TMTPost -- Tencent Holdings Ltd., the world's largest video game vendor, confirmed a recent report about Apple Inc.'s friction on App Store commission on in-app purchases from game developers in China.

Credit:Tencent

There are tensions between the game industry or the digital content industry and app stores, Tencent Chief Strategy Officer James Mitchell admitted at an earnings conference earlier this week. Mitchell told analysts the root cause of such tensions is that the game industry feels the app store charge. For the game industry, a 30% app store fee on games and other forms of digital content is a very onerous burden, while the app stores would argue they provide beneficial ecosystem that is supportive of this digital can change, Mitchell said.

As to some of the press commentary around the mini-game on iOS devices, Mitchell said there are some misunderstandings on the nature of the current sitution since Tencent doesn't monetize many games on iOS through in-app transactions and is discussing with Apple to seek a solution that will be in interests of both companies, the game developers and the users.

"We want to make it available on terms that we think are economically sustainable, that are also fair. And so that's a discussion that's underway, and we hope that the discussion leads to a positive outcome," Mitchell said. "But in the event that discussion doesn't progress, then the current status quo continues. In the event that the discussion does progress, then that's incremental revenue for us, incremental revenue for game developers, potentially incremental revenue for Apple and certainly a better experience for Apple users."

Earlier this month, Bloomberg cited sources that Apple has asked Tecent and ByteDance these months to close payment loopholes that allow users of WeChat and Douyin to enjoy external services like playing games, ride-hailing through links in mini-apps, which effectively circumuvents Apple App Store's standard 30% commission.

Apple was reported to warned Tencent in May that it may reject essential WeChat updates unless the developer eradicates links that mini-game developers use to accept payment off Apple's platform. Months later, Apple reportedly demanded Tencent to disable a key in-game messaging feature that also diverted users. Tencent hasn't compromised due to concern that Apple's proposed change would have negative impact on user experience. The Shenzhen-based company did agree to close a loophole that enables proliferation of web links that developers were circulating with a WeChat update in early July.

The Bloomberg report about Apple's seeking to close in-app commission loophole is true, multiple industry insiders confirmed to Chinese digital news media outlet The Paper Monday. One of the insiders told the media that Apple's pressure on Tencent and ByteDance largely targets the booming mini-game market. For Douyin, Apple's move does not only hit mini-games, but also the short drama business that has been very popular in recent years. The business was also the hardest hit area for evading the so-called "Apple tax", which meas the commission fee Apple charges for the use of its App Store and in-app payment system.

Apple, WeChat and Douyin have not reached an agreement yet, The Paper learned. "Apple's forced pressure mainly aims to ease its own pressure on revenue," said Zhang Jun, the operator of the popular mini-game "Sheep and Sheep" and former CEO of a Chinese game developer Baozou Games. "Apple's revenue in China has declined, while the mini-game market is growing rapidly, so (Apple), the distributor hopes to get a piece of the pie."