Take Rates in China - Will Quality Development Beat Out Traditional Distribution?

Epic v. Apple Sets the Stage for Developers Evaluating High Take Rates in China

Apple charges a 30% fee on in app purchases that takes place in games distributed through its App Store, worldwide. Its China App Store is no exception. In 2020 Epic Games challenged this “standard” in an anti-trust case that has received wide recognition in the West. Epic says that the 30% “take rate” is too high and wants to offer its own store on iOS as an alternative. The Epic Games Store, currently available on PC, charges a 12% take rate to third-party developers who distribute via that store. Epic says that it only costs them around 5% to process payments, 1% for the CDN bandwidth and 1% for other costs, which means the total cost per transaction is only around 7%. Epic takes roughly 5% profit on top, while Apple takes approximately 23% profit, assuming the costs are equivalent.

Notably, 28 Chinese app developers filed a complaint against Apple in 2017 for its abuse of market power which included removing apps and charging a high take rate for in-app purchases. Apple has a significant market share globally and roughly 25% of Chinese gamers play games on iOS smartphones. Chinese iOS gamers generally spend more on games than do Android gamers, with roughly 40% of mobile game revenue from iOS smartphones. Epic could afford the risk of Fortnite getting kicked off the App Store for violating payment policies in protest to the 30% take rates, but smaller developers cannot afford that risk.

While the media focuses on Epic v Apple, Chinese game developers are starting to challenge domestic Android app stores.

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Take Rates in China – Will Quality Development Beat Out Traditional Distribution?