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How can app stores be more open? Microsoft proposes a few ideas but doesn’t want to adopt them all right away

All the principles except the ones pertaining to developers’ choice apply to Xbox from today.

Microsoft on February 9 announced a set of open app store principles for its Windows app store and future game console marketplace. Sideloading (that is, allowing app downloads from outside the official app store) and letting developers use alternative payment systems are part of these principles. However, there are some important caveats:

  1. The Microsoft Store on Windows has adopted many of these principles last year including allowing third-party apps stores and letting developers use their own payment systems, so there’s relatively little new on that front.
  2. The Xbox game store, which is the bigger of the two stores and Microsoft’s cash cow, will only adopt some of these principles immediately. A notable exclusion is the one that allows developers to use alternative payment systems.
  3. We know nothing about the future games marketplace that Microsoft says will include all these principles.

Microsoft’s Xbox game store charges the same 30 percent commission as Apple App Store and Google Play Store, but the latter two have been under immense regulatory scrutiny around the world, including India. But now that Microsoft is looking to get regulatory approval for its $69 billion Activision Blizzard acquisition, it is preemptively proposing changes that will allay competition concerns.

“We have developed these principles in part to address Microsoft’s growing role and responsibility as we start the process of seeking regulatory approval in capitals around the world for our acquisition of Activision Blizzard. This regulatory process begins while many governments are also moving forward with new laws to promote competition in app markets and beyond. We want regulators and the public to know that as a company, Microsoft is committed to adapting to these new laws, and with these principles, we’re moving to do so.” —Microsoft

What are the proposed open app store principles?

The proposed principles cover four areas and borrow from the US Open App Markets Act, which recently received approval from the Senate Judiciary Committee, and South Korea’s new law:

Developer Choice

  1. Alternate payment systems: Developers will be allowed to use alternate payment systems to process in-app payments. But Microsoft hasn’t clarified if it will still charge commissions on these. On the Windows app store, the company doesn’t charge commission for apps using third-party payment systems, but charges games a 12 percent commission.
  2. Direct communication with users allowed: Developers will be allowed to communicate directly with users through their apps for purposes like pricing terms and product or service offerings. Currently, Apple and Google do not allow developers to send in-app prompts or notifications asking users to sign-up on the browser for a lower fee, etc.
  3. No terms parity: Developers will not be required to provide more favourable terms in the official app store compared to the other app stores.
  4. No disadvantaging: Developers choosing to use an alternate payment processing system will not be disadvantaged in any way.

Fairness and Transparency

  1. Equal treatment of all apps: All apps will be treated equally without unreasonable preferencing or ranking of apps by Microsoft or its business partners over others.
  2. Transparency on promotions: Microsoft will be transparent about rules for promotion and marketing in its app store and apply these consistently and objectively.

Accountability

  1. Equal standards for all apps: Microsoft will hold its own apps to the same standards it holds competing apps.
  2. Will not use non-public information to compete: Microsoft will not use any non-public information or data from its app store to compete with developers’ apps.

Quality, Safety, Security & Privacy

  1. Microsoft stores open to all who meet standards of quality and safety: Microsoft will enable all developers to access its app store as long as they meet reasonable and transparent standards for quality and safety.
  2. Consumers and gamers will be protected: Microsoft will continue to protect the consumers and gamers who use its app store, ensuring that developers meet its standards for security.
  3. Consumer privacy: Microsoft will continue to respect the privacy of consumers in its app stores by giving them controls to manage their data and how it is used.

“Put simply, the world needs open app markets, and this requires open app stores.” – Microsoft

Why the Xbox game store will not be fully open right away

All the principles except the ones under Developer Choice apply to Xbox from today. But the ones under Developer Choice are arguably the most important ones because they will give developers the freedom to use alternative payment systems.

Microsoft defended the Xbox store model in the Epic vs Apple case and it’s understandable why the company is reluctant to open it up: Microsoft does not make a profit on Xbox sales and only makes money through game sales and in-game purchases. The company reiterated this in yesterday’s blog post:

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“It’s important to recognize that emerging legislation is being written to address app stores on those platforms that matter most to creators and consumers: PCs, mobile phones and other general purpose computing devices. […] Emerging legislation is not being written for specialized computing devices, like gaming consoles, for good reasons. Gaming consoles, specifically, are sold to gamers at a loss to establish a robust and viable ecosystem for game developers. The costs are recovered later through revenue earned in the dedicated console store.”

Nevertheless, Microsoft noted that it “will need to adapt [its] business model even for the store on the Xbox console” and that it is “committed to closing the gap on the remaining principles over time.”

We will adapt to regulation rather than fight it: Microsoft

Microsoft took cognisance of the app store legislation being considered by governments around the world, including by the United States, the European Union, the Republic of Korea, the Netherlands, and elsewhere, and said that these regulations bring with them both benefits and risks. The risks deserve a fair hearing and thorough consideration, but Microsoft will “continue to be more focused on adapting to regulation than fighting against it,” the company said.

“In part this is because we have been adapting for two decades to antitrust rules, and we’ve learned from our experience. While change is not easy, we believe it’s possible to adapt to new rules and innovate successfully. And we believe it’s possible for governments to adopt new tech regulation that promotes competition while also protecting fundamental values like privacy and national and cyber security.” – Microsoft

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