The story of WeChat and Apple's reconciliation: Apple targets small games with 500 million monthly active users, while revenue sharing negotiations are still ongoing

On the afternoon of September 6th, Time Finance discovered that a new version 8.0.51 of WeChat for iOS was launched—this version was updated two months after the last update, and the latest version added new features to WeChat Moments and live streaming.

Recently, the news of "iPhone 16 may not support WeChat" and "Apple forces a choice between Apple and WeChat" has been circulating on social media platforms. With the update of WeChat for iOS, the rumor of "Apple forces a choice between Apple and WeChat" has self-destructed, clarifying the unfounded speculation about the escalating commercial competition between Apple and Tencent (00700.HK) and the possibility of Apple removing WeChat.

However, sources familiar with the matter revealed to Time Finance that Apple and Tencent are still negotiating on the issue of revenue sharing for mini-programs. This means that the two parties have only temporarily reconciled, and the core conflict remains unresolved.

Who is most affected?

The core reason for the clash between Apple and WeChat this time is that Apple wants to extend its Apple tax to the WeChat ecosystem, such as charging transaction commissions for mini-programs—according to Tencent's financial report, the monthly active users of mini-programs have exceeded 1.1 billion in 2023.

In January 2024, Apple announced that it will support cloud games, mini-games, and mini-programs uploaded by developers to access Apple's in-app purchase system. However, app developers providing such services must fulfill the review responsibility to ensure that every experience provided in the app complies with all App Store review guidelines. In other words, Apple intends to levy an "Apple tax" on mini-games and other mini-programs.

Currently, platforms like WeChat and Douyin's mini-programs do not comply with this requirement but choose to bypass Apple's payment system for transactions.

As Apple's sales revenue in the Chinese market continues to decline, Apple is increasingly envious of the revenue from mini-programs in the WeChat ecosystem, which undoubtedly represents a huge potential source of income.

According to the "China Game Industry Report for January-June 2024," in the first half of 2024, the actual revenue of mini-games in China reached 16.603 billion yuan, a year-on-year increase of 61%, with in-app purchase revenue reaching as high as 9.1 billion yuan.

Tencent's Chief Strategy Officer James Mitchell publicly responded to this issue at the second-quarter financial report meeting held on August 15, stating that the company is negotiating revenue sharing for iOS mini-games with Apple. "Currently, Tencent has not commercialized iOS mini-games through in-app purchases. However, if commercialization can be achieved, it will not only benefit both Tencent and Apple but also benefit game developers and users."

From a rational perspective, if Apple's Apple tax targets the WeChat mini-game ecosystem, it may ultimately harm the ecosystem that WeChat has built over the years and the small and medium-sized developers that rely on it for survival.

On July 16th, the WeChat mini-game team revealed a set of data: the number of mini-game users reached 1 billion, with 500 million monthly active users; in the past year, the platform has served over 400,000 developers, of which over 80% are small teams of fewer than 30 people, with over 240 games generating quarterly revenue exceeding tens of millions At the beginning of the mini-game opening, WeChat set the concept of "let creators gain value, let creators gain returns." Therefore, how to help small and medium developers survive is the fundamental core of this negotiation and also the focus of Tencent's negotiation.

"If mini-programs also have to pay the 'Apple tax,' it is expected to have an impact on developers' income. The current basic distribution model has been fixed. Now that Apple wants to intervene, the payment method will change, leading to an increase in developers' operating costs, which may also bring some changes in operational strategies," a mini-program game developer revealed to Time Finance.

Another developer expressed to Time Finance that the profit margin of this industry is very thin, only about ten percent. Once the "Apple tax" is deducted, developers will face great difficulties.

A common struggle for domestic software developers?

In fact, the "Apple-WeChat one of two" storm this time is the second confrontation between the two parties.

As early as 2017, Apple attempted to expand the scope of collecting the "Apple tax" to WeChat public account rewards. Tencent and consumers expressed dissatisfaction. After public opinion fermented and WeChat canceled the iOS version of the reward function, the final result was Apple clarifying, giving up the commission requirement for rewards, but requiring all platforms to not take a cut from rewards and must be fully handed over to the recipient.

In addition to WeChat, developers, and users involved in this incident, many domestic iOS software developers also find it difficult to stand alone. To ultimately solve this problem, it will require the joint efforts of all parties.

Zhang Ying, a partner of the Think Tank for Going Global and editor-in-chief of the "Internet Law Review," once analyzed to Time Finance that the struggle of consumers, developers, and the "Apple tax" will continue. "With the decline in Apple's market share and the rise of China's independently developed system, domestic software developers will gradually have the ability to negotiate with Apple."

As for when China can reduce the "Apple tax," Zhang Ying believes that it may ultimately require regulatory intervention.

"At present, with the increasing attention to the 'Apple tax' in society, if relevant institutions can intervene or exert pressure, prompting Apple to change its strategy, Apple may lower its fees. In other regions, the motivation for Apple to reduce fees usually comes from the introduction of laws, litigation pressure, and regulatory pressure."

Li Sanxi, Director of the Digital Economy Research Center at Renmin University of China, has also stated that with the increasing dissatisfaction of consumers and developers, he believes that China's regulatory agencies will take corresponding measures. Ultimately, Apple in China may adopt a strategy similar to that of the European Union, making compromises with application developers and consumers