Apple App Store draws new scrutiny in Japan, epicenter of gaming

Epic Games Inc.’s decision to sue Apple Inc. over its mobile store practices has sparked new scrutiny in the massive Japanese gaming market, prompting complaints and questions about how to counter the tech giant’s dominance.

While Epic, publisher of the hit title Fortnite, focuses on the 30% revenue cut app stores typically take, Japanese game studios have broader concerns. They have long been unhappy with what they see as Apple’s inconsistent enforcement of its own App Store guidelines, unpredictable content decisions and lapses in communication, according to more than a dozen people involved in the matter.

Japan’s antitrust regulator said it will step up attention to the iPhone maker’s practices in the wake of the high-stakes legal clash. And in rare cases, prominent executives are beginning to speak out after staying silent out of fear of reprisal.

“I want from the bottom of my heart Epic to win,” Hironao Kunimitsu, founder and chairman of Tokyo-based mobile game maker Gumi Inc., wrote on his Facebook page.

Apple and Google hold a duopoly over the mobile app market outside China. Any publisher that wants a game to be played on iPhones or Android devices is effectively forced to distribute it via their app stores, sharing revenue from an initial purchase and future, related items.

Epic, whose Fortnite generates more than $1 billion annually from in-game purchases of virtual cosmetics and extras, sued both companies for what it considers excessive fees and for the right to sell game extras directly to players. Apple and Google have disputed those charges in court. The iPhone maker argues its cut is justified by its provision of security, development support and an audience of a billion users.

The iPhone is a huge revenue driver for game creators in Japan, including established names like Square Enix Holdings Co., which gets 40% of its group revenue from smartphone games, and Bandai Namco Holdings Inc. Sony Corp. has a multibillion-dollar mobile hit called Fate/Grand Order.

With 702,000 registered developers, Japan is home to one of the most creative developer communities. A recent study commissioned by Apple estimated the App Store ecosystem in Japan generated $37 billion in billings and sales in 2019 – $11 billion in digital goods and services, $24 billion via physical goods and services and $2 billion from in-app advertising.

Yet the App Store is particularly problematic, according to game developers, compared with Google’s Android Play Store, where the approval process tends to be smoother and there’s better communication. There’s even a third-party service dubbed iOS Reject Rescue, designed to help developers navigate through the unpredictable approval process.

“Apple’s app review is often ambiguous, subjective and irrational,” said Makoto Shoji, founder of PrimeTheory Inc., which provides the rejection service. “Apple’s response to developers is often curt and boilerplate, but even with that, you must be polite on many occasions, like a servant asking the master what he wants next.”

Apple said it strives to give developers high-quality support by telephone or email, including through 1,400 advisers and customer service employees based in Japan. It has translated App Store review guidelines and this week released Japanese subtitles to its developer conference videos from the summer, setting out its latest thinking on optimal app design. Apple said the goal is to offer the best place for customers and developers to get and create apps.

The Japanese games industry is familiar with the 30% revenue share, since it originated with Nintendo Co. console cartridges back in the 1980s. Most developers don’t mind it, but they want to see better service, especially from Apple.

Developers complain that titles waiting for App Store review sometimes take weeks to be cleared. One local games studio said it gave up hosting seasonal in-game events, which can be a big revenue accelerator, because Apple didn’t respond to their update review request for more than a month.

“While Apple will never admit it, I think there are times when they simply forget an item’s in the review queue or they intentionally keep it untouched as a sanction to a developer giving them the wrong attitude,” said Shoji.

Apple said its app review team operates across two time zones and Japanese-speaking representatives are available to discuss particular apps over the phone with developers during local business hours.

In one case in November, cited by several game makers, Apple’s servers went down for more than a day without any notification to developers, undermining their efforts to diagnose the issue. The Cupertino, California-based company’s system status screens were also slow to indicate any trouble. Such malfunctions carry direct economic costs for creators, which Apple does not reimburse. Apple said it works hard to keep its App Store systems fully functional all the time.

Japanese firms also say the company flip flops at times on its interpretation of appropriate content and changes policies without advanced notice. Several game studios reported having characters that were approved on the interpretation they were dressed in swimsuits, then later rejected on the judgment that they were in underwear and thus sexualized. One developer who had implemented an in-game system that Apple approved, later saw the same code rejected by the App Store operator in a subsequent game.

Apple pointed out that its guidelines prohibit “overtly sexual or pornographic material” and stressed it has a responsibility to provide a safe and trusted place for users to get apps.

Tokyo-based games consultant Hisakazu Hirabayashi has seen the challenges first-hand. One development team checked their game’s revenue-making strategy with Apple several times before release, making sure Apple gave the go-ahead. Weeks after the app launched, the App Store owner changed its stance, saying the developer should take the function out of the app or the app’s distribution would be terminated, according to the consultant.

“Apple is a sheriff who sometimes makes unfair interpretations of the guidelines for its own benefit,” Hirabayashi said.