Microsoft is gearing up to shake up the mobile gaming world with its audacious plan to launch a brand-new app store. Will this be groundbreaking for the world of mobile gaming and alternative app stores or is Microsoft doomed to fail?

Due to be launched in July of this year, Microsoft is introducing its long-anticipated Xbox App Store, using its own first-party portfolio of games, including Candy Crush, Minecraft, and other hits. This bold stride not only marks a significant expansion of its gaming empire but also signals a potential reshaping of the entire industry landscape. 

The path ahead is fraught with challenges and opportunities. Regulatory scrutiny, integration hurdles, and the need to innovate in a rapidly evolving market will test Microsoft's resolve. The tech titan must navigate these obstacles to leverage its expanded portfolio effectively. How will this affect the mobile games industry? We take a look.

Microsoft’s mobile gaming strategy 

The initiative is a strategic move that aligns perfectly with Microsoft’s long-term vision - initially launching on the web, the new game store is poised to offer a ‘cross-platform gaming-centric mobile experience’ according to Xbox president Sarah Bond.

Following substantial investments in cloud gaming technology and an aggressive expansion of its Xbox ecosystem, this mobile-game store is poised to become the next jewel in Microsoft's crown. By leveraging its cloud platforms like Azure and gaming services like Xbox Game Pass, Microsoft is set to offer a seamless, integrated gaming experience that could potentially bridge various devices and platforms. This could give them a significant edge, especially as gaming continues to migrate towards more mobile and cloud-based platforms.

Could this mean democratisation?

The impact of Microsoft's move could be profound. A new player of this caliber could democratise the distribution of mobile games, offering developers better terms and gamers more choices. This disruption comes at a crucial time when the industry is ripe for change, driven by evolving gamer expectations and rapid technological advancements.

Currently, the mobile gaming sector is a fortress guarded by two tech giants: Apple and Google. Their stores are not just digital marketplaces but are entire ecosystems that have shaped consumer habits and developer economics for over a decade. With Microsoft entering the fray, the dynamics are poised to change. Microsoft's proposition is likely to be enticing for developers who have been craving more equitable revenue models and less restrictive operating environments than those offered by the existing duopoly. 

So, will Microsoft be able to counter the duopoly of Apple and Google?

Breaking through the duopoly of Apple and Google, Xbox's App Store aims to avoid the fees charged by Apple’s App Store and Google’s Play Store, thereby appealing to a broader audience. This has been made possible by the DMA’s new law stating that Apple has to allow EU users to download apps from competing app stores on IOS.

Establishing itself in a market that is dominated by two tech giants is no easy feat, and undoubtedly, Microsoft will face its own set of challenges when launching the Xbox App Store. For starters, the company must navigate stringent regulatory landscapes and foster developer relationships while ensuring competitive pricing and innovative features. Microsoft's ability to build a robust and diverse app library will be crucial, requiring aggressive courting of developers who are already loyal to rival platforms. The company must also convince consumers to adopt a new platform amidst entrenched loyalty to existing ecosystems, such as Apple's App Store and Google Play.

Further to this, Microsoft must address potential antitrust concerns and ensure that its app store policies are transparent and fair to avoid legal scrutiny. Success hinges on strategic differentiation, including leveraging unique Xbox integrations and exclusive content that can’t be found elsewhere. Seamless integration with Xbox hardware, compelling content offerings, and superior user experience will be essential to lure users away from established rivals. Microsoft's reputation and vast resources provide a strong foundation, but the company must execute flawlessly to carve out a significant share in this highly competitive market, which could prove to be a difficult thing to do.

What could this mean for developers and the gaming community at large?

The Xbox App Store could appeal to game developers by offering lower fees and better revenue-sharing models. What if developers could keep a larger percentage of their earnings, similar to the 12% revenue cut Microsoft implemented for PC games on the Microsoft Store, compared to the 30% taken by Apple and Google? Such financial incentives could attract independent developers seeking fairer terms and wider profit margins. Additionally, Microsoft's unique distribution capabilities, leveraging its vast ecosystem and cloud gaming service, could provide developers with unparalleled market reach. Imagine the possibilities for indie developers to showcase their games on Xbox consoles, PCs, and mobile devices seamlessly.

For the gaming community, this shift could mean a broader array of games and experiences, revitalising the market with fresh, unique content. Microsoft's historical influence and vast resources mean that they do have a very real potential to make a significant cultural impact, potentially democratising game development and leveling the playing field. There are some potential drawbacks to consider, however, especially pertaining to casual gamers. How will Microsoft get casual consumers to install a store as an app, or even still, visit it on the web? 

Can Microsoft's strategic moves redefine the mobile gaming industry's landscape and create a more developer-friendly ecosystem? Only time will tell, but the potential is certainly compelling.

A cross-platform focus could prove successful, but not for small devs

I think a lot of people are talking about what the Xbox App Store represents in terms of competition for Apple (App Store) but, more importantly, I believe it represents a strong push forward for cross platform games and multiplayer gameplay. The immediate benefactors will be Microsoft (owned) studios and other studios that have a strong relationship with the Xbox on console.  If you're not already thinking about cross platform gameplay, you need to be. Gaming audiences are everywhere (and everyone!) now and they don't want to be constrained by a single device type. Unfortunately "cross platform" also raises the bar for production costs and may have an adverse effect on smaller indie devs who, rightfully so, took advantage of the low barrier to entry on mobile for a long time.

-  Alex Kozachenko, CEO, Hyperbeard

DTC sales and UA through alternative app stores will be the new norm 

This news is both very welcome and very expected. Direct-to-consumer is shaping up to be the new frontier in mobile game monetisation and who else has the power to go against Google and Apple's walled gardens than the biggest players? In an era of increasingly expensive UA and decreasing monetisation, paying 30% to these platforms for IAP is simply too much. Today, it's Microsoft coming out with their own solution. Tomorrow, it's probably another giant like Sony. And in a while, this opportunity will become open to everyone, from large game studios and publishers, to startups. I don't expect this to happen any time soon, but in a few years I do believe DTC sales and UA through alternative app stores will be standard practice across mobile gaming.

                                                                      -  Jure Grahek, Head of Strategic Initiatives, ZBD

Games on alternative app stores won't see the same profit margins

With the latest information at hand, the Microsoft Store will initially launch as a web-only platform. Whether this move anticipates the upcoming iOS 17.5 update, which allows for direct app downloads from the web, or serves as a preliminary step toward a fully downloadable store like the AltStore, remains to be seen. Regardless, Microsoft is one of the few industry giants capable of launching a new store with credibility and a legitimate chance of success. I conducted a LinkedIn poll (disclaimer: limited sample size of game developers), which revealed that only about 40% of respondents were interested in releasing their products on the Microsoft Store if given the opportunity. In a recent article, I discussed the changes brought by the Digital Markets Act (DMA) and their implications. According to Apple's regulations, it is practically impossible for developers to launch on alternative stores while maintaining the profitability of their games and apps in the EU.

                                                                          - Jesse Lempiäinen, CEO & co-founder, Geeklab