It’s widely known that mobile games account for more than half of the global gaming industry revenues. Today’s thriving mobile gaming ecosystem has been in no small part enabled by the two dominant app store owners which have made distribution and billing a cinch for developers. App stores helped game developers reach a global audience and brought millions of new players to gaming.
It’s also pretty widely known that games make up almost 70% of app store revenues. In-app billing through the app stores created a near-frictionless buying experience and kept the payment process consistent across apps, which helped drive conversion. In return, the app stores charged developers up to 30% of their mobile revenues and until now in order to maintain control of standards around privacy and customer experience, the app stores have restricted users’ pay for games and in-app purchases.
In the past few years, a growing chorus of voices from brands, developers and regulators have begun challenging the app store business models and practices. In 2022, South Korea became the first country to request app stores to allow alternative ways to pay.
A new law allows mobile game developers to implement alternative payment systems to accept payments from their customers in South Korea. Meanwhile, in the US, we have seen the widely reported Epic vs Apple lawsuit roll on since 2021, recently resulting in app developers being able to provide external transaction links within the apps.
The recently launched EU Digital Markets Act, which enables third-party payment providers to enter the digital app domain, is the most significant regulatory change so far in the mobile payments space. The act came into force on 7th March 2024 with large fines (up to 10 percent of global revenue) for companies that fail to comply. Cutting through the techno-legal babble, what does this really mean for mobile game developers?
The Core of the EU’s DMA Legislation is expected to break a lot of Monopolies in the gaming industry
The DMA works to break up the purported monopolies of platform holders or ‘gatekeepers. Under this legislation, the tech giants will be held accountable for aspects such as fair ranking, business freedom and proper data handling on their platforms. This includes not only tools like search engines but also applications created by these companies and, consequently, their mobile application storefronts.
It effectively frees business users (such as studios and publishers) from the constraints of not being able to promote or direct users to other in-app purchase services off-platform. It also frees them from the constraints of being unable to select third-party payment systems rather than those provided by the platform holders.
The EU’s Digital Markets Act (DMA) in theory eases the hold that platform operators have had on mobile gaming storefronts and ultimately gives users more choice on where and how they’d like to pay, improving the overall experience. In recent years we’ve already seen in-the-know game developers like Supercell take advantage of opening up their own web stores.
If that represented a door creaking open, the DMA aims to kick it down for alternative payment providers and off-platform IAP systems, as well as third-party storefronts on devices manufactured by these ‘gatekeepers’ themselves.
The EU’s Digital Markets Act (DMA) Legislation provides the opportunity for higher revenues, greater control and fewer restrictions
But what does this groundbreaking piece of EU legislation really mean for game developers in practical terms? Put simply it provides the opportunity for higher revenues, greater control, and fewer restrictions. However, how this will actually be implemented is still not clear at this stage.
The app stores are concerned the new regulations could jeopardize consumer privacy, result in poorer user experience, and put users who purchase digital goods from other sources at risk of fraud but are beginning to slowly soften their stance on digital in-app purchases.
Both app stores have already announced several changes to the rules for their in-app billing system in certain countries across Asia and Europe. Apple has also started to reduce their fees to developers, so far by 3-4%, and both third-party app stores and marketplaces will be available on iOS in Europe. Google is piloting its alternative billing programs globally to explore offering this choice to more users.
The Digital Markets Act (DMA) Legislation will bring a new mobile gaming payment experience
There are two new payment options that are now available to app developers, either through in-app links directing players to external payment interfaces or through payment within the mobile game’s native user interface.
It may seem a little daunting for some developers – small ones in particular – to make the leap through this new gate in the in-app paradigm. But this doesn’t mean that you have to miss out on the potential revenue streams that the DMA and similar regulations open up, even if your players are reluctant to use web stores, developers will have the option to use both their existing providers and new providers should they not feel comfortable switching entirely.
There are a number of payment providers, including Worldline, now taking a much greater interest in the post-DMA mobile gaming landscape not just with web stores but with alternative IAP options as well. These providers are offering new, accessible and more equitable deals for dev that will certainly drive innovation across the mobile gaming market.
Industry Experts’ Column
This article is authored by Jonas Martins, Director of Video Gaming and Media at Worldline. We at GamingonPhone often take note of the opinions of the experts and put forward their thoughts and views as part of the Industry Experts’ Column.
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