In Microsoft’s application store ecosystem built around PCs or mobile phones, the Xbox Store has always been an independent existence. Like Apple’s App Store, Microsoft takes a 30% commission on games distributed through the Xbox Store.
Microsoft also defended the business model in last year’s Epic Games case against Apple. But now Microsoft has hinted that the Xbox Store will be more open and will completely change the business model of the Xbox console in the future.
In a series of changes to Xbox Store policies announced today, Microsoft President Brad Smith said the policies are designed to “ensure we’re delivering the best possible experience for creators and customers of all sizes.” However, some of these policies only apply to the Microsoft Store, not the Xbox Store.
Microsoft has previously revealed that it can’t make any profit from selling Xbox consoles alone, as the company employs a hardware subsidy model that generates profits through game sales and subscriptions to online services.
This mode is especially lucrative for popular free-to-play games like Fortnite, Call of Duty: Warzone and other games that rely on in-game purchases for monetization. Microsoft takes a cut of all these purchases, and we’ve seen the impact Fortnite has had on Xbox revenue.
While the business model is lucrative, Microsoft says it will need to change as it reassures regulators that are closely watching its $68.7 billion acquisition of Activision Blizzard. “We recognized that even for the store on Xbox consoles, we needed to adjust our business model,” Smith admits.
Today, Microsoft will apply seven of its 11 policies to the Xbox Store, including equal treatment of apps or games, transparency in the promotion or marketing of apps and games, and adoption of its own apps or games against other apps or games The same standard for games.
One of the most notable new policies that have yet to go into effect is that developers are not required to use their own in-app payment system on Windows. “We are committed to closing the gap with the rest of the principles over time, but there is no clear commitment to when the Xbox Store will be more open,” Smith said.
Microsoft has also pledged to keep popular Activision Blizzard games like Call of Duty and Overwatch on PlayStation as well. That commitment will even extend to Nintendo, which looks to position Microsoft as a game publisher spanning Xbox, PlayStation, PC, and Nintendo Switch, rather than Minecraft and existing Bethesda games.
Even though it’s unclear when the Xbox Store will be more open, we can feel a shift in Microsoft’s strategy. Microsoft said it is now building a “next-generation game store” based on these new policies.