Two and a Half Gamers & Stash debrief the DMA and D2C

By
Archie Stonehill
Feb 22, 2024

If there were ever a need to call an emergency podcast, it’s now. Two and a Half Gamers’ Matej Lancaric, ⁠Jakub Remia⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠r, and Felix Braberg held an emergency episode to debrief the latest Apple policies, and asked Stash Co-Founder Justin Kan and Head of Product Archie Stonehill to join. 

Tune in below or keep reading for highlights from the episode. You’ll get a “no bullshit” (in Matej’s words) breakdown of the Apple policies, learn whether it makes sense for your studio to adopt them, hear how other studios are already winning in direct-to-consumer, and more.  

The groundbreaking DMA

10:54 “The Digital Markets Act is a fairly groundbreaking piece of regulations for a few reasons. One of them is that its objective is not the typical objective you see in anti-trust action. Normally, anti-trust action is to protect consumers from monopolistic pricing and stuff like that. The Digital Markets Act is actually oriented towards competitors of platform businesses. It’s meant to foster an environment that enables competitors to have a fair shot at challenging what they call ‘gatekeepers’ in digital markets. That has a bunch of exciting implications, since it’s been hard to pin these big tech guys down on antitrust stuff when they give away all their stuff for free. So it’s hard to prove consumer harm when you’re giving things away for free. 

There were a couple of provisions Apple had to comply by. The deadline for that is March 6th. If you think about the app store ecosystem, Apple owns the device, the operating system, the app store, and the payments layer after that. What it can’t do now is use any one of those control points, most particularly the operating system and the hardware, to destroy competition downstream. In theory, Apple’s first salvo at complying with that is these new policies - which is a bit like setting up a choice and saying to the EU, ‘hey they have two options’.

There are three ways in which Apple could be opening up. One is allowing alternative app distribution. Another one is payments, allowing alternative monetization channels in-app. And then the third is non-app monetization and sales. It’ll give up on payments the last - that’s what it really cares about, which is payments for apps in the app store. It’s being forced to allow sideloading - and to be fair there are some viable products now with their sideloading infrastructure, even if they do come with that alternative app store install fee. By the way, it’s worth noting, it’s only installs above a million on the app store - if you’re distributing outside the app store, you pay that core technology fee on the first install. That makes it very tough for a smaller company to do this. 

Out-of-app payments have been the most immediate opportunity for a while, and a lot of the EU and American court action has opened up that even more.”

Does linking out to alternative payments make sense?

15:27 “I think there’s very few cases where the link-out makes sense. But having said that, there were two parts of the court ruling. The link-out got the most attention, but the other one was regarding communications about alternative payment methods. Previously, guideline 3.3 banned developers from any communication. So now you can do a lot more to tell players about your web store - which is pretty powerful and the most exciting thing that’s come out in the last few days. … Rovio just launched a pop up in their apps where they say ‘join the Rovio Club on our website’ and that then leads to a web store.” 

Already a huge market

17:51 “This would not be viable if it weren’t for whale monetization in free-to-play games. In fact, this is already a market that’s huge. Playika is doing 25% of its revenue through direct-to-consumer channels, namely web, Huuuge is doing 10% of its revenue, Plarium is doing 30% - these guys are already doing this. They move their top 0.5% of players through very high-touch account management services, a really good rewards program that incentivizes use of these channels. 

Strategy games, anything cross platform - like Scopely has had success doing this, Funplus - there’s a bunch of companies, even outside casino. Rovio’s pushing it hard, it’ll be interesting to see how Angry Birds does with this.” 

Should you adopt Apple’s alternative terms?

22:19 “If you adopt the alternative terms, then you would have to pay a fee that consists of two parts. That’s a reduced commission to Apple on App Store installs, you pay a no commission on installs outside the app store, and then on all installs (apart from your first million via the App Store), you pay your $0.50 fee. 

So you have two types of distribution for apps. You have the App Store - and on those, you don’t pay the install fee until the millionth and first install, but on all revenue you pay 20%. For out-of-app installs, you pay a $0.50 fee from day one. 

The upshot is, if your annual monetization per user is greater than $5 this makes economic sense for you. Even if you don’t use out-of-app distribution, then you switch to a $0.50 install above a million and a 20% fee. As long as the 20% fee vs the 30% difference is greater than or equal to $5 then you’re saving money. 

How much should studios expect to pay?

27:15 “It depends on volume and where your users are and how they’re paying. Fortunately, whales tend to pay with low cost methods. … If your users are using network carrier billing in Africa you’re going to pay a lot more, if they’re just using credit cards in America, you’re going to pay a lot less. You can expect to pay low single digit percents. 

Learning from hotels and airlines

29:54 “Games for the entire industry’s history have been intermediated by platforms - first the consoles and then mobile and Steam - so they’ve never operated direct-to-consumer channels successfully, with a couple of exceptions like Riot, Roblox, and Epic. The games industry doesn’t really have expertise on how to do this and relied really heavily on the platforms to do this. So we’ve been bringing in expertise from a couple industries that have been doing this very successfully. 

For example hospitality like hotels and airlines have maintained very successful direct-to-consumer strategies, and they’re quite similar to games because the additional cost to them per customer also isn’t meaningful - so it doesn’t cost you any more if you’re a hotel to have someone stay in a room if you’re not at full occupancy, the real cost is operating the hotel. It doesn’t matter if you have 99/100 guests or 100/100 guests. Same with an airline - the cost is flying the flight, not per passenger. That’s why they’re able to offer very generous rewards and loyalty programs. For games, it’s even better - there’s no incremental cost to another skin. So think about all the benefits you can offer a user to come to your direct-to-consumer channel with additional exclusive content, cosmetics, and stuff like that. There’s really exciting stuff we’re designing that’s similar to hotels and rewards. We’re also looking at fashion, which successfully went from being intermediated to direct-to-consumer online. Then the other big one is casinos.”

The advantage of gathering emails

36:48 “You can use lookalikes, you can build audiences, and retarget them. But from an overall marketing point of view, you talk to your customers. You use emails - which is really powerful. It doesn’t need to be UA or remarketing, it can be for free. … You build an audience on Facebook, Google, TikTok, and then send them to a web shop like ‘hello, we didn’t see you for a while - here’s a great special offer we have on our web shop.” 

Leveraging the web environment

38:18 “We don’t view the web environment as just a shop. We are not a web shop business, we’re a direct-to-consumer business. A lot of that is enabling experiences that are really valuable for players that they enjoy and enhance their experience with the game. That varies a lot by the type of game. If you’re a competitive multiplayer game, the web environment can be a social discovery tool where you can find players to find people to do raids with, or competitive teams they want to play with. Finding experiences that are enriching for the game, bring traffic to the web environment, and tie in naturally with your game are low effort to build but broaden out the ways in which your players interact directly with you.” 

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