Will Fritz  |  May 21, 2021

Category: In Depth Features

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The popular video game Fortnite is displayed on a smartphone screen. Fortnite’s publisher, Epic Games, is currently engaged in a legal fight with Apple over whether the latter uses “monopolistic” practices in maintaining its “walled garden” app store, where it takes a 30% cut of all payments made. Fortnite was booted from the app store after Epic encouraged gamers to make in-game purchases on its own platform to pressure Apple to cut its fees. Photo Credit: burdun/DepositPhotos.com.

Epic Games’ blockbuster video game Fortnite might be a winner-take-all, battle royale competition, but the legal fight between Epic and Apple — which Fortnite is at the center of — is anything but. In fact, there’s quite a bit of nuance, and a lot at stake.

At the heart of the antitrust lawsuit — which Apple CEO Tim Cook gave testimony in Friday — is Epic’s allegation that Apple uses “anti-competitive restraints and monopolistic practices in markets” for distributing software and processing consumers’ payments for digital content.

It is true that, much to Epic’s irritation, Apple’s “walled garden” of an app store is the only venue, short of a jailbreak, to install applications on iOS devices. And Apple takes a steep cut of the revenue from all purchases on its app store, to the tune of 30%.

In the original lawsuit, filed shortly after the hit game Fortnite, which Epic produces, was pulled from the Apple App Store in August 2020, Epic called Apple a “behemoth seeking to control markets, block competition, and stifle innovation.”

The issues surrounding the suit have been brewing for years. Tim Sweeney, co-founder of Epic Games, made it known more than five years ago that he felt the revenue cuts taken by online game stores like Steam, and by platforms like Apple’s app store, were unfair.

“All of the app stores take 30%,” Sweeney said in a keynote address at Gamescome’s Devcom in 2015, pcgamesn.com reported. “That’s strange, because Mastercard and Visa can do a transfer for three dollars.”

Sweeney went on to argue that “it’s very difficult to see that app stores need more than 7 to 8% of revenue” and that, in his opinion, it would be easy for app stores to make a significant profit on that size of revenue sharing cut.

Five years later, Sweeney and Epic Games were armed with not just empty musings, but an executable strategy: Project Liberty, which WIRED described as Epic’s “master plan to dismantle the $91 billion mobile gaming market as we know it.”

The scheme was simple — enact a 20% discount on Fortnite in-game purchases console and PC players, and for those mobile players who make purchases directly from Epic; players who opt to make purchases in Fortnite on the Apple App Store and Google Play Store would do so at the regular price. The discount went live in Epic’s “Fortnite Mega Drop” update that went live Aug. 13, 2020.

Epic made sure its reasoning for the discount scheme was no secret. In a message posted to Epic’s website at the time, the company told players: “Currently, there are no savings if players use Apple and Google payment options, where Apple and Google collect an exorbitant 30% fee on all payments. If Apple and Google lower their fees on payments, Epic will pass along the savings to players.”

Needless to say, Apple and Google were less than willing to cooperate with Epic; rather, both platforms acted swiftly to eject Fortnite from their app stores by the end of the day on Aug. 13. 

“Epic enabled a feature in its app which was not reviewed or approved by Apple, and they did so with the express intent of violating the App Store guidelines regarding in-app payments that apply to every developer who sells digital goods or services,” Apple said, in part, in a statement regarding their decision.

Epic’s counter strike, though, was swift as well. It filed its antitrust lawsuit against Apple, and a separate one against Google, the same day.

The case has been playing out since May 3, and is expected to wrap up in the coming week.

Time will tell what the outcome is — Apple CEO Cook argued in court Friday that he believes his company generally collects “the minimum amount that we can” but said he could not offer numbers on the App Store’s profitability. But the case certainly has sweeping implications: What kind of revenue sharing agreements are reasonable? Do platforms have to allow their users to use non-native app stores? We will just have to wait and see.

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12 thoughts onHow We Got Here: The Epic Games-Apple Court Showdown

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