Microsoft planned to reduce its cut from 30% to 12% for Xbox games too, a document filed as part of Epic vs Apple lawsuit in January shows

The Verge 2021-05-03 Tom Warren

Context & Ripple Effects

Microsoft had already widened the revenue share for non-game Store apps while preserving games' 70/30 split in its earlier app-developer payout policy. Days before this filing surfaced, it announced a 12% PC game-store commission to compete with Steam, making the Xbox plan evidence that the lower rate was considered for games beyond PC.

First-order effects

The filing identifies Xbox game developers as intended beneficiaries of an 88% revenue share, rather than the 70% share associated with the existing Xbox games model.
For Microsoft, a 12% Xbox commission would mean giving up 18 percentage points of gross transaction revenue per game sale if the plan were implemented.

Second-order effects

Developers assessing Microsoft's PC offer would have reason to evaluate PC Store and Xbox terms together, rather than treat the announced PC cut as a standalone concession.
Extending the PC Store's lower rate to Xbox would make Microsoft’s developer-economics pitch more consistent across its game storefronts, increasing pressure on competing game-distribution platforms to justify higher commissions.

Third-order effects

If Microsoft pursued the plan, the long-standing distinction between preferential terms for non-game apps and higher game commissions would weaken, shifting platform competition toward developer revenue share.
The Epic v. Apple filing places platform take rates in a legal and public-policy frame, where internal pricing plans can become evidence in wider disputes over digital-store economics.

The trend: Game platforms are using lower store commissions as a competitive lever for attracting developers, while litigation makes those take-rate decisions more visible and consequential.

Discussion

@tomwarren Tom Warren on x
the Xbox store cut to 12% is NOT happening. It looks like Microsoft explored the idea, but it's not going ahead. “We will not be updating the revenue split for console publishers,” says Microsoft in a new statement. Details: https://www.theverge.com/...
@tomwarren Tom Warren on x
Microsoft wants to reduce its Xbox store cut to just 12%. A confidential Microsoft document reveals the company's plans, along with some details on Xbox exclusive games. All the details here: https://www.theverge.com/... https://twitter.com/...
@zhugeex Daniel Ahmad on x
Pretty much what I said this morning. Cutting the take rate to 12% on PC for MS Store makes sense. Cutting the take rate to 12% on console would lose them over 1/3rd of their revenue overnight. Once MS is less dependent on console we could see some change in their approach. https…
@matpiscatella Mat Piscatella on x
It was a fun thought exercise for a Sunday morning. https://twitter.com/...
@tomwarren Tom Warren on x
Microsoft's app store changes this week are perfectly timed for all the bigger fights against Apple's 30% cut. I've looked at all the ways Microsoft has been quietly supporting Epic Games, calling for App Store changes, and more. My report here: https://www.theverge.com/... https…
@starfire2258 Sean Hollister on x
Not just the PC cut. Xbox too. https://twitter.com/...
@neogamespark Neo on x
So not just the Windows Store on PC but Xbox as well? That's great news for devs all around. https://twitter.com/...
@nintyprime Nintendo Prime on x
If this happens... wow. Microsoft is doing everything they can to get all the games all the time. https://twitter.com/...
@zhugeex Daniel Ahmad on x
For reference. Here is a quick thread on why a 12% cut does make sense for Microsoft's PC store and why it's playing in to the Epic v Steam line of thinking there. https://twitter.com/...
@spawnwavemedia Spawn Wave on x
If Microsoft actually ends up changing their cut on Xbox to 12% from 30% that could make things very interesting in the console space https://twitter.com/...
@falkoopa_ FalKoopa on x
I'll give credit to Epic here to kickstarting the trend to make 12% cut the standard. Yes it was out of spite, but something good may come out of it. Microsoft lowering the cut puts pressure on PlayStation, Nintendo and Steam to lower their cut as well. https://twitter.com/...
@haveyouseen01 HaveYouSeen on x
Microsoft is using its pockets to beat competitors. Lol. Microsoft can afford to only keep 12%. Sony cannot afford to do that. I love this for the industry and devs, not for the competition. https://twitter.com/...
@10_ch_10 TenchInvest on x
Very positive if true, especially for console-centric companies such as $EMBRAC https://twitter.com/...
@woelfel Chris Woelfel on x
Streaming rights is the most interesting part of the documents. Shows how all in MS wants to be apart of that future. It is the future anyways. https://twitter.com/...
@matpiscatella Mat Piscatella on x
No idea if true, but fun thought exercise. A cut like this would obvs make the platform even more appealing to pubs/devs, leading to addl 3rd party content, promotion and marketing. Would also accelerate the push of share shift to digital, to say the least. Would be wild. https:/…
@delmontyb Ginger Prime on x
It makes perfect sense when you factor in cloud gaming. The 88/12 split would be available to devs who support xcloud/gamepass https://twitter.com/...
@zhugeex Daniel Ahmad on x
There isn't much incentive for Microsoft or any of the console manufacturers to do this. Publishers will put their games on Xbox regardless. https://twitter.com/...
@nickstatt Nick Statt on x
Wow. Internal Microsoft document reveals early 2021 plans, potentially tentative or since scrapped, to lower Xbox store cut to 12% in exchange for streaming rights i.e. xCloud. Great get from @tomwarren. https://www.theverge.com/...
@quicktake Bloomberg Quicktake on x
Apple Inc.'s App Store had operating margins of nearly 78% in fiscal year 2019, according to testimony from an Epic Games Inc. expert witness https://www.bloomberg.com/... https://twitter.com/...
@schuldensuehner Holger Zschaepitz on x
Margins like in the drug trade: #Apple's App Store had a 78% operating margin in 2019, according to an Epic Games expert witness. https://www.bloomberg.com/... https://twitter.com/...

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