The jury is still out on whether the Paytm and Paytm First Games apps violated Google’s “gambling” guidelines and if the Internet giant was right in pulling them off their Play Store. But according to some industry experts, this is part of a broader struggle between app stores such as those owned by Apple and Google and content/music and gaming developers.
Barnik Chitran Maitra, managing partner and CEO, Arthur D Little, India and South Asia, decodes for Fortune India, what the controversy is all about.
Google’s Play Store and Apple’s App Store make money off the commissions they charge on each app’s sales and in-app purchases. Most of those aren’t straight-up paid purchases—a major percentage of their revenues come from in-app purchases in free-to-play games such as Fortnite and Candy Crush and subscription apps like Netflix, Tinder, and YouTube. According to the latest estimates, every single one of the 50 top-grossing apps on these platforms is either a major service that relies on subscription fees or a free-to-play game. Even the most popular paid apps like Minecraft or Facetune don’t make the same kind of money as free apps that rely on in-app purchases, even with in-app purchases to help bolster their numbers. And Google/Apple take a cut of each of those in-app purchases and subscriptions.
Apple has recently come under fire for the App Store model in the past few months: the U.S. Supreme Court is hearing an iOS App Store antitrust lawsuit that alleges Apple has an unfair monopoly on iPhone apps. And Spotify has filed another antitrust complaint over Apple’s 30% cut with the European Union, complaining that it gives Apple an unfair advantage when promoting its own streaming service, Apple Music.
Google’s move has brought to the fore two main tech policy issues—the company’s dominant position as an application marketplace, and the legal clarity on online sports betting.
What does the law say?
* According to Indian laws, fantasy sports are allowed all over India, except in a few states such as Assam, Odisha, and Telangana. There is no legal definition for ‘fantasy sports’ in India.
* The legality is subjected to whether the game qualifies as a ‘game of skill’ or a ‘game of chance’. Games of chance fall under gambling and are thereby restricted by state gambling laws. However, games involving considerable and substantial degree of skill (mathematically, more than 50%) fall outside the extent of betting laws and consequently are legitimate in India.
* Courts have examined the game format of Dream11 and have considered its format as a ‘game of skill’. Courts have not examined any other fantasy gaming formats and have not offered any views, judgments, or analyses of the format of any other fantasy gaming platform. Whether a fantasy sport is a game of chance or a game of skill, legality is based on the modalities of each game.
* As there are no set of government regulations, fantasy industry standards in India are regulated by the Federation of Indian Fantasy Sports (FIFS). Self-regularisation norms for the Indian fantasy sports industry have been set up by the federation until the government comes out with any standards and laws.
How is fantasy sports affected?
The implication for fantasy sports is that independent game publishers/developers will continue to pay steep revenue share to dominant app stores globally in the absence of concerted global regulatory action in the U.S. and Europe. In the absence of a robust policy framework to promote innovation and competition, this implies a high ‘toll or tax’ charged by the dominant app store in India, which is Android, ultimately slowing the spread of fantasy sports and limiting the ecosystem.
The way ahead
The contentious issue is the ‘cost’ of being on app stores. All such platforms ensure that all transactions in an app are conducted via the app store so that the app store can get the relevant share of revenue. Game developers and game publishers have argued that these are often high, and expensive, and often unfair. There will be an increasing movement by game developers and publishers to either push for a different regulatory framework for app stores or in the long run bypass app stores completely.