SEOUL Korea’s app developer is Apple Inc. And Alphabet Inc.s Google can quickly circumvent the digital toll roads mandated, but changes in app companies and consumers can be confusing at first.
Last week, South Korea passed the world’s first law banning Apple and Google from offering only their own in-app payment system. Bills awaiting presidential approval may come into force within a few weeks. Once enacted, Korean app companies can avoid paying tech giants up to 30% commission if users choose to pay through an alternative payment platform.
South Korea is the first test of how similar regulatory efforts working around the world will affect the app market.
According to local business groups and app makers, more payment options could lower the price of digital content accessed through apps in South Korea. However, consumers may hesitate to take extra steps to purchase items sold within games, digital comics, and other online content. Many mobile app companies may continue to pay fees to Google and Apple beyond the complexity and cost of choosing the status quo and setting up their own payment platform. According to industry analysts, both companies can impose separate fees to compensate for the loss of revenue from lost fees.
Graphics by Jerry Lee.
Meanwhile, two tech giants in the United States have expressed concern about the negative impact on the operation of the app store, but have not yet publicly declared how they will respond. Apple has warned that there is an increased risk of fraud and privacy. Google said fees helped maintain free access to the Android operating system, and the company is considering that option.
While Korean law focuses on in-app payments, efforts in the United States and Europe are considering additional areas along with billing arrangements. This includes sideloading scrutiny when the user installs the app without going through the app store. Google allows practice, but Apple does not. Regulators are also focusing on Apple’s practice of banning competing app stores from being installed on the iPhone, and U.S. lawmakers have spoken to both companies about how they used market power in mobile software. I’m criticizing.
According to Sensor Tower, a U.S.-based analytics firm that tracks global spending on Apple and Google’s app stores, it has a population of about 52 million and total spending on South Korean apps is in the U.S., Japan, and China. It is the 4th place in the world after.
A year ago, Google announced that it would begin requiring all developers around the world to use a payment system for in-app purchases and pay a 30% commission by October of this year. Previously, Google allowed some developers to bypass the requirement by requiring users to use an alternative payment system. After that, Google allowed app makers to comply until March 2022. In response to a similar move by Apple, we have reduced small developer fees to 15%.
The move proposed by Google was immediately repulsed by local tech giants, including South Korean app developers and Naver Corp. And Kakao Corp. Will be forced to switch to Google’s in-app payment system. The Korea Internet Enterprises Association, which represents information technology companies, predicted that the committee would reduce the revenue of mobile content of domestic app developers by about 2 trillion won per year, or about $ 1.7 billion.
That amount would have been a significant portion of the approximately $ 6.5 billion that the Korean mobile app and content industry earned last year. According to an industry group of the Korea Mobile Internet Business Association, about 58% of spending was for lifestyle apps such as mobile games, news and healthcare, and about 7% for webtoons and digital comics.
South Korean President Moon Jae-in’s office, which has 15 days to sign the bill after the bill was passed last week, said the new law would guarantee fair interests to local businesses and improve the mobile ecosystem. The Korean corporate group saw it as a victory.
Seo Bumgan, chairman of the Korea Webtoon Industry Association, resolved the content creator’s concern that the law would lead to higher prices for digital content that could drive consumers away from forced use of Google’s in-app payment system. He said he was.
This law applies to Apple and Google. However, about three-quarters of Koreans use smartphones made by local vendor Samsung Electronics Co, so it is locally called Google’s fraud prevention law. And LG Electronics Inc. Both use Google’s Android operating system and app store.
After the law comes into force, Google and Apple may decide to allow alternative payment options, but app companies offer aggressive discounts and special offers to users who choose an external payment system. It may block that. Market researcher. He said such a move would allow Google and Apple to claim that they are liberalizing their payment channels in line with South Korean law.
In such situations, most users are likely to stick to app store billing, Escofett said. Of course, you’ll still face resistance from app publishers.
Kwon Sefa, general manager of the Korea Internet Enterprises Association, said Google and Apple have been able to charge fees for purchases made through external payment systems, or new apps that require listing in one of the app stores. He said he could find a way to charge a higher fee.
Breaking away from the established systems of Apple and Google may also be a logistical challenge. A spokesman for the Korea Game Industry Association, an industry group, said it could be a hassle for some mobile game companies to create an independent payment platform for South Korea, relying on Google and Apple everywhere else. Said not.
According to a group spokesman, small game developers may also lack the staff and resources to create alternative payment systems to replace those offered by app store operators. As distributors and marketers, Google and Apple will continue to influence game makers in the app store, no matter how users pay.
Apart from that, consumers can resist change. Randy Nelson, head of mobile insights at Sensor Tower, said users wouldn’t want to leave the app to visit an external website and re-enter their credit card information unless there was a significant savings. I’m saying I’ll do it.
The Coalition for App Fairness includes Fortnite maker Epic Games Inc., Spotify Technology SA, and Tinder owner Match Group Inc. as its founding members. He said it would spur competition that could reduce from% to 30%. Store platform.
Korean law proves that regulations that challenge control of Apple’s and Google’s app stores are no longer impossible, according to Public Knowledge, a U.S.-based public interest group that tracks technology policy issues. John Bergmayer, General Manager of the Legal Department, said.
The biggest open question is how far this goes, Bergmayer said.
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