Microsoft will match Epic and share more money with video game makers


Satya Nadella, CEO of Microsoft, speaks with Herbert Diess, CEO of Volkswagen AG (not pictured), about a joint project between the two companies called the Volkswagen Automotive Cloud in Berlin on Feb. 27, 2019.

Sean Gallup | Getty Images

Microsoft said Thursday that on Aug. 1 it will raise the percentage of revenue that developers receive from sales of video games through its app store from 70% to 88%.

Microsoft wants to ensure video game developers don’t abandon the store that comes with the Windows 10 operating system, as video game content represents a growing source of revenue that Microsoft would prefer to keep healthy, attracting both developers and end users to keep its own store thriving.

Revenue from “Xbox content and services,” which includes royalties from third-party game sales for PCs as well, grew 34% in the first quarter as people continued to play games while sheltering in place to reduce spread of the coronavirus. Microsoft does not report absolute revenue for the segment, just percentage growth.

While Microsoft offers its own games such as Flight Simulator and Minecraft in its own store, the company wants to ensure that third-party developers continue to release their creations there, too. The update comes a week after Windows Central, citing unnamed sources, reported that Microsoft plans a revamp of its store app for Windows 10, along with more permissive policies.

“Having a clear, no-strings-attached revenue share means developers can bring more games to more players and find greater commercial success from doing so,” Sarah Bond, the Microsoft corporate vice president in charge of game creator experience and ecosystem, wrote in a post on LinkedIn.

The new revenue share will match the arrangement that privately held Epic Games employs in the store it has maintained since 2018. PC gamers spent more than $700 million on Epic store purchases in 2020, and Epic was valued at nearly $29 billion after a recent funding round, the company said earlier this month.

Microsoft is also seeking to distinguish itself further from privately held Valve Software’s Steam store, which since 2018 has offered 66% of revenue to developers, or 75% if developers earn over $10 million, or 80% for more than $50 million.

The toll that big technology companies charge small software developers has become an issue across the tech industry, particularly as regulators look at the power of mobile app stores run by Apple and Google. At the start of this year Apple introduced a program designed to reduce the burden on smaller developers. Developers who received less than $1 million in 2020 for all their apps and developers who are new to Apple’s App Store can qualify for the program, which takes 15% of revenue rather than the standard 30% cut.

WATCH: Why the Apple vs. Epic Games battle is about more than just games



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