Apple Versus Epic: An Industry Titan Showdown
The Future of the App Store
With the closing arguments made on May 24th and a decision expected later this year, many fans and industry employees are eagerly awaiting a verdict for a case that could have far reaching impacts on how apps, games, and software are distributed on digital marketplaces such as Apple’s App Store and Google’s Play Store. The results of this case could set a precedent for digital distribution rights for apps as well as establishing a standardized payout fee for the marketplaces handling those transactions. In other words, if you ever purchase apps for your devices, the results of this trial might be of particular importance to you.
The kerfuffle surrounding Apple and Epic Games heated up in the span of just a few short weeks, and despite little warning to consumers it quickly garnered international attention. The root of Epic’s issue with Apple’s App Store is the oppressively high 30% cut that Apple takes from all transactions made on their marketplace. Epic isn’t the first to have issues with Apple’s pricing policies, as Apple is also currently undergoing multiple antitrust probes launched by the Justice Department.
Here’s a breakdown of the events that lead up to the current lawsuit:
Epic Games are the creators and developers of the smash hit Fortnite, a PC and mobile game that has taken the younger generations by storm and generated nearly $10 billion in revenue in just two years. Fortnite uses its own in-game currency called “V-bucks” which can be purchased with real-world money. Like all transactions on the App Store, Apple was taking a 30% cut from all V-bucks sales and this really irked Epic Games.
It’s not hard to see why Epic was annoyed; there aren’t exactly any viable competitors to Apple and Google’s marketplaces and those companies essentially have monopolies on app distribution for their respective devices. If you want to sell your app and make money, you have to agree to eat the 30% fee. When your sales are in the billions, a 30% cut means massive losses in potential revenue.
Epic Games CEO Tim Sweeney has publicly derided Apple and Google for their marketplace policies, calling them an “absolute monopoly” and accusing them of “stifling competing stores.”
Epic Updates Fortnite
So, in a bold and risky move, on August 13, 2020, Epic Games launched an update for both the Android and iOS mobile versions of Fortnite. This update presented users with an extra choice when purchasing V-bucks: alongside the regular checkout method (which paid out to Apple) was a new payment option that completely cut Apple out of the equation and paid directly to Epic Games. Epic even offered discounts on V-bucks as high as 20% if you used the method that skirted Apple’s payment system.
The Legal Battle Commences
Unsurprisingly, within hours of the update going live both Apple and Google had pulled Fortnite from their marketplaces. Less than an hour after being taken down, Epic Games filed a lawsuit against Apple in retaliation. Shortly thereafter a separate suit was filed against Google.
In that suit Epic accused Apple of becoming a “behemoth seeking to control markets, block competition, and stifle innovation” and claimed that Apple’s power and influence “far exceeds that of any technology monopolist in history.” They argue that the App Store policies are anti-competitive and that Apple actively and aggressively works to shut out any would-be competitors. By establishing total control over app distribution, Apple is then free to leverage that control by charging exorbitant rates and gouging prices.
Apple Threatens Developer Accounts
A few days later on August 17th, Epic Games made public on Twitter that Apple was now moving to terminate all developer accounts and remove Epic’s access to iOS and Mac developer tools. Epic successfully filed a request to block this action, even drawing public support from rival company Microsoft. While on the surface it may seem like standard business practice, in reality Apple’s intent to hurt with this move was clear.
You see, Epic are also the creators of the Unreal Engine, an extremely popular video game engine used by thousands of developers around the world to build countless video games and mobile apps. By removing Epic’s access to developer tools, they would no longer be able to maintain the iOS and Mac elements of the game engine, therefore robbing Epic of the ability to provide support for third-party developers who had licensed the engine from them. In the lawsuit’s own words, “Apple is attacking Epic’s entire business in unrelated areas.”
Epic Seeks Allies
Epic began courting potential allies in their fight against Apple. Spotify had come out in support of Epic’s legal action almost immediately after it was filed, which is not a huge surprise considering they had previously filed their own antitrust complaint against Apple in 2019. Companies such as Tile, Deezer, Match, News Media Europe, ProtonMail, and others began to join in, and the Coalition for App Fairness was born.
Apple Fires Back
Apple’s first public statement on the issue was given August 18th, and was pretty much what you’d expect from the world’s largest multinational technology corporation: a clear-cut, straightforward PR response denying any wrongdoing and pointing the finger at Epic for not ameliorating “the problem Epic has created for itself.” They remind Epic that their dispute “can easily be remedied if they submit an update of their app that reverts it to comply with the guidelines they agreed to and which apply to all developers.”
Their statement concluded with, “We won’t make an exception for Epic because we don’t think it’s right to put their business interests ahead of the guidelines that protect our customers.”
Ever since then, the two companies have been embroiled in a nearly year long suit-and-countersuit battle over the fairness and legality of each other’s actions. Unsurprisingly, the internet is as divided as ever about the issue. Some people support Epic and say that Apple is using predatory and malicious tactics to bully businesses and competitors. Others say Epic knew what they were getting into when they agreed to the terms and conditions, and that they essentially shot themselves in the foot when they willingly and intentionally chose to break them. There are certainly merits to both arguments and I don’t envy the judge that is presiding over this case.
As it stands now, Fortnite is still unavailable in either the App Store or the Google Play Store, and fans may yet have months to wait before they finally find out if or when it will be available again.
What Happens if Epic Games Wins?
If Epic Games ends up winning their suit against Apple, the resulting implications would be huge. No one knows exactly what would happen to digital marketplaces, but there would likely be sweeping changes across virtually every app store imaginable. It could even potentially force companies like Microsoft and Sony to open up their Xbox and Playstation consoles to all software, allowing users to bypass the official stores. I’m not necessarily convinced that this is Epic’s intention, and I’m not certain that such a sweeping judgement would be passed, but it would absolutely shake up the mobile app business and trim the hedges of Apple’s “walled garden” in favor of free software distribution.
If video game and mobile app developers are able to promote and sell their product directly to consumers with either a reasonable or no marketplace fee, there is a good chance many businesses will pass the savings off on to the customers. It’s hard to say without a crystal ball, but Epic winning this case could potentially end up benefiting consumers.
Another interesting point to consider here is Epic’s angle of trying to convince the judge of Apple’s monopoly on its own products. Apple, of course, owns 100% of the market share for the distribution of apps on its own platform, so if Epic wins on the market definition issue it therefore proves Apple has a monopoly. It may sound strange trying to claim that one brand can count as its own entire market, but there is actually legal precedence for this in antitrust law that stems back from a similar 1992 case against Kodak. Who could even begin to guess what would happen to Apple if they were to be deemed a monopoly? Either way, I’m sure there would be years of appeals before any kind of conclusion would be reached.
What Happens if Apple Wins?
It’s a little bit easier to guess what would happen if Apple wins this case. A verdict in favor of Apple would most likely just reinforce the status quo with the addition of legal precedence. It would give Apple the ammunition it needs to tighten its grasp on the app marketplace while simultaneously making it more challenging for any competitors to break into the market. It would also make things exceedingly difficult for anyone to try and bring up similar litigation against Apple in the future, even if they have a completely valid case.
Even if Epic loses this case, I don’t think CEO Tim Sweeney intends to go quietly. He has been quite vocal, both on Twitter and in interviews on television, about how this is just a single battle in the war for fair and friendly consumer practices in digital marketplace distribution. An important part of Sweeney’s strategy seems to be intense, sustained, and very public pressure in an effort to sway consumers’ minds and nudge the industry in that direction. It is still entirely possible for him to succeed in this even if his lawsuits against Apple bear no direct fruit.
At Lithios we value outside opinions. This blog was written by one of our guest bloggers, Jonathan Baker, with feedback from the Lithios team.