Developers of Xbox PC games will give Microsoft a 12% cut of sales going forward

Microsoft is cutting down the share it takes.

A young gamer is playing an online multiplayer game at his home, rear shot
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Microsoft is dropping the amount it charges developers to offer games through its Xbox PC store. Starting August 1, creators will give the company 12 percent of their sales, down from 30 percent.

“Some news, this will be a good one, is that starting August 1st, we are going to be moving our rev split for developers from 70/30 over to 88/12,” head of Xbox Game Studios Matt Booty told Engadget. “It feels like right now, with our sort of re-invigorated push on PC, it seems a good time to do that.”

By dropping its cut of revenue, Microsoft is catching up to Epic Games which already offers an 88/12 deal to developers in its store.

Knife fight — It’s not certain — but it’s certainly possible — the move is related to Epic’s upcoming lawsuit against Apple. The two are feuding over the 30 percent cut that Apple takes on sales in its iOS App Store, which Epic has argued is exploitative.

Apple has defended itself saying that 30 percent is the industry standard (though, it and Google created that “standard”), and has cited Microsoft’s Xbox Store as an example. But Microsoft has come out strongly against Apple’s control of the App Store, saying that alternative iOS stores would create a fairer ecosystem for independent developers.

“In terms of who we're listening to, first and foremost that's our developers, right?” Booty continued. “We're looking to improve things [and] now is the right time to do that.”

Why not consoles? — But while it’s easy enough for Microsoft to drop its share of revenue on PC, the company makes the vast majority of its gaming sales on consoles where it continues to take 30 percent. Microsoft says comparing consoles to smartphones is unfair because the business models are fundamentally different. The only reason someone buys an Xbox is for gaming, and Microsoft sells its consoles at cost or even a loss, making money later through revenue sharing with game developers and subscriptions.

The company’s deal with developers thus is fair because it needs a cut of game sales in order to be sustainable. Apple, on the other hand, sells iPhones at a profit, and customers use its smartphones as general-purpose computers to do many things besides gaming, meaning Apple doesn’t need Epic and can bully it around — some say unfairly.

If you follow that logic, it makes sense that Microsoft would drop its revenue share on PC and not Xbox. With regards to its Game Pass subscription service, Microsoft has been experimenting with how to compensate developers.