Reporter Wang Jing
On September 6th, foreign media reported, citing informed sources, that "Apple has approved Tencent's i0S ecosystem WeChat update submitted this week to buy more time for ongoing negotiations
Recently, there were rumors in the market that "WeChat may not support iPhone 16". The reporter contacted Apple's official customer service, and the customer service replied, "There is currently no such information that says iPhone 16 does not support WeChat. Don't worry, all current iPhone phones can use WeChat normally
This afternoon, the WeChat iOS version was officially updated, which will quell the false speculation that Apple's iOS system will not update WeChat.
The new version of WeChat has been updated normally on the Apple Store. Screenshot of Apple Store
Behind these controversies, Tencent is in negotiations with Apple regarding the sharing of WeChat mini games. It is reported that Apple has requested that unless Tencent removes the payment link used by small game developers to accept payment methods outside of the Apple platform, Apple may refuse important updates from WeChat.
At the Q2 2024 earnings conference held in August, Tencent's management responded, "Currently, we have not monetized mini programs on iOS through in app transactions. I believe that if this monetization can be achieved, it is not only in our interest, but also in Apple's interest, and more in the interest of game developers and users. However, we hope to achieve this goal on economically sustainable and fair terms. Therefore, this discussion is ongoing, and we hope to reach a positive outcome because it will be a win-win situation. If we fail to reach an agreement with Apple, the current development situation will be maintained
It is not difficult to see from the response of Tencent executives that the focus of Tencent's negotiations is to achieve a three win situation, and how small and medium-sized developers can survive is the core of this negotiation.
Apple focuses on 'mini games'
The so-called "Apple tax" refers to the commission that Apple charges 15% to 30% on the consumption of digital content for all apps on the App Store. Whenever Apple users pay to download an app through the Apple App Store or purchase digital goods/services within the app, Apple will withhold a portion of the transaction amount as a "toll fee" and transfer the remaining amount to the corresponding app developer.
For many application developers, the "Apple tax" will increase operating costs and put pressure on some small developer teams or individual developers. Small games naturally have the advantages of small size and low development costs, which attracts a large number of teams, especially small and medium-sized R&D teams. The 2024 WeChat Open Course PRO mentioned that among the 300000+developers of WeChat mini games, more than 80% have small teams of less than 30 people. In order to ensure the survival and development of the team, some developers attempt to bypass Apple's payment system in order to gain higher profit margins.
An anonymous small game developer told reporters that people may subconsciously think that game profits are high, but in any industry of free competition, practitioners are all involved. The cost of promoting small games is very high, and during the game promotion period, the investment in buying volume is even higher than the scale of recharge revenue. Even during the stable operation period, it is necessary to allocate 60-70% of the revenue to maintain buying volume. So the profit margin of small games is relatively low, and the actual profit margin is much lower than Apple's tax of 30%. If Apple insists on collecting Apple taxes in the future, the entire industry's investment model may need to be overturned, and developers will have to find other ways to make up for this loss. The increase in costs may inevitably be partially transferred to users, but it also depends on their level of acceptance.
In addition, referring to App games, on the Android platform, game developers will cooperate with terminals. Simply from the perspective of commission, the Android platform is still higher, but it will have traffic support. Developers can also choose not to list on the app store, but Apple has relatively few options for serving developers, so the Apple tax will make everyone feel uncomfortable. Even if Apple taxes are introduced for future mini games, we hope that Apple can allow developers to have more choices.
Photo by journalist Zhang Jian
And this "Apple Tax" targeting Tencent and the rapid development of the domestic small game industry is related to it. In the first half of 2024, the domestic mini program game market reached 16.6 billion yuan, a year-on-year increase of 60.5%, which far exceeds the industry average growth rate. Behind this phenomenon, small games, with their lightweight, low-cost and high transmission efficiency, quickly occupied the user's fragmented time and became the new favorite of the mobile Internet. Moreover, the experience of "using up and leaving" has also made many people unwilling to download app games that can easily reach hundreds of megabytes or even exceed gigabytes (GB), which further exacerbates the subtle relationship between channel providers and gaming platforms to a certain extent.
In addition, the high "apple tax" may also suppress innovation vitality. Due to the enormous cost pressure, many developers may give up trying new technologies or innovative models and instead choose conservative development strategies. In March of this year, the US Department of Justice, together with the attorneys general of over a dozen states and territories, filed a civil antitrust lawsuit against Apple Inc. It is reported that this indictment is 88 pages long and mainly targets five areas where Apple is suspected of abusing its power. Among them, the highly concerned one is that the US Department of Justice believes that Apple restricts the development of "mini programs" on super application platforms.
Currently, the most popular mini program application is the WeChat platform, which is also being imitated by foreign companies such as Facebook, Twitter (now X), Uber, and Snap. However, the super application ecosystem has not become popular in the United States, and the US Department of Justice believes that Apple's strangulation is one of the reasons.
The impact of the 'Apple tax' is not limited to developers alone. In fact, the most common way for developers to maintain their profit margin is to increase the price of purchases in the application, which makes some Apple users pay more than Android users when buying virtual goods such as audio and video members, content subscriptions, and online disk members. In addition, if users want to top up the Tiktok platform to give rewards to the anchors, Apple phones can only buy 7 diamonds for 1 yuan, and Android phones can buy 10 diamonds for 1 yuan.
The global controversy surrounding the 'Apple Tax' continues
Currently, the "Apple tax" has been heavily criticized, causing dissatisfaction among a large number of developers and users worldwide. In recent years, not only the EU, but also Japan, South Korea, Türkiye and other countries have launched legislative challenges against the "apple tax".
In June of this year, the official website of the Japan Fair Competition Commission (JFTC) announced that the anti-monopoly bill "Smartphone Specific Software Competition Promotion Act" had been passed and implemented in the Japanese Senate. It is reported that this bill is the latest measure taken by the Japanese government to break the monopoly of large technology companies in the smartphone application market.
In recent years, the "in app payment" settings of Google and Apple have frequently been embroiled in compliance disputes. The above-mentioned bill explicitly states that "designated providers" shall not prevent application developers from using third-party payment methods, such as imposing conditions to prohibit third-party payment systems; On the issue of "self preferential treatment" on large platforms, the bill stipulates that "designated providers" shall not discriminate or unfairly treat application developers; We cannot take any form of preferential treatment towards our own services when displaying search results without justifiable reasons.
Although specific technology companies were not directly named, it is widely believed that Japan's bill mainly targets tech giants such as Apple and Google who play an important role in developing operating systems, app stores, browsers, and search engines. The bill is expected to take effect by the end of 2025.
In addition, the EU's investigation into Apple has not yet ceased. On June 24th, the European Commission announced that Apple's new regulations for the App Store still violate the EU's Digital Markets Act. Following a € 1.8 billion antitrust fine imposed by the EU in March for monopolistic practices in the streaming music market, the EU may take further measures.
South Korea is also following in Japan's footsteps. At the end of 2023, the Korea Fair Competition Commission announced that it will continue to challenge the "Apple Tax" by enacting the Platform Competition Promotion Act. In June 2022, South Korea revised the Telecommunications Business Act, forcing Apple to allow Korean apps to use third-party payment functions. The standard proportion of "Apple tax" in South Korea has been reduced from 30% to 26%.
However, in terms of rates, China is still one of the countries in the world where Apple has the highest commission rates for in app transactions. The "Apple Tax" rates levied by Apple on standard enterprises and small and medium-sized developers in the Chinese market are 30% and 15%, respectively.
It is worth noting that in the past decade, Apple's software services revenue has continued to grow in a single quarter, rising from $4.8 billion in the first quarter of 2015 to $24.213 billion in the third quarter of 2024, with the revenue share expanding from 6.43% to 28.22%. On the contrary, revenue from iPhone decreased from $51.182 billion in the first quarter of 2015 to $39.296 billion in the third quarter of 2024, with the revenue share narrowing from 68.61% to 45.80%. The growth of software service revenue cannot be separated from the contribution of the "Apple Tax".
Lowering the domestic apple tax is highly anticipated, but compared to the lawsuits against Apple or the "apple tax" in the aforementioned countries and regions, it can be seen that government intervention, enacting laws, and other means are important factors in winning or fighting for rights. It is difficult for individual consumers or businesses to challenge global giants like Apple.