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NetEase CEO William Ding Lei attends the World Internet Conference (WIC) in Wuzhen, Zhejiang province, China, October 20, 2019. Photo: Reuters

NetEase CEO says Genshin Impact, Apple moves will pressure Chinese app stores to cut fees

  • Most Chinese Android-based app stores that come preloaded on phones from Xiaomi and Huawei have taken a 50 per cent cut of developer revenue
  • The pushback against app store commission fees worldwide is not new, but it was given impetus when miHoYo and Lilith Games took their fight public

Chinese app stores are losing their bargaining power to app developers as pressure grows for lower platform fees, according to the founder and chief executive of Chinese video games giant NetEase.

On the company’s third-quarter earnings call last week, William Ding Lei commended miHoYo for bypassing most Chinese app distribution platforms to offer its blockbuster game Genshin Impact as a direct download from its own website. He said miHoYo’s bold move, coupled with Apple’s decision to halve its commission on in-app purchases for small app publishers, will push Chinese app stores to rethink their own platform fees.

Most Chinese Android-based app stores, many of which come preloaded in Android phones manufactured by companies such as Xiaomi and Huawei Technologies, have historically taken a 50 per cent cut of the revenue generated by mobile apps on their platforms. In comparison, Google Play and Apple’s App Store have traditionally charged only 30 per cent.

“We are pretty optimistic about this because China is the country with the highest cost of publishing a game,” Ding said last Thursday. “Strangely, when it comes to Android app stores, those overseas take 30 per cent, and those in China take 50 per cent. So there is a lot of room [for improvement],” he said.

“We endorse Genshin Impact’s decision to publish the game with its own distribution channel. This is a very excellent market decision. I’m also aware that Apple has lowered its fee to [15 per cent]. These all suggest that the battle between app stores and content providers will tilt towards content providers,” he added.

Genshin Impact, TikTok lead world’s mobile game, app charts

Last Wednesday, Apple announced that developers earning less than US$1 million a year will only have to pay half the standard commission of 30 per cent on in-app purchases, effective January next year.

Ding said he believes Google will follow suit and that more app stores in China will pursue diversified strategies to publish their content.

The pushback against app store commission fees worldwide is not new, but it was given impetus when miHoYo and Lilith Games, another heavyweight in the Chinese gaming market, took their fight public.

Genshin Impact and Lilith Games’ Rise of Kingdom, two of the most anticipated games for the fall, decided at the last moment not to make them available on the app stores of Huawei, Xiaomi, Vivo and Oppo amid disagreement over revenue sharing.

When asked for details of the disagreements, the game developers and smartphone makers declined to comment.

Genshin Impact bypassed app stores, a move praised by NetEase. Photo: Handout

Apple and Epic Games have also engaged in a public fight over revenue sharing. Epic Games, the creator of popular game Fortnite, teamed up with a dozen other tech companies including Spotify and Match Group to form a coalition to push back on Apple’s 30 per cent platform tax. Apple’s decision to lower the commission was widely interpreted as a concession to the mounting pressure, even though Epic Games ended up pulling Fornite from the App Store.

The higher commission rates levied by Chinese app stores is in part because Google Play is blocked in the country, allowing home-grown Android app stores run by smartphone makers to dominate the market.

The Mobile Hardcore Alliance, a coalition created to facilitate distribution of apps across Android app stores run by eight smartphone makers including Huawei, Vivo and Oppo, said in a report that its app stores reached 65.7 per cent of users, or nearly 700 million people, in the first three quarters of last year. Xiaomi, which is not an alliance member, reached 16.6 per cent of users with its app store, according to the same report.

However, analysts say pressure is mounting for game stores to change tack, a trend accelerated by the emergence of new app stores willing to offer advantageous revenue share schemes to developers. Most notably, XD Network Inc’s TapTap platform levies no commission at all.

Separately, after Apple announced its intention to cut App Store fees for most developers, seven South Korean lawmakers called on Google to do the same for in-app purchases on Google Play, according to a report by the Yonhap News Agency.