May 4, 2021
Image: Epic Games
This week in Protocol Gaming, your weekly guide to the business of video games: fierce debate in the game industry over longstanding revenue-sharing deals, troves of confidential court documents reveal telling financial metrics and Discord is arriving on game consoles at long last.
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When we talk about digital marketplaces and game distribution in particular, the numbers that most often come up are 70-30: That is, the 70% earned by the seller and the 30% kept by the marketplace. This revenue split has been a longstanding industry standard; it's how the App Store and Google Play Store operate, and it's how Microsoft, Nintendo, Sony and Valve have handled digital game sales for years.
Once upon a time, the 70-30 split was revolutionary. Compared to the share of revenues taken by GameStop or Walmart and the costs associated with physical retail, a flat 30% commission was a cause for celebration. And so game makers flocked to digital, and sales soared.
These changes helped birth both the modern indie game movement and the mobile market, while also starting the slow, steady transition away from buying games on discs from a store toward downloading them from online platforms. Last year, amid record digital spending during the COVID-19 pandemic, overall digital game sales exceeded physical sales, with major publishers like Activision Blizzard and EA reporting more than half of all revenue coming from digital purchases.
But the 70-30 model is now coming under close scrutiny. The last few years have called into question how justified these arrangements are, and what, if anything, might shift attitudes, business models and developer agreements toward a more equitable sharing of profits for creators.
And the industry standard no longer seems so standard. Microsoft last week announced a planned reduction of its commission on PC games from 30% to 12%.
This backlash didn't come from left field: It was a trend building steadily over the last decade.
The upshot is pressure on Apple and others to share more of the wealth, especially as the cost of operating these platforms has dropped. Few companies are as willing or financially capable as Epic or Microsoft to forgo profits in favor of shoring up developer support. But it's starting to look like the 70-30 industry standard may not survive the next decade. It's just a matter of which major platform buckles first — or, in Apple's case, is forced to.
As the world becomes increasingly digital, we look to a future that's bright with possibilities. But we must first address a stark reality: Unless we radically rethink how we make decisions and who benefits from the outcomes, we risk reducing the chances of participation in the digital economy for billions of people.
A PC gaming cafe in Tokyo is opening its doors on May 19 to any and all aspiring athletes who want to come train at what the establishment is calling an esports gym, according to Insider. It's not the world's first esports gym — apparently that honor belongs to LA's E-Coliseum — but the 7,700-square foot Tokyo esports facility will feature dedicated training courses and rentable PC stations featuring the most popular competitive games like Valorant and League of Legends.
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