Google pauses its plan to levy service fee on real-money gaming apps

Google had earlier announced that it will allow more types of real-money gaming apps on Play Store this year and also start levying a service fee on them

Google is pausing its plans to levy a service fee on real-money games and expand to other formats across the world including India, the tech giant said on June 21, citing challenges with the lack of a central licensing framework in certain markets and the complexities in developing an appropriate monetisation model.

The Android maker is also extending the grace period for developers offering daily fantasy sports and rummy apps on Play Store in India as part of the company's pilot programme for an indefinite period, providing a temporary relief to these firms.

“Expanding our support of real-money gaming apps in markets without a central licensing framework has proven more difficult than expected and we need additional time to get it right for our developer partners and the safety of our users" a Google spokesperson said in a statement.

The spokesperson said the firm is "working hard to develop a thoughtful framework" and hopes to provide more details on the path forward in the coming months.

Google Play's real-money gaming pilot

In January, Google had announced that it will allow more types of real-money gaming apps on Play Store this year and also start levying a service fee on them.

The initiative was expected to start in India, Mexico, and Brazil from June 2024, with plans to expand to users in more countries in the future.

At the time, Google had stated that the rollout was based on learnings from several pilot programmes the firm has conducted across a range of countries, including India, in recent years.

In India, the tech giant ran a year-long pilot starting from September 2022 to offer daily fantasy sports and rummy apps on Google Play to users in India by developers incorporated within the country.

The pilot ended on September 28,2023, and is no longer accepting new apps into the programme. Developers who were participating in the programme could, however, continue to remain on Google Play until June 30, 2024, the company said in January. This was an extension of an earlier grace period that was set to end on January 15, 2024.

During the 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 pilot, Google had a strict policy of not allowing real-money games on its Play Store.

Google stated that the deadline extension was intended to provide the company time to navigate the absence of a central licensing framework that identifies which real-money gaming apps are permissible and legal in the country.

In April 2023, Ministry of Electronics and Information Technology (MeitY) had notified gaming-related amendments to the IT Act 2021, which will allow multiple self-regulatory organisations (SROs) to determine whether a real-money game, where the transfer of money is involved, is permitted to operate in India or not. But the ministry later reportedly dropped the plan to appoint SROs.

In February, India's former junior IT minister Rajeev Chandrasekhar had said they are progressing towards creating a framework to allow safe infrastructure and permissible gaming. The third term of Prime Minister Narendra Modi will establish a more stable and predictable regulatory environment, he said.

Google also mentioned that the company previously thought six months would be sufficient to catalog the wide variety of available game types in the sector. However, the task has proven to be more challenging than anticipated, and the firm has now sought more time to develop operational models to identify and categorise "acceptable and safe" real-money gaming apps.

A new service fee model for real-money gaming

Google currently levies 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.

For developers that choose the firm's third-party billing option, Google levies a commission of 11-26 percent, marking a reduction of 4 percent on the service fee.

This service fee model, however, doesn't work for real-money gaming apps, since it relies on a different business model. These apps primarily generate revenue by taking a commission from the fees that players pay to participate in tournaments or contests on their respective platforms.

Hence, in January, Google said it is considering a new service fee model that reflects the unique economics and various developer earning models in the real-money gaming sector without disclosing any specific details.

Google said it is working closely with developers on developing an appropriate fee structure and will need more time to determine it.

'Arbitrary and anti-competitive'

This development comes amid intense backlash against Google's app policies and business practices from Indian developers in recent years, a move that has also drawn increased scrutiny from the country's antitrust watchdog Competition Commission of India (CCI).

Roland Landers, CEO of skill gaming industry body All India Gaming Federation (AIGF) termed Google's decision as "arbitrary and anti-competitive"

He said that not having an inclusive policy and discriminating against other formats is a form of gatekeeping and market distortion. "The disregard for Indian law, encouragement of anti-competitive practices, and limiting user choice by a private entity is alarming" Landers said.

"While we were initially concerned about Google's decision to limit the pilot to certain games, we understood that, as an early initiative, it would eventually be expanded to include all skill-based Pay to Play games.

To Google's credit, they extensively engaged with the industry over the past year and even announced earlier this year that they would onboard all skill-based Pay to Play games. Given that the Google Play Store conservatively holds over 90 percent of the app distribution market, they exert tremendous control over the Indian mobile market and is a must have" he said.

Landers said this decision grants Google "unchecked control to pick winners in the market, favouring large companies and preventing small and emerging startups from effectively competing in this sector".

"This situation underscores the imminent need for ex-ante competition regulation and the swift implementation of the Digital Competition Bill" he said.

That said, Landers mentioned that they will continue to engage with Google and hope that the firm will soon implement the policy and level the playing field.

Real-money gaming executives have previously told Moneycontrol that being available through Google Play Store will enable companies to significantly reduce their marketing costs due to better app discoverability and increased trust. This will result in improved unit economics for skill-gaming companies who are already grappling with the recent 28% GST levy on the sector.

The move will also help firms reduce the friction faced by users in installing these games on their smartphones, thereby enabling them to attract a much broader audience.

At present, people have to manually sideload these apps on their smartphones by downloading the Android Package (APK) file of these games from alternate distribution sources, which can be quite a cumbersome process.