Maintaining its current distribution of income will help the company invest in the future of its gaming division.
Microsoft unveiled Windows 11 at a digital conference in late June, and games featured heavily in this unveiling in more ways than one. The Redmond software company highlighted the features of Xbox Game Pass, Xbox integration with Windows 11, and a new revenue-sharing plan that allows app developers to claim 100% of their profits from the Windows Store, at unless they create games.
“Many developers love the Microsoft Commerce platform because of its simplicity, global distribution, platform integration, and competitive revenue sharing terms at 85/15 for apps and 88/12. for games, ”Microsoft said in its Windows 11 announcement blog post. “From July 28, app developers will also have the option to bring their own commerce platform or a third-party commerce platform into their apps, and if they do, they won’t have to pay a fee to Microsoft. They can keep 100% of their income.
The statement seemed to deliberately omit the mention of game developers, and Microsoft confirmed to The Verge that the 100% profit option does not apply to game developers. Instead, the Xbox manufacturer’s existing 88/12 profit split will still hold true for them.
Microsoft hasn’t explained the reason for excluding game developers from this new revenue-sharing system, but the desire to make higher profits is likely behind it, according to one game developer.
“It seems clear to me that they classify the game as a different, possibly more important, revenue generator for the store,” Nicholas Laborde, founder of Raconteur Games, told GameDaily. “While this decision is frustrating when you read the title, I can certainly understand the decision not to leave the games completely royalty free.”
Maintaining the current revenue split will help Microsoft’s gaming division stay strong and profitable going forward.
During the Epic vs. Apple trial earlier in 2021, Microsoft admitted that it doesn’t make any profit from the sale of consoles and said most of its revenue comes from game sales. The companydeclared $ 143 billion in revenue for 2020 in its annual statement to shareholders, but even billions are running out.
Louise Shorthouse, senior analyst at Ampere Analysis,says GameDaily Epic Games’ similar 88/12 revenue split is not enough to keep it profitable if the studio continues to invest large sums elsewhere, such as expenses.hundreds of millions of dollars on exclusivity agreements.
While Xbox investments occur less frequently than these Epic engineers, they are often more expensive. Microsoft bought ZeniMax Media for 7.5 billion dollars, for example, and embarks on a new campaign to pioneer of cloud gaming with its xCloud program.
Shorthouse also told GameDaily that strategies like Epic’s are primarily viable for building strong customer bases, a tactic Microsoft also appears to be using. For example, Infinite haloThe multiplayer campaign will be a free-to-play experience in a move that NPD Group’s Mat Piscatella said is likelydesigned to increase the number of people who buy Infinite haloand Microsoft devices to play it.
In short, maintaining the 88/12 revenue split for its profitable gaming segment means Microsoft can continue to offer programs like Game Pass and invest in future generations of hardware and software.
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