Why Google is getting heat from game companies on recent commission cuts

Global IT giant Google is facing strong backlash from South Korean game companies angry with having to pay a 30% commission on in-app purchases while other digital content apps require only a 15% commission.

On June 24, Google announced that it would lower the in-app payment commission from 30% to 15% for digital content apps such as webtoon, music streaming and e-book apps from July 1.

Last year, Google announced that it would make the in-app payment system mandatory for all digital content apps listed on its marketplace from October 2021, meaning that the platform giant would have taken a 30% cut on all of the in-app purchases as no other billing method would be available.

But Google has decided to lower the commission rate for digital content apps due to fierce opposition from the digital content industry. Currently, digital content apps don't need to pay a commission to Google because they aren't yet obligated to use the platform's billing system.

For now, Google only requires mobile games to use the in-app payment system.

GOOGLE ACCUSED OF REVERSE DISCRIMINATION

Korean game companies are up in arms, saying that Google's stance is reverse discrimination as the commission has been reduced only for digital content apps.

Last year, Korean game companies combined paid around 765.5 billion won ($678 million) in commissions to Google, according to the Korea Mobile Internet Business Association. This year, the companies are expected to pay a combined 952.9 billion won, up 24.5% from the year-earlier period.

Korea's major game publisher Netmarble Corp. has been paying over 20% of its total revenue to app marketplace operators such as Google and Apple due to its mobile game-focused portfolio.

It's even tougher for small and medium-sized game companies to pay the required commissions.

In 2019, listed game developer Com2uS Corp. spent 40.6% of its overall operating expenses to pay commissions, according to Lee Tae-hee, the dean of the Graduate School of Global Entrepreneurship at Kookmin University.

During the same period, other smaller game companies such as Vespa, SundayToz Corp. and Neptune Corp. paid commissions that were almost three times more than what they spent on employee salaries and about four times the amount that went into research and development.

KOREAN GAME COMPANIES REFRAIN FROM VOICING THEIR ANGER

Unlike digital content companies and associations that have expressed their fury against Google's in-app payment system, Korean game companies have not been so vocal about their frustration.

"Korean game companies are dependent on Google's platform so it's difficult for them to explicitly voice their complaints," said a game industry official.

According to the official, Korean mobile game companies' revenues are determined by their exposure on the app marketplace Google Play. Also, they face the risk of Google potentially blocking the release of their games on the grounds that they need to be reviewed. This is also why Korean digital content providers fought back against Google’s obligatory in-app payment system.

Some industry watchers say that large Korean game companies aren’t releasing their games on the domestic app marketplace, One Store, due to objections from Google.

For example, popular mobile game hits such as NCSoft Corp.’s Lineage series; Netmarble’s Seven Knights series and Krafton’s PlayerUnknown's Battlegrounds (PUBG) aren’t available on One Store.

Write to Joo-wan Kim at kjwan@hankyung.com
Danbee Lee edited this article.