Microsoft's plan to win the app store wars

Shots fired

Microsoft just made the contentious app store regulatory fight much more interesting. To get ahead of federal regulation and in a bid to smooth out any potential roadblocks to its Activision Blizzard acquisition, the company on Wednesday announced 11 new app store principles.

These commitments align closely with both the U.S.'s proposed Open App Markets Act and similar app marketplace legislation overseas, effectively outlining how the company will more fairly treat developers and avoid anticompetitive conduct.

This could complicate the fight for Apple and Google. Regulators have begun to chip away at the dominant app marketplaces on Android and iOS, though both Apple and Google have fought vigorously to defend their platform policies and restrictions. But the most adversarial legislation is on the horizon.

• The Open App Markets Act poses a serious challenge by banning certain business tactics Apple and Google have engaged in for years and with which the two companies maintain control over developers and the flow of mobile commerce.
• Microsoft’s new principles largely align with all the bill’s proposals and similar legislation in countries like the Netherlands and South Korea.
• That puts pressure on Apple and Google to make similar concessions should they try and compromise before they’re forced to alter their stores and business practices.

Microsoft has little to lose, and a lot to gain. The Windows-maker is one of the most valuable tech companies on the planet, thanks largely to its software and cloud businesses. That’s given Microsoft the leeway to take business risks in areas like digital distribution and gaming that other companies cannot afford.

• Microsoft is not a leader in PC game distribution; that’s Valve’s Steam. It also no longer runs a mobile app store of its own, after shuttering the Windows Mobile platform. It’s not in the lead in the game console race, either, as it’s lagged behind Sony for years.
• By adapting to new regulations ahead of any federal mandate to do so, Microsoft isn’t ceding vital ground to competitors while also winning favor with consumers, developers and regulators.
• This could be crucial to getting its Activision Blizzard deal approved, and the company said as much in its announcement by pledging to keep some of the publisher’s biggest games, like Call of Duty, on competing platforms.

Gaming is becoming a battleground for the future of digital commerce. Because of how large the gaming market is and how fast it's adapting to new technologies and platforms, the industry has become a testing ground for new business models and distribution approaches. These fights today are going to define how business is done on the internet well into the future.

• Just as Epic Games tried to set new precedent by suing Apple and Google for antitrust violations, the broader showdown over app store policymaking is going to dictate how billions of people access entertainment in the future, be it on AR or VR headsets, mobile phones or through the cloud.
• Microsoft’s new policies specifically address its desire for a “more open app market.” The company has realigned its gaming business, spearheaded by Xbox chief Phil Spencer, to prioritize the growth of its consumer audience, regardless of what screen they play on. But companies like Apple stand in the way.
• Though Microsoft is applying its new principles to the PC, mobile and cloud, it is not extending them fully to the Xbox console platform. Right now, Microsoft says it needs Xbox to remain closed for it to make money. The company is pledging to loosen developer restrictions on Xbox over time.

Microsoft President Brad Smith used yesterday’s announcement as a way to slam the company’s rivals. “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,” he wrote. “Put simply, the world needs open app markets, and this requires open app stores.”

The company’s motives are clearly not altruistic. But Microsoft is putting the work in today to ensure it benefits in the future if Apple and Google are forced to give up control. Microsoft, more so than perhaps any other tech company, has the experience to know when it’s on the losing end of a regulatory battle, and preemptive compliance may prove to be a much more prescient strategy than defending decade-old app store policies.

— Nick Statt (email | twitter)

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Samba TV operates the world’s largest independent source of first party connected TV data helping brands, agencies and content owners to plan, buy and measure all in one place. The State of Viewership report offers the industry’s most accurate insights into television viewing and advertising engagement. Download the report at www.samba.tv

Learn more