, stifling the growth of new sectors such as cloud gaming, crippled by Google’s cut on app store revenues. Cloud gaming remains unprofitable as we head into 2024, with sales hampered by a lack of in-app purchases on Google Play. And without a Google Play presence, discoverability dwindles, driving up Microsoft’s customer acquisition expenses.
Even though I’m no fan of Google, particularly after their stance against Windows Phone, it isn’t entirely unfair from their perspective. With the DOJ branding Google’s ad biz a monopoly, they might need to find alternative ways to monetize Android if they’re pressured to scale back their ad revenue stream. They’d naturally want to avoid losing two major revenue streams.
Microsoft argues their 30% developer cut on Xbox games is justified, given they sell Xbox consoles like Series X|S affordably, making money through the platform cut. They’ve hinted at opening future Xbox consoles to other game stores like Epic Games Store or Steam, but that vision is still in the pipeline. On PC, Microsoft’s store takes a notably smaller slice, around 12%.
I believe the open nature of the Windows platform has been beneficial for consumers, compared to the closed ecosystems of iOS and Google’s Android where Microsoft charges a 0% fee, allowing innovators like Steam to thrive. Android’s openness compared to iOS is a plus, with easy side-loading and OEM app stores, but Google Play’s tight control still favors Google’s products over competitors. Amazon’s Kindle app, for instance, had to remove in-app purchases on Android while Google continues selling books via Google Play.
The future path will ultimately be dictated by courts, but much of this friction could have been sidestepped if Microsoft had persisted with its mobile platform dream, like with Windows Phone. And that, as they say, is the bottom line!
