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A Tale of Two Tims
When Tim Cook finished up his appearance in front of the House Judiciary panel in July, the conventional wisdom was that the Apple CEO had gotten off easy (we previously wrote on the House Panel meeting here). He was joined by Sundar Pichai, Mark Zuckerberg, and Jeff Bezos, and each one seemed to have more to worry about. The only major questioning Apple had received was on iOS App developers only earning 70% of sales from in-app purchases due to Apple collecting a 30% commission and how Apple makes at least 60 apps like Music and Mail that compete with third-party sellers but are not subject to the 30 percent tax that it places on them, reducing competition in the marketplace.
Little did people expect Epic’s dramatic attack on those same Apple App Store policies, bringing Apple’s anti-competitive nature to the spotlight.
Fortnite, along with PUBG, became a household name in 2018, popularizing the battle royale genre across the world and opening up gaming to a new generation. Fast forward two years, and Fortnite is still hugely popular and has allowed Epic Games (its maker) to reach newer trailblazing heights in the gaming industry. Fortnite earned Epic $2.4 billion in 2018 and $1.8 billion in 2019, helped in large part by its popularity across platforms, as players can use the same account across iOS, Nintendo Switch, PS4, Xbox One, and PC and its commercial success enabled Epic to make several changes to its other product offerings too, along with expanding their business streams like staring their own game store called Epic Games Store to compete with the likes of EA, Ubisoft, Steam in the PC-gaming space and by receiving additional investments and acquiring other valuable companies (such as the popular app HouseParty).
The Journey So Far
On August 13, 2020, Epic released a version of Fortnite that included a permanent discount on V-bucks (their virtual in-game currency) across all platforms. On mobile, however, things are a bit more complicated. On both iOS and Android, Epic introduced a new direct payment option.
“Currently, there are no savings if players use Apple and Google payment options, where Apple and Google collect an exorbitant 30 percent fee on all payments,” Epic said. “If Apple and Google lower their fees on payments, Epic will pass along the savings to players.”
(Credits: The Verge)
Both Apple and Google immediately de-listed the game for violating the storefronts' terms of service by including their own storefront, which led Epic to file lawsuits against both companies the same day, accusing them of antitrust behavior in how they operate their app stores. Android users, however, can still download Fortnite using Epic’s own app launcher, which it distributes independently through any mobile web browser.
Following the removal, Epic also revealed a carefully calculated series of responses, including an antitrust lawsuit seeking to establish Apple’s App Store as a monopoly and a protest video that aired on YouTube and within Fortnite itself mocking the iPhone maker’s iconic “1984” ad and calling on gaming fans to #FreeFortnite by supporting its fight against Apple and standing up to the Big Brother.
Epic Games, and its CEO Tim Sweeney, have a history of using the ‘David V. Goliath’ analogies against big-tech companies. Epic had previously bypassed Google’s Play Store on Android by releasing Fortnite as a direct download through its own software launcher. But the studio eventually relented after failing to appeal Google for an exemption of its similar 30 percent cut of all in-app purchases.
“After 18 months of operating Fortnite on Android outside of the Google Play Store, we’ve come to a basic realization,” reads Epic’s statement. “Google puts software downloadable outside of Google Play at a disadvantage.”
It has also previously accused Apple of operating "a complete monopoly" over the one billion users of its operating system, which underpins all Apple devices, including the iPhone, iPad and Macbook. Apple, in return, has said that Epic has itself benefited from being on the App Store and has "grown into a multi-billion dollar business".
Tim Sweeney has constantly used his personal social media platforms to speak against the 30% commission rules put in place by Apple and Google. His fight has already cost Fortnite its place in the App Store. It also threatens to disrupt thousands of other developers who rely on Epic’s Unreal Engine to make their own games.
As of August 28, 2020, Apple has officially terminated the Epic Games account on the App Store. That means the app is no longer available on the iPhone or iPad whatsoever, even if you’ve once downloaded it once before — and other Epic games like Infinity Blade are also no longer re-downloadable. Apple says Epic will no longer be able to submit apps or updates using its Epic Games developer account, but users who’ve previously downloaded Fortnite on iOS and Mac can keep playing it.
Coincidentally, Apple recently promoted PUBG on their App store the same day itself. The situation is made even more ironic when one remembers that PUGB Mobile is actually built with Epic’s Unreal Engine. Tim Sweeney took a jab at this on Twitter.
The End?
Epic is not the first developer to take issue with the App Store's fee structure, although it is perhaps the biggest. An analogous case which comes to mind is that of Spotify.
Back in 2014, Spotify raised its monthly subscription rate to $13 from $10 in a bid to make up for Apple’s 30% tax. Then, exactly one year later, Apple introduced its own streaming service — Apple Music, pricing it at $10 a month. In 2019, Spotify filed a complaint against Apple with the European Commission (EC), the regulatory body responsible for keeping competition fair and nondiscriminatory, accusing Apple of purposely limiting choice and stifling innovation at the expense of the user experience—essentially acting as both a player and referee to deliberately disadvantage other app developers. Here’s Daniel Ek, Founder and CEO of Spotify, on the issue:
“As an alternative, if we choose not to use Apple’s payment system, forgoing the charge, Apple then applies a series of technical and experience-limiting restrictions on Spotify. For example, they limit our communication with our customers—including our outreach beyond the app. In some cases, we aren’t even allowed to send emails to our customers who use Apple. Apple also routinely blocks our experience-enhancing upgrades. Over time, this has included locking Spotify and other competitors out of Apple services such as Siri, HomePod, and Apple Watch.
We aren’t seeking special treatment. We simply want the same treatment as numerous other apps on the App Store, like Uber or Deliveroo, who aren’t subject to the Apple tax and therefore don’t have the same restrictions.“
The EU announced recently that it has formally launched investigations into whether Apple’s rules for app developers covering distribution of apps via the App Store violate EU competition rules after Spotify’s complaint. If the EU determines Apple violated antitrust laws, the tech giant could be fined up to 10% of annual revenue and also be required to modify its business practices, the Wall Street Journal reported.
Coming back to Epic’s conundrum. If Epic wins, Apple and Google could be ordered to allow developers to sell in-app purchases without giving the tech giants a cut or giving a reasonable cut much lower than the current 30%. The court could also rule that Apple and Google are prohibited from bundling payment services with their app stores, allowing developers to be paid directly.
If Epic loses, John Bergmayer, the legal director for Public Knowledge, said
"at least that highlights what the limits of antitrust law currently are, so people who want change can look to other avenues."
Alternatively, Apple and Google could simply settle with Epic and quietly change their policies. But that would be the most disappointing outcome of this ‘epic’ battle between the two Tims.
Gautam Marwah is the founder of Indianaut, a platform showcasing and strengthening India's next best analytical and creative minds.