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Publishing in the Microsoft Store - Part 2 of 3 : Monopoly, Monopsony, and the Microsoft App Store

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The Microsoft App Store is different from other App Stores in ways that matter to developers.

The advantages of app stores [link] mentioned in my previous article might sit poorly with those of you pushing apps into the Apple App Store (30% tax) and Google Play Store (30% tax). Both Apple and Google also charge an initial registration fee and annual developer fee. Most of the other online stores: Steam, Etsy, Facebook, Playstation, Xbox, Twitch, Galaxy, and most others are comparable. Amazon’s fees can range from 6% to 45% depending on category.

These companies can charge whatever price to retail users wanting software, music, movies, products from these sites and services. The more exclusive the user access to services, like Apple, Google, and Amazon, the more these services are monopolies. That these organizations extract more money for their services than the value they provide has brought lawsuits and regulatory interest.

What sometimes gets missed is that these services are also monopsonies where developers wanting access to customers must offer their products within price constraints defined by the same alleged monopolists ( Microsoft is the only recently convicted tech monopolist, so far). When a company can force others to sell at a defined price that is a monopsony. There was a US Supreme Court decision on monopsony in 2019 called Apple vs Pepper.

An exception is the Microsoft App Store. The Microsoft’s App Store has 5% fees if the app is found through your website with a ceiling of 15% fees if the app is found and downloaded only through the Microsoft App Store. This is a much better deal for vendors than available through other online stores (until very recently).

Microsoft’s App Store is behaving differently; why?

Perhaps Microsoft has changed its ways as a result of new management or the anti-trust conviction, or a little of both. But, as the book The Innovator's Dilemma points out, company culture is very difficult to change.

I think Microsoft was was mostly always better at cooperating. Steve Jobs said this in public to to Bill Gates at the 2007 All Things D conference near the end of his life. Rare praise from a decades-long competitor. And I agree that at this time, Microsoft with its first-rate: developer outreach, education, lead support, and Partner program, is the company with whom I prefer to collaborate.

Microsoft has always needed developers to deliver its services.

Whether it was programming languages, an operating system, or cloud services like Azure and Office365, Microsoft needs a ecosystem of partners to adapt their offerings to every niche in the world economy. Microsoft does consult on big and government contracts but it is the long-tail of business their partners uncover and support throughout the world that continues to make their products useful.

On top of that, developers and customers have alternatives to Microsoft. Developers can continue to offer their apps for installation on Windows or MacOS. And with maturation of the web and SaaS as an acceptable business model, mobile and more operating systems are accessible through the web. This means I can work with Microsoft with much more latitude in how I reach my customers.

The fact that I can absolutely leave the Microsoft App Store might be why it imposes the lowest charges. 15% and 5% (for customers you deliver to the Store) for a store that sits on every Windows 10 desktop tells me Microsoft knows their developers have alternatives. The strength of the Microsoft App Store is that it has more competition than do other app stores.

Note that the Microsoft XBox store charges much higher prices than the Apple or Google Stores.

These prices are much higher than than imposed by the Microsoft App Store (separate from the XBox Store). The XBox is part of a gaming oligopoly with Playstation and Nintendo and there is only one store on the platform. It appears that with more market power Microsoft behaves like every other business wanting to satisfy shareholders every quarter. This tells you how to know, beyond higher imposed prices and control, when the Microsoft App Store might be getting too powerful.

When it gets hard to reach customers outside the Microsoft Store then you should look for another partner.

For now, there is no risk of that happening. Microsoft is famous for maintaining backward compatibility so as to not lose legacy customers (even to the extent that Microsoft to maintaining a special version of XP for the US Department of Defense!). Old Windows applications usually still run on Windows 10 or have a clear and easy upgrade path to the platform. And the ecosystem around Microsoft will capably support any path to market that Microsoft choose to deprecate.

Competition makes Microsoft a good partner.

Like Microsoft’s Surface, the App Store looks to be at this time an example of what Microsoft wants to see exist on Windows 10 to genuinely raise the quality and safety of the apps in the store. Our next post will show how we make the Microsoft App Store even better by making it more accessible[LINK to next post?]