Effective March 15, 2026, commission rates for iOS and iPadOS apps on the mainland China App Store will be adjusted. The standard commission rate for purchases and paid apps will decrease from 30% to 25%. Eligible commissions under the App Store Small Business Program and the Mini Apps Partner Program, as well as auto-renewing subscription rates after the first year, will be reduced from 15% to 12%.
A Jefferies research report noted that Apple's reduction of App Store commission rates in China, including lowering the rate for in-app purchases and paid app transactions from 30% to 25%, is a positive factor for the overall entertainment sector. The impact on the earnings of major companies this year is expected to be in the low single digits.
For TENCENT (00700), market expectations project smartphone game revenue to grow 11.7% year-over-year to 256 billion yuan in the current year, accounting for 31% of total revenue. Jefferies estimates approximately 70% of this revenue comes from the domestic market, amounting to around 180 billion yuan. Assuming 30% of revenue is derived from iOS, and the commission rate drops from 30% to 25%, the positive impact on 2026 earnings is anticipated to be in the low single digits.
Regarding NetEase, the market expects its game revenue to increase by about 8.5% year-over-year to 97 billion yuan this year, constituting 80% of total revenue. The firm estimates 90% originates domestically, with 40% of game revenue coming from iOS. Considering the new measures take effect in mid-March, the impact of the commission rate reduction on this year's earnings is projected to be less than 3%.
For Kuaishou, the market anticipates its live-streaming revenue will remain flat at 39.4 billion yuan this year, representing 25% of total revenue. Assuming 25% comes from iOS, the positive effect on this year's earnings from the commission cut is estimated to be below 2%.
Concerning online music platforms, the report suggests the adjustments will have a positive impact of approximately 1% and 2% on the current year's earnings for Tencent Music and NetEase Cloud Music, respectively.
Northeast Securities released a report stating that Apple's commission rate reduction for the China App Store, specifically lowering rates for small developers and mini-program partners from 15% to 12%, will directly benefit the substantive improvement in profit margins for overseas mobile games, particularly mid-core and hardcore games reliant on in-app purchase revenue.
The securities firm believes the fundamentals of the gaming industry are supported. On the supply side, game approval numbers remain stably high, and numerous companies have rich pipelines of new games. In the long term, leading game companies are actively embracing AI transformation, and the sector's valuation repair is viewed favorably.
Hong Kong-listed stocks in the online game industry chain include: Kuaishou-W (01024), FriendTimes (06820), Heartstone (02400), NetEase-W (09999), TENCENT (00700), Bilibili-W (09626), Qingci Games (06633), Tanwan (09890), and China Ruyi (00136). Hong Kong-listed stocks related to online entertainment include: Tencent Music-SW (01698) and NetEase Cloud Music (09899).
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