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Friday, December 9, 2022

Apple and Second Life Slam Meta over Fees for Metaverse Creators

Meta says its fees make VR headsets cheaper, which creates more potential customers for VR games.

One of the promises of “the metaverse” is that anyone will be able to create 3D items, worlds, and games and sell them to other metaverse inhabitants for real money. That plan often includes big, specious ideas about decentralized blockchain marketplaces, but right now we’re talking about roughly the same thing as selling a Dota 2 skin on the Steam Workshop. Someone submits a Dota 2 cosmetic, Valve approves it, and then they split the revenue.

A big question answered this week is what that revenue split is going to look like for Horizon Worlds, the social VR app from Meta (the company formerly known as Facebook), and it’s not the most inspiring number the platform’s future builders could hope for.

After fees charged by the Meta Quest Store and Horizon Worlds itself, creators will receive 52.5% of the pre-tax revenue from sales of virtual items and experiences. That’s according to Business Insider, who confirmed the math with Meta after the company announced it had begun testing monetization in Horizon Worlds on Monday.

“If a creator sells an item for $1.00, then the Meta Quest Store fee would be $0.30 and the Horizon Platform fee would be $0.17 (25% of the remainder), leaving $0.53 for the Creator before any applicable taxes,” a Meta spokesperson told the publication.

The Meta Quest Store fee refers to a fee for sales made through Meta’s VR game and app marketplace, which used to be called the Oculus Store. (Meta has started to phase out the original name of the VR company it bought eight years ago in favor of its metaverse-themed rebrand.) The second fee, which is 25% of whatever’s left after the platform fee, is charged by Horizon Worlds itself. 

Meta told Business Insider that while the Horizon Worlds fee will be paid by anyone selling Horizon Worlds stuff, the 30% platform fee will vary according to the platform used to access it, which won’t necessarily be the Meta Quest Store. The company intends to make Horizon Worlds available on mobile devices, for instance, and on iPhones, Apple’s 15% to 30% fee would replace the Meta Quest Store fee.

On PC, Steam takes a 30% cut of transactions for most publishers (it’s lower for the biggest earners), while the Epic Games Store is notable for taking only 12%. 

Speaking to the Verge, Meta’s VP of Horizon called the Horizon Worlds fee structure “pretty competitive,” and it actually may be competitive compared to Valve’s offer to item creators. Team Fortress 2, CS:GO, and Dota 2 cosmetic makers whose items are approved for sale on the Steam Workshop don’t simply pay the 30% Steam platform fee that game publishers pay. Valve takes a much bigger cut for the privilege of selling items to the crowds that gather in its multiplayer games.

Back in 2017, a group of Dota Workshop artists said that they collectively earned 25% of the revenue from sales of their Dota 2 creations, but complained that changes to compensation related to the Dota Battle Pass had effectively dropped their share to 6%. The system has probably changed since then (I asked Valve for details and didn’t receive a response), but if it’s at all close to what those Dota creators said it was, Meta indeed offers creators a much bigger cut.

However, a better comparison for Meta Horizon Worlds is Second Life, a long-running socialization-focused virtual world in which creators can do what Meta is testing now: Make money creating and selling virtual stuff. Outside of premium subscriptions and payments for use of virtual land, Second Life’s primary fees are extracted when users move money into or out of its virtual economy, and range from 3.5% to 7.5%, says Brad Oberwager, executive chairman of Second Life creator Linden Lab.

“I can’t imagine that Meta’s nearly 50% take will be that motivating to creators,” Oberwager told PC Gamer when asked for his opinion on the news, adding that Linden Lab paid out $86 million to creators in 2021.

I expected Oberwager to be critical of Meta’s fee structure: I recently spoke to both him and Second Life founder and strategic advisor Philip Rosedale about the metaverse boom (or possibly bubble), and both strongly disapproved of Meta’s reliance on data-collection and targeted advertising, notorious features of Facebook and Instagram.

“[Meta’s fee] seems like a great way to dissuade creators from actually participating in its economy, but, frankly I would expect nothing less from them,” Rosedale told PC Gamer this week. “They need to find some way to fill the coffers as their surveillance model loses steam.”

Apple has beef with Meta, too. Meta CEO Mark Zuckerberg has criticized Apple’s fees in the past, and the social media empire supported Tim Sweeney and Epic Games when they sued Apple over App Store fees a couple years ago. Apple took this opportunity to get its own shots in.

“Meta has repeatedly taken aim at Apple for charging developers a 30% commission for in-app purchases in the App Store—and have used small businesses and creators as a scapegoat at every turn,” Apple spokesperson Fred Sainz told MarketWatch. “Now—Meta seeks to charge those same creators significantly more than any other platform. [Meta’s] announcement lays bare Meta’s hypocrisy. It goes to show that while they seek to use Apple’s platform for free, they happily take from the creators and small businesses that use their own.”Advertisement

Reached for comment, a Meta spokesperson told PC Gamer that its Meta Quest Store fee is used to offset the cost of its VR devices. 

“Our approach is to grow the market for VR by shipping affordable devices, and [fee] revenue is critical to maintaining an accessible headset retail price,” said Meta’s spokesperson. “The economic value we’ve delivered to our developers via this growth is clear: We now have over 120 titles with $1 million or more in gross revenue on the Quest Store alone—an achievement that would have been unthinkable on any VR platform just a few years ago.”

Meta CTO Andrew Bosworth alluded to that strategy when he fired back at Apple on Twitter, saying that the iPhone maker collects “a significant margin on their devices” on top of its 30% fee on software sales.

“They’ve capitalized on their market power to favor their own business interests, which comes at great expense to developers,” Bosworth said.

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