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Microsoft shakes up PC gaming by reducing Windows store cut to just 12 percent

Microsoft is shaking up the world of PC gaming today with a big cut to the amount of revenue it takes from games on Windows. The software giant is reducing its cut from 30 percent to just 12 percent from August 1st, in a clear bid to compete with Steam and entice developers and studios to bring more PC games to its Microsoft Store.

“Game developers are at the heart of bringing great games to our players, and we want them to find success on our platforms,” says Matt Booty, head of Xbox Game Studios at Microsoft. “A clear, no-strings-attached revenue share means developers can bring more games to more players and find greater commercial success from doing so.”

These changes will only affect PC games and not Xbox console games in Microsoft’s store. While Microsoft hasn’t explained why it’s not reducing the 30 percent it takes on Xbox game sales, it’s likely because the console business model is entirely different to PC. Microsoft, Sony, and Nintendo subsidize hardware to make consoles more affordable, and offer marketing deals in return for a 30 percent cut on software sales.

Microsoft’s new reduction on the PC side is significant, and it matches the same revenue split that Epic Games offers PC game developers while also putting more pressure on Valve to reduce its Steam store cut. Valve still takes a 30 percent cut on sales in its Steam store, which is reduced to 25 percent when sales hit $10 million, and then 20 percent for every sale after $50 million.

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Despite this larger revenue cut, Steam continues to dominate mind and market share among developers, but many don’t think the 30 percent fee is fair. A recent survey of 3,000 game industry professionals found that most game devs don’t think Steam earns its 30 percent revenue cut. Microsoft’s move will only increase the pressure on Valve further.

Competing with Steam is still a big challenge. Microsoft and Epic Games have both struggled to convince game developers to list titles in their stores to compete with Steam. Epic Games has tried exclusives to lure developers in, but a big part of Microsoft’s struggles have been related to forcing game developers to use UWP in the past, and the terrible Windows store app that exists today.

Microsoft finally started supporting traditional win32 games in its store a couple of years ago, but this change alone hasn’t helped the Windows store compete with Steam. The 12 percent cut might tempt more developers into listing their games in Microsoft’s store, particularly if the company can improve the poor experience for end users.

Booty is promising just that, with “improved install reliability and faster download speeds over the next few months.” Microsoft is also reportedly working on an overhaul to its Windows store that could pave the way for developers to be able to submit any Windows application to the store — including browsers like Chrome or Firefox. These store improvements may even allow third-party commerce platforms in apps, which would be a big shift alongside this 12 percent cut.

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Beyond the store, Microsoft still needs to significantly improve PC gaming. The Xbox Game Bar has been a welcome improvement, but services like Steam and Discord are far more popular than Microsoft’s alternatives. The world’s biggest PC games are also fighting a huge surge in cheaters and hackers, and Windows doesn’t do enough to help game studios protect their games.

“We know that we still have a lot of work to do, but based on the response from both PC gamers and PC game developers, we think that we’re headed in the right direction for this community with the investments we’re making,” says Booty. Microsoft still has more to share on its PC plans and general Windows improvements in the coming months. Booty teases a promising second half of 2021 “when our work across the entire PC ecosystem has the potential to come together in a way that propels the industry forward and brings great games to more gamers around the world.”