Why is Google facing backlash from gaming companies over its recent commission cut?

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Global IT giant Google is facing a strong backlash from South Korean game companies who are angry that they have to pay a 30% commission on in-app purchases while other digital content apps only have to pay a 15% commission.

On June 24, Google announced that it would reduce the in-app payment fee from 30% to 15% for digital content apps such as webtoon apps, music streaming apps, and e-book apps starting July 1.

Last year, Google announced that it would make the in-app payment system mandatory for all digital content apps listed on its app marketplace starting in October 2021, meaning the platform giant would take a cut. 30% for all in-app purchases as no other billing method would be available.

But Google has decided to lower the commission rate for digital content apps due to fierce opposition from the digital content industry. Currently, digital content apps don’t have to pay a fee to Google because they’re not yet obligated to use the platform’s billing system.

For now, Google only requires mobile games to use the in-app payment system.

GOOGLE ACCUSED OF REVERSE DISCRIMINATION

Korean gaming companies are in riot, accusing Google of reverse discrimination as the fee was reduced only for digital content apps.

Last year, Korean gaming companies paid a combined fee of approximately 765.5 billion won ($ 678 million) to Google, according to the Korea Mobile Internet Business Association. This year, companies are expected to pay a total of 952.9 billion won, up 24.5% over the previous year period.

Leading Korean game publisher Netmarble Corp. paid more than 20% of its total revenue to app marketplace operators like Google and Apple thanks to its mobile gaming-focused portfolio.

It is even more difficult for small and medium-sized gaming companies to pay the required fee.

In 2019, listed game developer Com2uS Corp. spent 40.6% of its overall operating expenses to pay commissions, according to Lee Tae-hee, dean of the Graduate School of Global Entrepreneurship at Kookmin University.

In the same period, other smaller gaming companies such as Vespa, SundayToz Corp. and Neptune Corp. paid commissions that were almost three times higher than those expenses for employee salaries and about four times the amount that went into research and development.

KOREAN GAMING COMPANIES REFEREE FROM VOICE THEIR ANGER

Unlike digital content companies and associations that have expressed their fury against Google’s in-app payment system, Korean game companies haven’t been so outspoken about their frustrations.

“Korean gaming companies are dependent on Google’s platform, so it’s hard for them to express their complaints explicitly,” a gaming industry official said.

According to the official, the revenues of the Korean mobile games companies are determined by their exposure on the Google Play app marketplace. They also run the risk of Google potentially blocking the release of their games because they need to be reviewed. This is also why Korean digital content providers have opposed Google’s mandatory in-app payment system.

Some industry observers say big Korean game companies will not release their games on the national app market, One Store, due to Google’s objections.

For example, popular mobile game hits such as NCSoft Corp’s Lineage series; The Netmarbles Seven Knights series and Kraftons PlayerUnknown’s Battlegrounds (PUBG) are not available on the One Store.

Write to Joo-wan Kim at [email protected]

Danbee Lee edited this article.

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