The video games industry is quietly fuming about Google and Apple's sky-high app store fees (GOOG, AAPL)

fortnite

The video games industry is quietly furious about Apple and Google's 30% fees on all app transactions, according to analysts.
According to a recent research note from Macquarie, some in the industry are considering finally taking their complaints public — a potential nightmare for the two companies.
Tim Sweeney, CEO of EPIC, the studio behind "Fortnite," is already outspoken about the fees, calling them "parasitic."
Any change could send games companies profits skyrocketing — but may also cost Facebook and Google billions of dollars.

Tim Sweeney, the CEO of EPIC, the video games studio that makes wildly popular survival shooter "Fortnite," isn't a fan of how Apple and Google do business. In 2017, he called the fees the firms charge app developers "parasitic" — and earlier this month took the unprecedented step of deciding to release "Fortnite" on Android independently of Google's app store, side-stepping the fees altogether.

This may only be the tip of the iceberg.

For as long as Google and Apple have operated app stores for their mobile operating systems — the Google Play Store on Android and the App Store on iOS respectively — the two Silicon Valley giants have charged a hefty 30% on all transactions, whether buying apps or in-app purchases. (For subscription services, in some circumstances, they now charge 15%.)

These fees has long been considered a cost of doing business in the world of apps — but according to a recent research note from analysts at Macquarie Research, a financial services and research company, the games industry is growing increasingly fed up.

Given our coverage of the video game industry, we’ve had behind closed door discussions with game developers who claim that [Apple] and [Google's] commission structure is unfair and that they may take a more public role in pushing back against the business model," the analysts wrote in a note.

"We’ve also heard directly from the CEO of a major game publisher that 'Apple is a monopoly' that is taking way too big of a cut. As [Google] and [Apple] continue to add more services and directly compete with app developers, we suspect some of these voices from the music, video, game business, and others may become louder."

In other words: Games companies are privately griping inside the industry about the problem, and more and more are thinking about finally going public with their concerns — a radical move that could inflame the debate around the appropriateness of Apple and Google's fees to a level not seen in years. (Outside of the games industry, Netflix is now also experimenting with a way to avoid app store fees.)

Google and Apple did not respond to Business insider's request for comment.

There are limits to what games companies can do short-term, of course. For consumers, the process of side-stepping Google's Play Store to get apps is technical, and requires users to change settings on their phone, potentially compromising their security — something users would arguably be less inclined to do for anything other than the megahit that is "Fortnite."

And on Apple's iOS such a maneuver simply isn't possible: The operating system is locked down, with no way in for developers other than the App Store. It's Apple's way, or the highway.

But a very public display of displeasure could still put pressure on Google and Apple to make concessions, in an era of extreme sensitivity around tech companies' public images amid increased dissatisfaction with the industry from regulators, lawmakers, and the general public.

If app publishers do win concessions, it could be an absolute bonanza for games companies.

Macquarie calculates that King, a mobile games publisher owned by Activision Blizzard, would see a 12% boost to its EBIT (a measure of profitability) in 2020 if the fees were cut to 15%. EA's 2021 EBIT would surge 8%. And Zynga's 2020 EBIT would soar 53%.

These are multi-billion dollar companies — meaning there's a whole lot of money potentially up for grabs. But Facebook and Google are unlikely to give up easily either; they risk losing billions of dollars from a reduction in fees.

It's too early to say which way this will play out, but it sounds like the issue is drawing towards a crisis point — and the tech giants have a lot to lose.

Join the conversation about this story »

NOW WATCH: What's going on with Elon Musk