Apple and Tencent agree to 15% fee on WeChat mini game purchases

[HONG KONG] Tencent Holdings has agreed a deal with Apple that will see the iPhone maker handle payments and take a 15 per cent cut of purchases in WeChat mini games and apps, according to people familiar with the discussions.

Resolving the issue, under negotiation between the two tech titans for over a year, opens a new revenue stream for Apple and takes pressure off Tencent. Apple had demanded Tencent close loopholes that app creators employed to funnel users to external payment systems, circumventing the iPhone’s typical 30 per cent commission.

To qualify, developers will need to sign up to certain Apple software requirements, such as one to help parents share their child’s age range, one of the people said. They asked not to be named as they weren’t authorised to speak publicly.

A Tencent spokesperson declined to comment, while Apple representatives did not immediately respond to a request for comment.

At 15 per cent, Apple is taking half the usual fee that it charges many developers on in-app purchases, but it is making inroads in a growing segment of entertainment in China. Mini games, contained entirely within WeChat – which is now used by 1.41 billion people every month – contributed to 32.3 billion yuan (S$5.9 billion) in social network revenue for China’s most valuable company in the September quarter.

Tencent disclosed in August last year that it was talking to Apple about “economically sustainable” and fair terms to let the US company take a share of mini game and app sales on iPhones.

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Mini games, in particular, have been steadily growing in popularity, though the previous absence of an agreement meant that Apple was not receiving any income from purchases.

Apple has in recent years taken steps in several jurisdictions to either reduce its once-universal 30 per cent fee on purchases made via iPhones, allow exemptions for things like subscriptions or open devices up to alternative payment-handling services. Its agreement with Tencent marks an important step towards normalising relations with China’s social networking leader and establishing a precedent for other software purchases on iPhones in China. BLOOMBERG