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Copyright, Competition and Business Models in App Stores and Gaming: Event Highlights

Posted on    by CREATe Team

Copyright, Competition and Business Models in App Stores and Gaming: Event Highlights

By 14 March 2023No Comments

On the 17th of February, University of Glasgow’s Advanced Research Centre (ARC) hosted a roundtable discussion on ‘Copyright, Competition and Business Models in App Stores and Gaming’. This roundtable was the first in a series of events that form part of the CREATe investigations into the changing landscape of the gaming industry and app stores, and the resulting regulatory challenges. Competition law and intellectual property law scholars, economists, and industry participants, many of whom are avid video game players, gathered around the table. Dr Magali Eben of CREATe chaired the discussion. 

The roundtable opened with the contributions of Justin Alae-Carew of Blazing Griffin, Stijn Huijts of Geradin Partners, Dr Friso Bostoen of EUI and KU Leuven, and Alba Ribera Martinez of University Carlos III of Madrid. Contributors highlighted various aspects of app stores and cloud gaming, including: 

  • App store fees: App store fees and policies, especially those of Apple, have been subject to antitrust scrutiny on both sides of the Atlantic (see for example the EU’s investigation of Apple’s App Store rules and Epic v Apple). The level of fees has divergent effects across industries. Traditionally, music streaming involves higher costs than gaming due to royalties. Therefore, music streaming apps have greater incentives than gaming apps to drive down app store fees. However, this landscape might change as games become more interactive and games can be hosted within games. Creators’ share is lowered when they pay fees to not just one but several platforms (for example, both to the app store and to Roblox).
  • Effects of ‘walled gardens’ in the gaming industry: While closed ecosystems like Apple have long been scrutinised by competition authorities, competition among walled gardens have had positive effects for developers in the gaming industry as some of these companies are also important funders of content. 
  • Metaverse and the future of the internet: The internet will likely become more interactive. If so, technologies underpinning the gaming industry today will play an important role in the development of the internet of tomorrow. While some companies will likely remain gaming companies only, others might go beyond and become dominant tech companies in general, which will create new challenges for competition authorities.
  • Market definition in the gaming industry: Microsoft’s proposed acquisition of Activision Blizzard raised competition concerns across many jurisdictions. Both the European Commission (EC) and the Federal Trade Commission (FTC) are reviewing the merger. But there isn’t much in the name of precedent to delineate the product and geographic markets in the gaming industry. In its past decisions in Vivendi/Activision, Activision Blizzard/King and Microsoft/ZeniMax, EC did not take a clear stance on relevant product market definition, especially on the distinction between mobile, PC and consoles. Meanwhile, the FTC has opted for a complex relevant product market definition in its administrative complaint to block Microsoft’s acquisition of Activision Blizzard, defining ‘High-Performance Consoles’, ‘Multi-Game Content Library Subscription Services’ and ‘Cloud Gaming Subscription Services’ as relevant product markets. 

Based on these themes, two major points of interest among participants were: (i) the effects of cloud gaming on player creativity in the gaming industry and (ii) the optimal level of app store fees. The following comments emerged in the discussion with participants. 

Player creativity: Platforms like Roblox allow players to create and monetise their own games, which can be seen as a boost to player creativity. In contrast, traditionally, monetary rewards are not the main incentive for players to develop modifications or “mods”. Allowing mods to be monetised on gaming platforms has even backfired in the past, drawing players’ wrath. Several participants highlighted the social rewards associated with modding, since mods are often associated with their creators. Furthermore, cloud gaming is seen as capable of hampering mods since all activity related to the game takes place within a remotely controlled server, allowing for less or no modification. In cases where a player is a financially rewarded developer, this also raises questions for competition authorities regarding the distinction between consumers and undertakings.  Overall, the question of how player-creators should be rewarded remains open. 

App store fees: There are quite a few different fee models relevant to the gaming industry. Apple App Store and Google Play Store have mainly charged a 30% fee on all in-app purchases. Where games can be hosted within games, for example on Roblox, the creators face higher fees overall (see above). Roblox charges a near 70% fee for creators, which includes the app store fees. While there haven’t been any major conflicts on this front, platforms like Roblox are expected to proliferate as the internet becomes more interactive, which might give rise to regulatory issues on fees for interactive platforms. Meanwhile, in the gaming industry, whether app store fees raise concerns seem to depend on the types of games in question and the specific business models of developers (for example, whether the developer relies on in-app purchases). In general, competition authorities do not wish to be seen as price regulators and therefore shy away from setting specific fee levels. There are however examples where competition authorities have taken issue with app store policies, such as the Netherlands Competition Authority’s (ACM) case against Apple on dating apps. As a result of this case, Apple lowered its fees to 27%. 

One question underlying the discussion was what kind of effects the Digital Markets Act (DMA) will have on app stores. In particular, the DMA forces mobile operating systems (OS) to allow third party app stores on their OS. It also prohibits anti-steering, which will in effect allow app developers to contract with end users outside the app and therefore avoid app store fees. The DMA will start to apply on 2 May 2023, therefore its concrete effects on entrenched app stores are yet to be seen. 

The discussion continued in the afternoon at Friso Bostoen’s public lecture, ‘From music streaming to the metaverse: competition policy’s role in clearing (app store sized) roadblocks to innovation’. The lecture expanded on the discussion on app store fees and other app store policies that might throttle innovation in music streaming, cloud gaming and the metaverse. You can access Friso’s relevant work here and here. 

This project will continue with more events and publications. Stay tuned!