Microsoft vows to adapt to app store regulations — just not for Xbox

Microsoft has announced a series of new app store policy commitments, which apply to its Microsoft Store on Windows and in its various gaming marketplaces. The company specifically cited proposed U.S. regulation, which includes the Open App Markets Act and the American Innovation and Choice Online Act, along with potential scrutiny of its Activision Blizzard acquisition, as the motivating factors.

The post, authored by President Brad Smith, outlines 11 principles the company has pledged to follow with how it treats developers and the rules it imposes on software distribution. Some of these principles cover existing positions, like Microsoft's announcement last year it would not forbid app-makers from using a third-party payment system for software sales through the Microsoft Store.

But Microsoft is going a step further today in "adapting to regulation" rather than "fighting against it," Smith wrote. He explained that the commitments the company is announcing today are "grounded in app store legislation being considered by governments around the world, including by the United States, the European Union, the Republic of Korea, the Netherlands, and elsewhere."

The principles include three commitments to quality, safety, security and privacy; two on accountability, including a pledge to "not use any non-public information or data from our app store to compete with developers’ apps"; two on fairness regarding the ranking of apps and marketing and placement in its stores; and four principles on developer choice, outlining Microsoft's positions on letting app-makers choose third-party payment systems and communicate with customers.

Many of these positions stand in stark contrast to App Store restrictions Apple has been vigorously defending both in the antitrust lawsuit against Epic Games and in bouts with regulators around the world. And Smith's post takes a clear shot at Apple.

"Our vision is to enable gamers to play any game on any device anywhere, including by streaming from the cloud. App stores on the most relevant and popular everyday devices like mobile phones; PCs, including Windows PCs; and, in time, the cloud, are important to realizing this vision," Smith wrote. "But too much friction exists today between creators and gamers; app store policies and practices on mobile devices restrict what and how creators can offer games and what and how gamers can play them."

All 11 of these principles will apply to Microsoft's approach to software distribution on PC, mobile and the cloud, but not all of them will apply to its Xbox platform. The company sees its Xbox console as a closed ecosystem; in the Epic trial, Xbox executive Lori Wright outlined how the company loses money on hardware sales and relies on the closed nature of the Xbox platform to earn money on software sales and subscription services.

"Some may ask why today’s principles do not apply immediately and wholesale to the current Xbox console store. It’s important to recognize that emerging legislation is being written to address app stores on those platforms that matter most to creators and consumers: PCs, mobile phones and other general purpose computing devices," Smith argued. It's a position Wright also emphasized in her testimony, and one Microsoft has publicly expressed to explain why Xbox should not be open to third-party app stores.

"Gaming consoles, specifically, are sold to gamers at a loss to establish a robust and viable ecosystem for game developers. The costs are recovered later through revenue earned in the dedicated console store," Smith said. "Nonetheless, we recognize that we will need to adapt our business model even for the store on the Xbox console. Beginning today, we will move forward to apply Principles 1 through 7 to the store on the Xbox console."

Smith did, however, add that Microsoft is "committed to closing the gap on the remaining principles over time," and that it will "incorporate the spirit of new laws even beyond their scope, while moving forward in a way that protects the needs of game developers, gamers, and competitive and healthy game-console ecosystems."

It's unclear if that means Microsoft may in the future open the Xbox platform to third-party payment systems or alternative app stores, or if the company intends to lower its store commission on Xbox from 30% to 12%, as it did last year for PC gaming apps on the Microsoft Store.