Microsoft Cuts Revenue Share Of PC Games To 12%

Microsoft Takes a Shot Across Valve’s Bow
Microsoft Cuts Revenue Share Of PC Games To 12%

It is fair to say that Microsoft’s foray into running an app store has been a massive let down. The interface is clunky, making it an exercise in frustration trying to find an app or game that you want to buy. Rumours have been making the rounds that along with a cosmetic update coming later this year, MS are also redesigning the store to make it much more user-friendly and today’s announcement may just be a sign of things to come.

Following on from their recommitment to gamers, see the incredible value for money GamePass, it was announced today that the Windows Store will be reducing its share of revenue from sales of games from 30% to 12% from 1 August 2021. If that 12% figure seems familiar, that is because it is the exact same revenue share that Epic takes from sales made on its Epic Game Store. MS has already shown that they share the same view as Epic with regards to fairness to developers when they joined Epic’s trade group created to challenge Apple and Google’s walled garden approach to the app stores on mobile devices.

The 12% is significant, as it directly challenges the narrative around the costs and profitability of digital stores. Valve has steadfastly refused to alter its cut of revenue unless a game reaches the ludicrously high target of either $10m or $50m, resulting in a reduced Valve cut of 25% and 20%, respectively. Valve has been rightly criticised for this ludicrous half-measure as it is only likely to benefit the AAA studios who do not need the additional share of revenue.

In fact, a recent survey of 3000 developers shows that only 3% of those surveyed believe that digital storefronts deserve such a large cut.

With this move, Windows is making their store more attractive to developers, and a more attractive store is a strategy to strengthen GamePass on PC, as this will likely drive users to buy additional content (DLC and the like) on the store.

Analyst Daniel Ahmad has put his thoughts on Twitter and it is hard to argue with him that while GamePass is a great deal, MS’ offering on PC and mobile via Xcloud is nowhere near as compelling as the one on console.

Sadly, the improved terms for developers does not extend to games sold on the console store, whose revenue share is remaining unchanged at 30%. The reasons for this are, obviously, not public, but we can guess that the old console model of selling hardware at a loss and recovering those losses via a cut of software sales is part of the reason.

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