On the first day of 2021, Tencent removed its massive portfolio of games from Huawei’s app store in China due to a revenue share dispute. Netizens in China broke out the popcorn and grabbed a front row seat in anticipation of the upcoming heavyweight duel. However, the dispute resolved itself within 24 hours, and Tencent’s games are now back on Huawei’s store.
This whirlwind of events spurred discussion about how revenue share is structured in China’s Android ecosystem, how power dynamics between game companies and platforms function, and it potentially foreshadows where the industry is heading.
Most of you already know that Google Play is unavailable in China, and Chinese Android users (80% of the market) rely on Chinese app stores to download apps. The standard revenue share for Chinese app stores is 50/50 (after payment processing fee – usually 5%). This is the legacy approach to Android game distribution in China, where app stores own the user traffic and have massive bargaining power. The app stores’ argument for charging 50% is that they drive traffic to your title, provide suggestions to optimize your game, and help run in-store promotions for their users. The brief disagreement between Tencent and Huawei is about the 50% revenue share, and the speed of which the situation resolved itself highlights the differences in power dynamics (especially compared to the Epic vs Apple trial):
- Tencent is dominant. Its portfolio of PUBG, Honor of Kings, QQ Speed, Peacekeeper Elite, and more are the top grossing titles in the market and are also culturally the most impactful. Not having Tencent games in your app store in China is equivalent to not carrying Nikes in a sports shoe store.
- Android is still an open ecosystem, and Huawei users can download Tencent’s games from other 3rd party channels or the official game page. Not having Tencent’s games listed will annoy and drive away Huawei users. It would also be lost revenue for Huawei but not Tencent.
Since Tencent’s games are now reinstated back on Huawei, one can speculate that Tencent got the revenue share it wanted. Going forward, the pressure from game companies to improve their revenue share split on Chinese Android app stores’ will likely increase — especially since miHoYo’s Genshin Impact and Lilith’s Rise of Kingdom succeeded massively while bypassing mainstream app store. While Tencent, miHoYo, and Lilith are outliers, more will try to bypass the app store’s legacy practices. Eventually the paradigm will shift, and even though there are differences between regions — Tencent’s influence and greater user choice, most importantly — it could inform on what’s possible in other parts of the world, too.
