The app ecosystem is about to get very interesting indeed…
By 2021, global app downloads are expected to reach 352bn. The digital platforms occupy a vital role in distributing content, and providing a secure marketplace for developers. With this as their justification, most app store providers charge a hefty commission fee of 30 per cent. Although there is a clear duopoly shared by Apple and Google, others like Amazon, Microsoft, and Steam developer Valve also enjoy a formidable market share. Since Apple opened its app store in 2008, the status quo has remained more or less the same… But could that be about to change?
An Epic challenge
Due to the complexity of building an app store, it’s difficult to imagine a smaller company standing up to the tech giants. That said, in December 2018, Fortnite creators Epic Games announced the release of a brand new app store. In a direct challenge to the existing ecosystem, the Epic app store charges developers a modest 12 per cent commission fee… That’s less than half of the charge paid to more established platforms. Epic also has a loyal following of 200 million registered Fortnite gamers – a ready made audience, if you like.
According to DISRUPTIONHUB expert contributor Haydn Shaughnessy, the app store scene is ready for a reshuffle.
“You have to look to who is behind Epic. Apart from a very smart CEO, they are also backed by Tencent and it could present an interesting way for Tencent to develop experience in global marketing and maybe also to bring some of its own micro-app philosophy into the European and US mobile markets,” he says. “As Epic point out, Apple can keep them out of iOS but it is time for a shake up in the app store world.”
A question of conversion
“Really the question for Epic is how well it can cross promote and convert players of Fortnite into consumers of other content on a brand new sister service. They will definitely attract a lot of content, but at the moment the number of available titles is very small. They have quite the task of curating what has to be a flood of hundreds if not thousands of games being proposed by developers.”
Successful conversion will rely on a effective marketing campaign, the range and quality of content, and a tight handle on costs. With such a strong online presence already, it looks as if Epic can handle the challenge.
Gibson believes that a successful Epic store could lead to an influx of new, cheaper platforms for developers, giving them more freedom and another channel with which to reach a wide audience. From a user perspective, having another app store will mean going through more digital channels. However, if Netflix’s self inflicted severance from the Apple store is anything to go by, the impact on apps – and their users – is negligible.
“Ultimately this is about an increasing fragmentation in the number of places consumers need to go to buy products. I don’t think that is particularly challenging. When it comes to digital content, they’re used to shopping around,” says Gibson. “Households have multiple different subscriptions, rather than going to one place. Players will find one product in one place, and another product in another, especially if products are exclusive on specific platforms. The end price that the consumer has to pay is not going to change.”
What really happens next depends on how the bigger players – Google, Apple, Valve, Amazon, and Microsoft – react.
“For Epic, the charge of 30 per cent is simply untenable, and launching an Android games store will take a bite out of Google’s revenues as some players move to Epic. How significant a bite remains to be seen,” explains Gibson. “Apple is more difficult. I don’t think the iTunes 30 per cent is going to change any time soon. However, it turns out that some of the larger app development companies have already stopped going through the iTunes store.”
And, as Shaughnessy points out, app stores were flourishing long before the tech giants joined the party.
“People forget that neither Apple nor Google invented app stores,” he says. “There were 50,000 apps on the Palm store before Apple launched its app store, and independent companies like Handango were doing well too. Maybe someone should have been challenging the status quo a lot earlier.”
So will the dominant app store providers really be threatened by Epic’s cheaper option? At this early stage of the game, it’s hard to say whether or not it presents a serious threat. But what we can be sure of is that this is the first part of a saga which will see the diversification of the app store infrastructure.
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