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Legendary programmer and former Oculus CTO John Carmack doesn’t think Meta’s developer incentive structure is healthy for the Horizon Store ecosystem, calling it “wasteful churn.”

The News

While Carmack departed Meta in 2022, concluding his “decade in VR,” the one-time Oculus CTO has never been one to mince words when it comes to virtual reality.

In a recent X post, Carmack lays out what appears to be a pretty clear inequity: why does Meta fund third-party titles when they’re just going to turn around and tax them 30% on every transaction?

“Companies like Meta subsidize third party developers in various ways to help grow their platforms, then take 30% of the developer revenue right back with the platform tax, which is a wasteful churn,” Carmack says.

To avoid unnecessarily circulating money between platform and developer, Carmack points to Epic Games’ fee structure, which doesn’t take anything from developers for the first $1 million per year in revenue.

“You would still need explicit subsidies to get certain types of games / apps created at all, but it perfectly rewards what you actually want: increased economic activity, versus a biased pre-selection process,” Carmack continues.

Tagging Epic CEO Tim Sweeney, Carmack muses whether Meta could even actually pay developers extra for early revenue instead of charging an initial platform fee—something radically different from directly hand-picking projects and applying its usual 30% cut.

“If it wasn’t so easily exploited by buying your own app, a negative rate ‘earned income tax credit’ for initial revenue would actually be a good incentive for a platform like Quest.”

In response, Sweeney says the $1 million no-fee threshold works and hasn’t been abused, although that’s partly because Epic’s fees are relatively low to begin with—a meager 12% cut.

“There hasn’t been significant gaming of the system. Thankfully there are enough benefits to curation and reputation in having one >$1M app than to breaking it up into a near-duplicate set of <$1M apps. But this assumes a modest take rate. At 30% behavior may change,” Sweeney says.

My Take

PC gaming is much more flexible than Quest when it comes to sourcing games; PC users can choose from any number of store, including Steam, Epic Games Store, or GOG. This is unfortunately not the case for Quest.

But let’s not conflate the two too much though. Meta subsidizes Quest hardware to make back money with app sales—basically what console manufacturers have always done.

The wrinkle is that Quest users can download and install alternate app stores, like SideQuest, which uses Quest’s ability to sideload Android APKs. But it’s no real competitor to the Horizon Store, and I don’t expect it ever will be.

It’s unlikely Meta would disable sideloading, although would-be competitors are probably still cautious from incurring Meta’s wrath. In SideQuest’s case, it’s now mostly an app discovery layer and installer, with many of its app listings now linking directly to Horizon Store.

And from what I’ve seen, I just don’t think Meta would allow real app store competition anywhere near Quest—similar to how Apple doesn’t allow Epic to bring its Games Store to the iPhone ecosystem—the subject of a massive 2021 lawsuit that Apple mostly won.

No competition means no incentive to change. And more importantly, it means nobody can swoop in and by flaunt a better fee structure (and free games) like Epic Games Store seems to be doing as it attempts to pry away users from Steam. Notably, Steam features a 30% platform fee that then descends to 25% after $10 million revenue, and 20% after $50 million.