Epic CEO Tim Sweeney Criticizes Google for Misleading Statement about Microsoft’s Xbox Store on Android

In the landscape following the decline of Windows Phone, Microsoft finds itself uncomfortably reliant on Apple and Google for support in the mobile computing arena. Whether it’s in the realms of Microsoft Edge, the Microsoft Copilot, or Xbox Cloud Gaming, both tech giants appear committed to thwarting any significant progress Microsoft hopes to make on mobile platforms.

Currently, the fight is centered around Android, which isn’t exactly friendly to third-party developers. To bypass Google’s charges, companies like Microsoft, Epic Games, and Samsung have considered launching their own app stores. Despite this ambition, with 99% of Android apps sourced directly through Google Play, the chances of any new store truly gaining momentum are slim. Microsoft, for instance, has postponed its Android app store for Xbox mobile games due to ongoing legal battles in the U.S. addressing Google’s stringent rules on Android app distribution.

On BlueSky yesterday, Sarah Bond shared insights on the status of the Xbox mobile app store for Android. “We’re committed to providing players with more options on where and how they enjoy their games, including buying directly from the Xbox app,” Bond explained. She highlighted their initial focus on launching these features within the Google Play Store in the U.S., anticipating that other app stores will align with consumer desires. Yet, as anticipated, Google is not passively allowing this to unfold.

An illustrative example depicts Microsoft’s workaround for Google’s 30% transaction fees, prompting them to eliminate in-app purchases from the Xbox app on Android for financial viability. Now, users can access these features via the web at xbox.com/play.

Google was granted a temporary stay by U.S. courts while it prepares its appeal, delaying Microsoft’s planned feature launch. Bond elaborated, “We’re ready to activate these features as soon as the court reaches a decision.”

In response, Google asserted, “Microsoft has always had the option to allow Android users to purchase and play Xbox games directly from their app—they’ve simply decided against it.” Google insists that, “The court order and the haste in enforcing it threaten Google Play’s capacity to offer a secure experience. Microsoft and Epic overlook these substantial security concerns. Our focus remains on an ecosystem accessible to all, not solely the industry’s biggest players.”

Tim Sweeney, CEO of Epic Games, weighed in following the reference to their legal skirmishes, stating, “Google’s statement is misleading,” expressing his discontent on Twitter. Sweeney argued, “Google’s 30% commission far exceeds the profit margins from game streaming. They know this from their costly ventures into the failed Stadia project.”

Let’s delve deeper into this.

Sweeney is right in pointing out Google’s misleading statements. Microsoft and Epic are stepping away from the Google Play model due to its onerous 30% cut on sales. Unlike console ecosystems like Xbox, PlayStation, and Nintendo, where hardware is often sold at minimal or no profit margins, Google’s financial approach doesn’t involve such direct hardware distribution. Apple’s model, which also includes a premium on hardware alongside a similar developer fee, exemplifies a dual revenue stream — hardware and software.

Google doesn’t sell significant hardware either; its Pixel phones have a minor market share globally, and reports suggest that its Android tablet line has ceased. Google’s Android strategy is predominantly driven by software and service provisions through Google Play on third-party devices, while simultaneously bolstering its extensive advertising network—recently labeled as monopolistic by U.S. authorities. Google’s strategy involves requiring manufacturers to pre-install its apps to access Google Play, enhancing its data gathering capabilities for its ad operations.

These imposed barriers frustrate developers like Microsoft and Epic Games. The 30% fee limits the potential growth of new sectors, such as the cloud gaming industry, currently unprofitable and hindered by the lack of in-app purchasing options in Google Play. Moreover, without a listing on Google Play, visibility plummets, raising Microsoft’s user acquisition costs.

Although Google’s practices can be criticized for effectively stifling competition, it’s understandable, given the Justice Department’s monopoly claim, that Google might need to find other profit channels for Android if its advertising revenues take a hit. Losing both streams could significantly impact their business model.

Microsoft’s own 30% developer fee on Xbox games is aimed at making its Xbox Series X|S hardware affordable for consumers. Looking forward, Microsoft intends to allow third-party stores like the Epic Games Store and Steam on future consoles, although this development is in the distant future. However, on the PC front, Microsoft only takes about a 12% commission, much lower than the industry norm.

Windows’ open platform approach arguably offers better consumer conditions compared to iOS and Google-controlled Android, with Microsoft taking no commission, enabling innovators like Steam to thrive. Android allows more openness than iOS, granting side-loading and OEM app stores, but still maintains tight control over Google Play, promoting Google’s services over competitors. For example, Google enforced restrictions on Amazon’s Kindle app despite vying in the book sales market.

Ultimately, the courts will decide the direction this issue takes. All of this drama could perhaps have been sidestepped if Microsoft had invested more in its own mobile ecosystem, like the Windows Phone era. And there you have it!