The dispute between Apple (AAPL. NASDAQ) and Tencent (00700. HK) has resurfaced.
On September 2nd, there were rumors that WeChat may not support iPhone 16. Once an iPhone is upgraded to iOS 18.2, WeChat will no longer be available and users will be reminded not to update the system. As soon as the news was released, it attracted a lot of attention, and multiple related topics were trending on Weibo.
Both Tencent and Apple have not responded to this. However, informed sources told Time Finance that the news is not true.
From Apple's perspective, WeChat has 1 billion monthly active users and high user stickiness, so Apple's removal of WeChat is like cutting off its arm. Apple users may not need to face the dilemma of choosing between WeChat and iPhone, but this does not mean that the dispute between Tencent and Apple will stop here.
From the perspective of WeChat, the ecosystems of mini programs and games are all created by WeChat itself, and developers have been maintaining them bit by bit, which has nothing to do with Apple. In fact, the profit margin of this industry is very thin, only a little over ten percent, and once Apple taxes are levied, it will be very difficult for developers, "a developer analyzed to Time Finance.
On August 6, according to the surging news report, Apple is increasing the pressure on Tencent and ByteDance, requiring the two companies to cooperate in plugging the payment loopholes in WeChat and Tiktok. It is understood that developers can exploit similar vulnerabilities to bypass the Apple ecosystem, redirect users to external payment systems, and evade the high "Apple tax".
As a closed system, Apple attempts to control the flow of funds for every transaction and collect substantial commissions from it. In China, the proportion of "Apple Tax" is usually 30%, with only some small businesses and new developers receiving a 15% commission.
Zhang Ying, a partner of the Going Global Think Tank and chief editor of Internet Law Review, explained to Time Finance that "Apple Tax" is mainly for the digital services in the app, including game top up, entertainment rewards, member services (such as video members, social software), etc.
In the past, Apple and WeChat have had friction over rewards on official account.
In 2017, Apple expanded the collection scope of "Apple Tax" to reward on WeChat official account, and defined the reward behavior of readers to creators as "in app purchase". This regulation has sparked huge controversy in China, where Chinese users generally believe that online tipping is a voluntary gift rather than a purchasing behavior. As a result, WeChat has cancelled the tipping function in the iOS version.
Until three months later, Apple made a clarification and waived the commission requirement for tipping, but required that all platforms should not take any commission from tipping and must fully hand it over to the recipient.
Currently, as the transaction volume of small games continues to grow, Apple intends to "harvest" small games.
According to the "China Game Industry Report from January to June 2024", mini games have maintained a strong growth trend in the domestic gaming market for three consecutive years. The actual sales revenue of small games in the first half of this year was 16.603 billion yuan, a year-on-year increase of 60.5%. Among them, the revenue generated from internal purchases was 9.098 billion yuan, with a significant year-on-year increase of 81.56% in actual sales.
Apple naturally does not want to miss out on such a rapidly growing and huge market. In the current iOS ecosystem, the internal purchase income generated by the small games in WeChat and Tiktok is not connected to Apple's own payment channel like the game applications downloaded in the App Store. Users can recharge through the game's own customer service center entrance to the customer service session page. As a result, Apple is unable to control the popularity of the funds involved, let alone make any profit from it.
In January of this year, Apple announced that it would support developers to add cloud games, mini games, and mini programs to Apple's in app purchasing system. However, app developers who provide corresponding services must fulfill their review responsibilities and ensure that every experience provided in the app is required to comply with all App Store review guidelines - this is seen as a precursor to Apple's "Apple Tax" on mini games and other mini programs.
But it is not easy to make developers accept the extra 30% commission, and Apple has taken more aggressive measures to address this. According to reports, Apple warned Tencent in early May that it would refuse to provide WeChat updates in the future if it did not remove the ability for developers and users to bypass the Apple ecosystem; In June, Apple warned Tiktok again.
From the current situation, none of the three parties have made a compromise, and the game is still ongoing.
Time Finance found that in the APP Store, the last update of WeChat and Tiktok was two months ago, and the updated versions were 8.0.50 and 30.3.0, respectively, which was significantly slower than before; In Android, the latest version of WeChat is consistent with that of iOS, while Tiktok was updated to 31.3.0 in late August.
Tiktok compares versions on both sides of Android and Apple, with Android on the left and Apple on the right, screenshots of the app store
Tencent's Chief Strategy Officer James Mitchell publicly responded to this during the Q2 earnings conference on August 15th, stating that the company is in talks with Apple regarding revenue sharing for iOS mini games. At present, Tencent has not commercialized small games on iOS through in app purchases. However, if commercialization can be achieved, it would not only benefit the interests of both Tencent and Apple, but also the interests of game developers and users.
However, it is worth noting that James Mitchell emphasized that there is a natural tension between the gaming or digital content industry and app stores, rooted in the fact that app stores charge a commission of about 30%, which is undoubtedly a heavy burden. Over time, whether for regulatory or commercial reasons, the trend is that app store commission rates will change or decrease.
The reason why James Mitchell made such a judgment is highly likely due to the failure of the "Apple Tax" in overseas markets. In recent years, with more and more overseas developers rising up, many countries and regions such as Europe, America, Japan, and South Korea have conducted anti-monopoly investigations or directly punished Apple, forcing the tech giant to reduce its commission rate in multiple regions.
Countries such as Europe, America, Japan, and South Korea have all passed legislation to reduce channel taxes around 2022. Among them, the EU's "apple tax" has been reduced to 17%, while South Korea only has 26%; Japan also passed the "Specific Smartphone Software Competition Promotion Law" on June 12th this year, which clearly stipulates the need to reduce taxes on Japanese apps.
In contrast, China's "apple tax" remains at a high level of around 30% and contributes a significant amount of revenue to Apple. According to a report released by Sensor Tower, in 2023, the "Apple Tax" brought Apple approximately 22.34 billion US dollars in global revenue, equivalent to approximately 160.8 billion yuan, of which the Chinese market contributed over 40 billion yuan.
The market generally believes that Apple's differentiated "tax rates" for different countries undoubtedly strengthen global market inequality and social discrimination. More and more consumers and developers have begun to show dissatisfaction, and conflicts occasionally erupt.
Last August, game company miHoYo attempted twice to bypass Apple by setting up payment portals on other platforms to avoid the "Apple tax," but the portal was taken down within a month.
Earlier in 2021, Apple user Jin sued Apple for allegedly abusing its market dominance, resulting in multiple digital products purchased through Apple's system channels being priced higher than Android. The case was sentenced in May this year, and the court determined that Apple has a dominant market position in the software market in China, but there is no abuse. This ruling has been seen as a small victory by the plaintiff's legal representative, while Apple appealed in July, opposing language such as "dominant position" in the ruling.
In Zhang Ying's view, although domestic developers may not currently have the bargaining power with Apple, in the long run, the high "Apple tax" will not last long in China. Nowadays, Apple's innovation capability and market share are both declining, and the shipment of domestic mobile phones is gradually increasing. When the Android system and domestic systems surpass the Apple App Store, Chinese developers will have stronger bargaining power, forcing Apple to make concessions