According to a report from the Wall Street Journal based on figures made public during a recent antitrust trial, Apple made more in profits from games distributed through the App Store in 2019 than actual game developers like Nintendo Co. and Activision Blizzard Inc., and game console makers Microsoft Corp. and Sony Corp.
The goose that lays this golden egg for Apple is the App Store. With ‘sideloading’ apps an impossibility across Apple’s ecosystem, the App Store is the only platform game developers can use to publish games and process in-game purchases for iPhones and iPads. And Apple, for being the purveyor of this platform, takes a 30% cut of all app sales and in-game purchases made.
There are thousands of games from third-party developers available on the App Store, including highest-grossing titles like Epic Games Inc.’s Fortnite (up until last year, at least), Niantic Inc.’s Pokémon GO, and Honor of Kings and PUBG Mobile from Tencent Holdings Ltd., and Apple gets a hefty commission on sales made on each of them.
In 2019 alone, Apple made a whopping $8.5 billion USD in operating profits from commissions on games sold and in-game purchases made via the App Store. That’s more than Nintendo Co., Activision Blizzard Inc., Microsoft Corp., and Sony Corp.’s combined operating incomes from video games during the same period, according to the WSJ.
“Apple said Friday the disputed operating margins come from an analysis that doesn’t include many joint costs for the App Store and results in margins that it describes as being too high because it includes all revenue but only a fraction of the costs,” reports the WSJ. Essentially, Apple is disputing these gaming margins from 2019.
Apple touted the estimated commerce facilitated by the App Store ecosystem worldwide for 2019 was $519 billion USD, according to its report last year based on a study from the Analysis Group.
While Apple isn’t a video game developer, the App Store acting as the gatekeeper to gaming on iPhones and iPads has made the Cupertino tech giant one of the world’s largest video game companies.
Apple may not be able to maintain its iron grip on iOS gaming for long, though. While the company’s long-fought legal battle against Fortnite developer Epic Games recently ended and the trial concluded with decisions in nine out of ten counts going in favor of Apple, federal judge Yvonne Gonzalez Rogers also ruled that Apple must allow developers to inform users of alternative payment mechanisms and even link to their own transaction systems within apps.
Even though the trial against Epic Games has come to a close, the issues and behaviour highlighted have led to a number of antitrust probes into Apple’s practices, as well as increased scrutiny from lawmakers and regulators across the globe.