Frontiers: Content Quality Provision and Welfare Implications of Digital Platform Commission Fees

Several digital content developers, including Epic Games and Spotify, have voiced concerns that the commission fees charged by platforms (e.g., Apple’s App Store, Sony PlayStation) are too high and stifle innovation. Therefore, they advocate for a reduction in the commission rates. This paper employs a game-theoretic model to analyze a platform ecosystem comprising two competing platforms, hardware devices compatible with these platforms, and a representative content developer to examine whether reducing commission rates improves content quality provision and consumer surplus. Our findings reveal that reducing the commission rate may not always enhance content quality. Moreover, even when a lower commission rate reduces content quality, the developer may still be better off. We also find that consumer surplus may decrease as the commission rate declines. These results are primarily driven by platforms raising device prices when commissions decrease, thereby contracting the developer’s effective market.

History: Catherine Tucker served as the senior editor. This paper was accepted through the Marketing Science: Frontiers review process.

Supplemental Material: The online appendix is available at https://doi.org/10.1287/mksc.2024.1084.