Retaining its current revenue split will help the company invest in the future of its gaming division.
Microsoft unveiled Windows 11 during a late June digital conference, and games featured heavily in that unveiling in more ways than one. The Redmond software company highlighted Xbox Game Pass features, Xbox integration with Windows 11, and a new revenue-sharing plan that lets app developers claim 100% of their profits on the Windows Store--unless they make games.
“Many developers love the Microsoft Commerce platform because of its simplicity, global distribution, platform integration and its competitive revenue share terms at 85/15 for apps and 88/12 for games,” Microsoft said in its Windows 11 announcement blog post. “Starting July 28, app developers will also have an option to bring their own or a third party commerce platform in their apps, and if they do so they don’t need to pay Microsoft any fee. They can keep 100% of their revenue.”
The statement seemed to deliberately leave out mention of game developers, and Microsoft confirmed to The Verge that the 100% profit option does not apply to game developers. Instead, the Xbox maker’s existing 88/12 profit split will still hold for them.
Microsoft didn’t explain the reason behind excluding game developers from this new revenue-sharing scheme, but the desire to realize higher profits are likely behind it according to one game developer.
“It seems clear to me that they classify gaming as a different, likely more sizable revenue generator for the store,” Nicholas Laborde, founder of Raconteur Games, told GameDaily. “While this decision is frustrating when you read the headline, I can certainly understand the decision to not let games go completely royalty-free.”
Keeping the existing revenue split will help Microsoft’s gaming division remain strong and profitable moving forward.
During the Epic vs. Apple trial earlier in 2021, Microsoft admitted it makes no profit from selling consoles and said most of its revenue comes from game sales. The companyreported $143 billion in revenue for 2020 in its annual shareholders statement, but even billions run out.
Louise Shorthouse, senior analyst at Ampere Analysis,told GameDaily Epic Games’ similar 88/12 revenue split isn’t enough to keep it profitable if the studio continues investing large amounts elsewhere, such as spendinghundreds of millions of dollars on exclusivity deals.
While Xbox investments happen less frequently than those Epic engineers, they’re often more costly. Microsoft bought ZeniMax Media for $7.5 billion, for example, and is embarking on a new campaign to pioneer cloud gaming with its xCloud program.
Shorthouse also told GameDaily that strategies such as Epic’s are primarily viable for establishing strong customer bases, a tactic Microsoft also appears to be employing. For example, Halo Infinite’s multiplayer campaign will be a free-to-play experience in a move NPD Group’s Mat Piscatella said is likelydesigned to increase the number of people who buy Halo Infiniteand Microsoft devices to play it on.
In short, keeping the 88/12 revenue split for its profitable gaming segment means Microsoft can keep offering programs such as Game Pass and invest in future generations of hardware and software.
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