Google to start levying service fee on real-money gaming apps

"We’re pleased that this new approach will provide new business opportunities to developers globally while continuing to prioritize user safety. It also enables developers currently participating in RMG (real-money gaming) pilots in India and Mexico to continue offering their apps on (Google) Play" said Karan Gambhir, director, Global Trust and Safety Partnerships at Google, in a blogpost.

New service fee model for real-money gaming

Gambhir also said they are considering a new service fee model for the real-money gaming sector, but didn't disclose any specific details on the fee it intends to charge developers for in-app purchases or app sales.

"We are working closely with developers to ensure our new approach reflects the unique economics and various developer earning models of this industry. We will have more to share in the coming months on our new policy and future expansion plans" he said.

During the recent pilot, Google did not impose any fee on the participating apps, although it limited their distribution to only India and specified that they should not use Google's in-app billing or be available as a paid app on the app store. Prior to this, Google had a strict policy of not allowing real-money games on its Play Store.

The move comes at a time when the real-money gaming sector is grappling with the government's recently implemented 28 percent Goods and Services Tax (GST) tax regime and the potential retrospective taxation claims from authorities.

Read: India's real-money gaming sector had a rough 2023. Will 2024 be any better?

Google has typically levied a 15-30 percent service fee on in-app purchases and paid app sales on Play Store, based on the developer's annual revenue. For the first $1 million earned per year, the fee is 15 percent. Beyond that threshold, the fee increases to 30 percent. Subscriptions are charged at a flat 15 percent, irrespective of the developer's annual revenue.

In recent years, Google has however faced intense backlash from Indian developers over its app policies, particularly after the search giant's announcement in October 2020 that it will begin enforcing a mandatory integration of its Play billing system across the world. Several app developers have mentioned that these commission fees are "extremely high" and "unfair".

The tech giant is also facing regulatory scrutiny over the business practices of their app marketplace Google Play in India and several other markets.

In October 2022, the Competition Commission of India (CCI) directed Google to allow third-party app stores on Google Play as part of the corrective measures in its antitrust ruling. However, the National Company Law Appellate (NCLAT) subsequently set aside this direction in March 2023.

Last year, the company started offering an alternate billing system called "user choice billing" that provides a 4 percent rate reduction on the service fee. This effectively means that developers will have to shell out a service fee to Google ranging from 11-26 percent for in-app purchases and subscriptions, depending on the type of app/service.

The tech giant claims that these changes comply with the CCI's order, but many local app developers disagree and have challenged it in the court.

Onus on developers for law compliance

With a regulatory framework for real-money games in India still under development, Google has put the onus on developers to ensure their apps comply with local laws and the company's updated policy that is expected to be unveiled in the coming months and come into effect from June 30, 2024.

In September 2023, the tech giant had announced plans to allow all types of real-money games on Play Store that would be approved by self-regulatory organisations (SRO) once the new regulatory framework was put in place in the country.

This came after the Ministry of Electronics and Information Technology (MeitY) notified gaming-related amendments to the IT Act 2021 in April 2023, which would allow multiple SROs to determine whether a real-money game is permissible in India or not. The ministry is however yet to notify SROs for the sector.

"Google Play's existing developer policies supporting user safety, such as requiring age-gating to limit RMG experiences to adults and requiring developers use geo-gating to offer RMG apps only where legal, remain unchanged and we'll continue to strengthen them" Gambhir said in the blogpost.

The company will also continue other user safety and transparency efforts such as its expanded developer verification mechanisms, he said.

Roland Landers, CEO of skill gaming industry body All India Gaming Federation (AIGF) said this move would give a big boost to the country's gaming industry, where skill gaming platforms account for over 70 percent of the industry's overall revenue.

"With Google having over 90 percent market share of app distribution platforms in India, this decision will help with responsible innovation and provide a bouquet of choices to the Indian consumer" he said.

Landers said the move will especially help MSMEs and new developers or platforms who will be able to compete with established companies, since it will substantially bring down the user acquisition and other associated costs.