South Korea’s App Store law is a grand experiment | Opinion

It may not be an especially large market for the games industry overall, but time and again South Korea has proved itself to be a market you ignore at your peril.

It’s often ahead of the global curve, and for the past couple of decades people have been consistently caught out by being too quick to dismiss major gaming or online media trends in South Korea as local phenomena that will never catch on elsewhere. It may take a while for Korean trends to be reflected overseas, but more often than not it happens in the end; South Korea was dramatically ahead of the curve on trends like esports and free-to-play monetisation, and an early mover on a host of other influential trends, from Twitch-style game streaming to MOBAs and Battle Royale games.

Now, once again, South Korea is about to leap ahead of the curve and become something of a global test case for a highly contentious issue that will have a major impact on the games business (and on the tech and media sectors more generally). The country’s new law forbidding App Store operators — including Apple and Google — from restricting in-app payments to their own payment processing systems is a gigantic experiment whose outcomes and consequences will be watched very closely by parties on both sides of the argument over how much these platforms should be regulated, and by whom.

South Korea is about to effectively turn itself into a Petri dish for this kind of legislation — and once again, the world should be watching what happens closely

The actual parameters of the law will undoubtedly be probed and challenged in the courts in the months to come, and what it means in practical terms won’t be entirely clear until that process is complete — but the broad strokes of the legislation are similar to some of the reforms Epic (most famously) and others are arguing for in other countries.

Going significantly beyond Apple’s announcement this week that it will permit apps to point users to alternative payment options outside the app, the South Korean law is designed to force platform holders to allow app developers to offer alternative payment processing systems right inside the app itself. On the face of it, this would mean that a free app with in-app purchases — such as a free-to-play game — would be able to push consumers to its own payment processing service for the IAP, effectively bypassing the store operator’s payment system and thus its share of the purchase price.

There are pretty strong arguments both for and against this regulation — enough of the world’s digital commerce flows through these storefronts to justify governments taking an interest in how they are operated, certainly, but on the other hand the claim that opening up to a smorgasbord of payment processors and options will create significant security risks for consumers isn’t unfounded either. The question of fairness is also more thorny than proponents of either side like to make out; what’s “fair” in this situation depends entirely on whose perspective you’re taking, be it the platform holder (who did build this platform and arguably has a right to charge a toll for its use), the consumer (who did buy this device and arguably has a right to make a free choice about how they use it), or the app developer (who did create this app and arguably should not be bound to hand over a large share of their revenue to a platform holder in perpetuity).

South Korea's new law will ban platform holders like Apple from forcing developers to use their proprietary payment systems

South Korea’s new law will ban platform holders like Apple from forcing developers to use their proprietary payment systems

I’m not going to go back over the merits of all of these arguments, because South Korea’s law is about to render some of the hypothetical discussions moot. What many of these arguments have been missing is data; lots of people think they know how things will turn out if the App Stores are regulated and forced to knock some holes in their walled gardens, but there’s not a lot of data to support one side or the other. Now South Korea is about to effectively turn itself into a Petri dish for this kind of legislation — and once again, the world should be watching what happens closely, because similar moves are being pursued either through the courts or the legislative systems of major markets around the world, including the United States and the EU.

It’s notable in this context that South Korea is being quite specific in what it regulates here: it’s forcing platform holders to open up App Store payment processing, but doesn’t seem to have gone so far as to push for competing app stores be allowed to operate on devices. That would have put the country more in line with China, where the fragmented Android App Store situation seems frankly to be a bit of a hellscape for consumers; instead, South Korea’s proposals are more moderate and thus more in line with what EU and US legislators may well find themselves mulling in the months and years to come.

I have no doubt that as the consequences of this new law become apparent — on consumer choice, on security, or on the business models and revenues of app and game developers — there will be plenty of spin applied to the data by both sides of the argument.

One extreme possibility, of course, is that either Apple, Google, or both of them decide that the relatively small (albeit lucrative) South Korean market isn’t worth stepping onto this slippery slope for — both companies could shrug, express regret, say that they’re unwilling to compromise user security, and pull app store support from the South Korean market without an especially notable impact on their bottom lines. That’s a trick with limited applicability — it won’t work with the EU or the US, after all — but it might be considered worthwhile if there’s a perceived risk that South Korea becomes a precedent followed elsewhere.

More likely scenarios involve lengthy and drawn-out court battles over the specifics of the law, followed by a begrudging implementation of the most bare-bones, letter-of-the-law version of the new regulations possible by both Apple and Google. How things play out from there could have a major impact on deliberations in other countries; whether security and fraud issues are created by the move will definitely be a key factor to watch, but it will also be important to see how much impact the change actually has on consumer behaviour (how much of a discount do you need to offer to overcome the consumer’s trust and the ease of use of the platform’s built-in payments system?) as well as on the approach of the platform holders themselves, whose attitude to their App Stores is likely to change dramatically if they’re no longer a significant source of revenue.

Whatever happens, once again South Korea’s high-tech consumers are going to be in the world’s spotlight in the next few years — and the results of this regulatory experiment are likely to have an outsized impact on how the tech, media and games industries function for decades to come.

GamesIndustry.biz

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