Third-party app stores are coming to the iPhone in Europe thanks to the Digital Markets Act (DMA), which forces Apple to open up iOS to competition. But that doesn’t mean apps will be cheaper now that Apple is willing to let the official iOS App Store compete.
Epic will be one of the providers of these new app marketplaces, the Epic Games Store (EGS). Epic has just confirmed the commission it will take from developers who publish apps on EGS and use Epic’s payment processor. Developers will pay 12%, which sounds better than some of Apple’s commissions. I will note that Apple’s fee may also include payment processing, depending on what the developer wants to do in Europe.
That EGS fee may seem like a great deal, but it’s not as good as it seems. Developers who pay 12% to Epic could also be hit with Apple’s CTF fee, which is €0.50 per app install after 1 million downloads.
As I said before, DMA will not make applications cheaper in the EU. That will only complicate things. The sole purpose of EGS is to get Fortnite back on the iPhone.
Epic Games Store Fees
Per 9to5Mac, Epic confirmed the fee structure for the Epic Games Store at the Game Developers Conference. Epic said EGS will be available on iPhone by the end of the year, using the same commission structure for Windows and macOS platforms:
Finally, we shared more about our plans to bring the Epic Games Store (EGS) to mobile later this year. EGS will become the first multi-platform store focused on games and will work on Android, iOS, PC and macOS. Mobile developers will benefit from the same fair terms on EGS for PC: 88/12 revenue share and the same programs you can use to keep 100% of the revenue using your own payments for in-app purchases, Epic First Run and Now On Epic.
That division 88/12 applies to in-app purchases and in-app content only if the developer does not use its own payment processor. This is something that the spokesperson further clarified 9to5Mac:
The Epic Games Store has an 88/12 revenue split for developers who distribute paid apps on PC and Mac, and this will continue on mobile platforms as well. Developers don’t pay Epic anything to distribute free apps. If developers offer in-app purchases, they can choose to either use our payment processing system with an 88/12 revenue share or use a third-party payment processor and keep 100% of that revenue, just like they do today.
So one could conclude that the 12% fee that Epic charges is there to cover the payment processing fee, not the costs associated with running the Epic Games Store on iPhone and other devices. And, again, remember that any developer who puts apps into EGS will also pay fees to Apple once the CTF threshold is reached. By the way, the same goes for Epic and its games.
Meanwhile, Apple has new fees for EU developers who want to ditch the old deal. Fees range from 10% to 17% (depending on developer size) if developers use their own payment processor, or 13% and 20% if they use Apple’s. CTF also needs to pay if their apps cross that 1 million download threshold.
Larger companies that no longer benefit from the lowest possible commission (10%) could be lured by the 12% commission that EGS proposes. Make it commission-free if they use their own payment processor. But if they don’t qualify for the App Store Small Business Program, which would earn them a 10% fee, they’re probably already using popular apps. These apps could have more than a million downloads per year. Therefore, they would have to pay Apple a CTF fee.
It might be better for those developers to stick to the old App Store terms rather than the new ones. Apple offers a fee calculator, which I used a few weeks ago to show that iPhone apps won’t get cheaper in the EU because of DMA. The Epic Games Store won’t do that either.
Also, let’s not forget that the App Store gives developers access to all devices in the EU, that is, the world. Meanwhile, EGS cannot offer the same exposure. The revenue will be much higher from App Store applications than from EGS.
It’s all about Fortnite
The only good thing coming from the Epic Games Store is access to Fortnite from the official source. Because Fortnite is so popular, Epic will pay it to the CTF. And if Epic thinks paying 0.50 euros per user to Apple is fair, it means the company also thinks it can make more from in-app purchases on EGS in Europe than it would from the App Store.
Fortnite has been banned from Apple’s App Store and there is no indication that Epic will be able to bring it back.
Of course, we’re still in the early days of DMA. Maybe the EU will decide it doesn’t like the CTF, but I have popcorn ready. I wonder how the EU will tell Apple that it can’t tax developers for access to the iPhone, developer tools and the hundreds of millions of users in Europe who could run their software, or what kind of compensation would be fair.
Epic and others certainly don’t like the €0.50 CTF fee. If they want, they would like free access to the iPhone.
One more thing
There’s one thing that EGS might allow access to that the App Store won’t: apps that Apple bans from the App Store. The same goes for other app markets coming to iPhone in Europe.
However, this is not necessarily a good thing. It can open the door to clones and other potentially malicious applications.