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#1: European Parliament Approves Digital Services Package

Last week, the European Parliament announced that it has adopted the Digital Services Package (DSP), a comprehensive rulebook for online platforms and services that was first proposed in December 2020. It’s a landmark piece of legislation and could change how users, developers, and publishers interact with online platforms such as Apple’s and Google’s app stores in the future. The ruling was applauded by a certain CEO who lost a case last year against Apple that included clauses similar to those in the DSP.

The Digital Services Package consists of two acts – The Digital Services Act (DSA) and the Digital Markets Act (DMA). The DSA focuses on the protection of consumers and applies to online intermediaries, including “internet service providers, cloud services, messaging, marketplaces, or social networks.” It includes bans on certain types of targeted advertising, increased transparency measures, allowing researchers access to data, and a ban on using “dark patterns” in online platforms. The DSA also obligates very large online platforms to “mitigate against risks such as disinformation or election manipulation, cyber violence against women, or harms to minors online.”

The DMA is where platforms like Apple’s and Google’s app stores will be heavily impacted. The act applies to very large online platforms that have been identified as “gatekeepers” to various services and products. In the DMA, the three criteria for an online platform to be considered a “gatekeeper” are:

1. A size that impacts the internal market. This is defined as the company achieving an annual turnover of €7.5 billion or more in the European market over the last 3 fiscal years.
2. It controls an important gateway for business users towards final consumers. The platform has more than 45 million monthly active users and more than 10,000 yearly business users in the EU.
3. An entrenched and durable position. This criterion is met if the first two points have been met for each of the last three financial years.

Once a platform has been identified as a “gatekeeper,” it will be obligated to implement several outcomes such as:

• Allowing end users to install third party apps or app stores that use or interoperate with the operating system of the gatekeeper.
• Allowing third parties to inter-operate with the gatekeeper’s own services.
• Allowing business users to promote their offers and conclude contracts with their customers outside the gatekeeper’s platform.
• A ban on requiring app developers to use certain gatekeeper services (such as payment systems or identity providers) in order to appear in the gatekeeper’s app stores.

So does this mean that Fortnite will once again be available on the iOS and Android stores? Unfortunately, it may be a while before this happens.

First, the DSP has to be formally adopted by the Council of the European Union. Once that is completed, it will be published in the Official Journal in autumn this year and only comes into force 20 days after it has been published.

Next, the European Commission needs to identify to which “gatekeepers” the DMA will apply. Companies will have to self-verify as a “gatekeeper” based on the thresholds set in the DMA and then provide that information to the Commission. Based on that data, the Commission will then designate a company as a “gatekeeper” if it meets the requirements. There will likely be a back-and-forth as “gatekeepers” may rebut the Commission’s designation, and the Commission will need to follow up with a market investigation. Once all that is done and a final decision on a company’s “gatekeeper” status has been made, it has six months to comply with the directives in the DMA.

For us in mobile F2P, the key question is if the App Store and Play Store will fall under the purview of the DMA. To answer that, we need to look at the three criteria – market size, user base, and if it is in an entrenched position.

In terms of size, this report from Sensor Tower shows the App Store exceeding the €7.5 billion threshold in 2020 and 2021, while the Play Store only met the threshold in 2021. A mobile market outlook report by Sensor Tower forecasts that spending on mobile apps in Europe will reach €23 billion in 2022, indicating that both the App Store and Play Store will likely meet the size thresholds within the next year or two.

For the user base criteria, it’s difficult to get information on active users of app stores as most reports are geared towards downloads and spend. To see if the app stores are likely to exceed the gateway thresholds, we’ll need to make some educated guesses. According to Sensor Tower, the iOS app store received an average of 587 million European downloads per month in 2021. Of course, downloads are not a proxy for user count as most people download more than one app.

What we can do is estimate user numbers based on the average number of apps a user downloads per month. To exceed the gateway threshold of 45 million MAU, European iOS users would need to, on average, download 13 or fewer apps a month, which seems entirely plausible given that this (admittedly old) report by data.ai revealed that more than half of smartphone users download 3 or fewer apps a month. On the Play Store side, it received an average of 1.6 billion downloads a month in 2021, so it’s even more likely to exceed the 45 million MAU threshold.

In terms of business users, this app market explorer reveals that there are over 13,000 app publishers on the Play Store from Germany alone, so it’s reasonable to believe that there are over 10,000 iOS publishers from Europe as well.

So, based on the above, both the App Store and Play Store will likely be considered “gatekeepers” in Europe and thus subject to the DMA. What does this mean for publishers on the platforms? I think big publishers will begin investigating if investing in external payment solutions in Europe is worth the effort. In fact, this report by GameRefinery shows that some publishers like Supercell have already set up external web stores for game purchases, though they cannot advertise that fact within the app. For those that have yet to do so, is pouring money into an entirely new payment solution, potentially losing users due to the increased friction in the payment process, and having to pay Apple a commission in any way worth it?

At the moment, unless you’re a huge publisher with many games in your portfolio, I don’t believe so. That could change in the future, because while the DMA currently only covers Europe, other regions may follow its lead. South Korea has already passed legislation that forces Apple to allow third party payment providers for apps on the Korean app store, but the key will be whether the US follows suit and at what terms. If that ever happens, we could see an upheaval in how publishers approach IAP on the app stores.

Game Launch Radar

#1: Rebel Riders

• Publisher: King
• State: Soft-launch
• Territories: Android: Germany, Indonesia, Malaysia, iOS: Canada
• Classification: Midcore – Shooter – Tactical Shooter

• Quick thoughts:

  • Rebel Riders is an arena-based 3v3 vehicular shooting game. As standard for the genre, different vehicles have different stats and specials. The “Rider” portion of the name refers to collectible characters that pilot the vehicles, but they are purely aesthetic for now and serve as another collectible in the game.
  • It has taken a lot of inspiration from fellow 3v3 PVP game Brawl Stars, as the layout and structure of the game is very reminiscent of Supercell’s game. It uses the same progression system as Brawl Star’s Trophy Road (called Victory Road in Rebel Riders), you earn Toykens (Tokens) to progress through the Rebel Pass (Brawl Pass), and open up Big Crates (Big Box) to acquire currency, vehicles, and upgrades. Even the store has the same layout as Brawl Stars’. I guess imitation is the sincerest form of flattery even for a publisher as big as King.

#2: Yeager: Hunter Legend

• Publisher: IGG

• State: Open Beta
• Territories: Canada (Android only)
• Classification: Midcore – RPG – Action RPG

• Quick thoughts:

  • If you’ve always wanted a mobile version of Monster Hunter, wait no more. Yeager: Hunter Legend follows the same recipe as Capcom’s series of games. Players choose different weapons (which drastically affect how you approach combat) and kill monsters to acquire resources to make better equipment to help them kill even more difficult monsters.
  • The game is being developed by IGG, developers of strategy smash hit Lords Mobile, and also has a pretty active official Discord server with around 13k members. If you’re interested in the beta, it is available for pre-registration on the TapTap.io app store.

Other Game Announcements

• Ubisoft opens registration for the closed alpha of The Division Resurgence, its mobile version of the third-person RPG. Link

• Diablo Immortal earns $49 million in its first month of operation. Link
• Niantic’s Campfire social app is available on limited access on iOS and Android. Link
• Netmarble announces the development of a game based on popular Japanese web novel Shangri-La Frontier. Link
• Hit Chinese 4X game Era of Conquest is coming to the western markets, with early bird servers going online. Link
• Netease’s 2v4 stealth game begins a technical test in Australia, Malaysia, Thailand, and New Zealand. Link
• FunPlus’s new pirate-themed strategy game, Misty Continent: Cursed Island, is in beta for Android users. Link
• The crowning esports event of Riot’s MOBA Wild Rift, the Wild Rift Global Icons Championship 2022, is not attracting many views. Link
• Flexion reaches an agreement to bring Matchington Mansion to alternative app stores. Link

Company Announcements

• Supercell invests $37 million into Space Ape, increasing its stake to 75% of the company. Link

• Hypercasual publisher Kwalee aims to rejuvenate “stale” casual genres. Link
• Netease invests in Polish VR studio Something Random. Link
• Klang Games raises $41 million for its multiplayer virtual world, Seed. Link
• Game publisher Playstack joins hands with mobile game developer Laser Dog to open a new studio, Playstack Leeds. Link
• German publisher and developer InnoGames appoints Michael Lenz as Chief Analytics Officer. Link
• Kongregate acquires Chilean mobile developer Gamaga. Link
• VR and mobile developer Resolution Games opens up its first US studio. Link
• Cross-platform game developer and publisher Thunderful appoints ex-2K Games exec Jon Rooke as VP of Marketing. Link

Ecosystem Announcements

• The creator of the Yu-Gi-Oh! manga and card game, Kazuki Takahashi, has passed away while snorkeling. Link

• Activision Blizzard employees plan another walkout on July 21 to protest the company’s response to the overturning of Roe v. Wade. Link
• Market research firm NPD projects that US spending on games will fall by 8.7% this year. Link
• Tencent will shut down its mobile games portal, Pocket WeGame, in September. Link
• Konvoy Ventures announces a new $150 million fund for early-stage companies. Link
• Anime games make up 20% of all app store spending, according to data.ai. Link
• HoYoverse and Lilith Games sues Chinese mineral and metal trading company Minmetals Corp. Link
• Market research firm Ampere Analysis forecasts a 1.8% decline in worldwide game content and services markets. Link
• Six Dutch political parties unite to propose the banning of loot boxes. Link

Content Worth Consuming

• Supercell’s Ilkka Paananen and King’s Sebastian Knutsson on breakthroughs, mistakes and more (MobileGamer.biz): “We were super inspired by Netflix culture. We spent hours going through the Netflix culture and what kind of company we wanted to build. It took me almost two years to write down what our values really were and formalise them. So maybe the learnings for other founders are that it’s never too early to start thinking about culture.” Link
• Analysts: “The games industry is not going anywhere” in the face of a recession (GamesIndustry.biz): “The fact that the games sector is now as broad as it is suggests that there is likely to be more cases where a cost-of-living squeeze will impact consumption,” he says. “Stating that the games sector is ‘recession proof’ is really a fallacy — it is relatively highly insulated from impact as during downturns people find great value in playing games but there are areas which will still be impacted.” Link
• data.ai’s Melania Calinescu on what Next-Gen AI Means for App Publishers (data.ai): “In the podcast, Melania describes how data.ai is evolving beyond its key offerings of estimating downloads and revenue, and describing user patterns. She explains how the extraordinary recent advances in ML are moving data.ai in four new directions namely: broadening the training data to include social media activity around apps and games, going deeper into advertising – helping publishers to better optimize their ad strategies, using ML to make specific recommended actions to customers, and awarding customers one ‘mobile performance’ score across four pillars: acquisition, engagement, sentiment and monetization. Then giving customers the ability to see which metrics they should study in order to improve.” Link
• The performance marketing approach to working with influencers (GamesIndustry.biz): “Newcomers to influencer marketing may balk at an influencer’s going rate for a sponsorship and question if the return on investment truly works in their favor. Applying a performance marketing mindset to campaign management helps quantify success in influencer campaigns, identify how influencers fit into long-term marketing strategies, and encourage effective campaign iteration.” Link
• Big mobile marketing creative review: the things that work (GameDeveloper.com): “Sooner or later, most mobile game developers will face the need to make ad creatives: whatever people may say, the success of an organically marketed project is not comparable to what a large-scale ad campaign can achieve. Everyone gets why marketing is important, but what do you do when an outsourcing studio wants $6,000 for a playable ad, competitors make misleading ads, and gameplay videos for your project are being edited by a puzzled artist in whatever way they see fit?” Link