Tag Archives: Apple Inc

Wage Epic War

Apple Inc. is, by some measures, the biggest company in the world. From a near-bankrupt state in 1997, it has turned itself into a globe-spanning colossus, worth somewhere in the region of a trillion dollars. In an age of corporate technology titans, it’s been at or near the head of the pack for years.

And this week Epic Games declared war on it.

Not just on Apple either. On Google too, which along with Facebook and Amazon, forms a modern tetrarchy of technology. It’s a war that’s being fought on legal and public fronts, but exactly how does Epic plan to win? And how did these corporate David and Goliaths come to be at odds?

Founded in 1991, Epic Games started as a video game developer before segueing into developing the tools that others use to make video games, most notably its Unreal Engine game engine. Just as sellers of shovels made more money during Gold Rushes than most miners, so Epic did pretty well out of that move. Then, a few years ago, it released Fortnite.

You’ve probably heard of Fortnite. Even if you don’t play it, you know kids who do, or maybe just kids who watch video streamers who do. A free-to-play game with battle royale, creative, and cooperative elements, its in-game purchases have proved a massive cash cow for Epic, pushing the company’s valuation into the tens of billions.

With all that cash weighing it down, Epic decided to throw its weight around. Casting itself as Robin Hood, it first took on Steam, the dominant storefront for PC games, promising players cheaper games and developers a bigger cut of the revenue. The verdict on this ongoing war remains open, as while the Epic Games Store continues to host exclusive titles and offer free games to tempt new customers, many PC gamers are heavily invested in Steam. However, it’s now clear that this was just a warm up for Epic’s biggest fight.

Apple has faced years of criticism for its “walled garden” approach to releasing software on its iPhone and iPad devices. In short, if you want your software to run on an iDevice, you follow Apple’s rules and give Apple its 30% cut. While the ecosystem for Android devices is more open, the Google Play store, which has adopted similar rules and a similar revenue cut, is the quickest and easiest way to find and install new software. Hence, most users will use it.

This week, Epic said “nuts to that” and implemented a new feature in Fortnite, whereby users could make in-game transactions directly from Epic without giving a cut to Apple or Google. Apple swiftly removed Fortnite from its App Store: if you already have it, you can continue to play, but there’ll be no new users and no updates. Google followed suit not long after, delisting Fortnite from the Google Play store.

For players, the immediate impact is minimal. The difference will only really start to show when Fortnite’s new season begins. Unable to update, iOS and Google Play users will miss out on the new content. But Epic didn’t wait to let them know about it. Not only did they slap Apple and Google with a lawsuit accusing them of monopolistic practices, but they also hosted an in-game video that mocked Apple’s famous “1984” advert, arguing that Apple now held the same position as the corporate behemoths it once opposed.

It’s a fair comment. Apple is “the man” now, just as Google has long since ceased being a scrappy garage startup. Both companies have their share of questionable practices and wield ludicrous economic and social power. Yet the fact that Apple got a video whereas Google didn’t suggests that Epic is relying on public opinion being on its side in this fight. Specifically the public opinion of millions of young Fortnite gamers who might end up missing out due to this corporate spat over revenue sharing.

Apple’s argument is the same two-pronged one that it’s used to fend off anti-competitive arguments in the past. First, it built the App Store, and the host devices, and their operating systems. If Epic uploads a free-to-play game and makes billions through in-app purchases, it’s effectively freeloading if Apple doesn’t get a cut. To which Epic might respond, well, isn’t 30% a bit much? In their turn, Apple can say that the same rules apply to everyone, no matter their size. Epic might then point to Steam, which responded to the competition posed by Epic by implementing lower by altering its terms for revenue sharing. It’s a back-and-forth argument but not Epic’s strongest suit.

Apple’s second argument sees it on shakier ground: it controls its walled garden by checking the content it hosts. This has kept Apple’s App Store largely free from the knockoff apps and rubbish that plagued Android in the past, but it also means that the everything on the App Store has to be Apple-approved. With Apple having recently banned Microsoft and Facebook from hosting their own game-streaming services on iPad and iPhone, this is an opportune moment for Epic to draw attention to how Apple’s corporate culture defines what its users get to experience.

The stakes are high. Apple makes a good chunk of its earnings from hardware sales, and losing Fortnite could see it lose a chunk of those (it’s already facing threats to its Chinese market from Trumpian “diplomacy” to add to its vulnerability). On the other hand, Apple has more cash-in-hand than most countries and can weather the storm, whereas Epic is for the first time putting its cash cow at risk.

On the other hand, if Epic can’t quickly find acceptable terms with Apple and Google, some of its players and streamers might just move on. No game lasts forever as “the big thing,” and my own nieces and nephews are pretty happy with Roblox. Epic is not lacking in competitors who would be more than happy to carve off slices of the Fortnite billions.

Of course, Epic has its own war chest to fight this war, and the lawsuit against Apple and Google may prove to be nothing more than a negotiating tactic. After all, implementing changes to the law does require the presence of a justice system with the will to do so, and the U.S. has its own issues at the moment. Europe would be a more friendly venue in which to argue the merits of the tech giants’ market power, but that’s not where the lawsuit was served (as far as I can tell).

Which is where Epic’s social media strategy comes in. The video mocking Apple was a call to arms for Fortnite players to rally to the game rather than the platform. To think about a world where Apple doesn’t take a 30% cut of Epic’s earnings. Which, given that the game deliberately targets younger players with its marketing and in-game purchases, comes across as just a little bit skeezy.

Ultimately, this is a fight between companies worth billions about who gets how much money. Just because it’s the little guy doesn’t make Epic virtuous. As shown in its conflict with Steam, it’s quite happy to leverage its riches and fight dirty. Similarly, just because Google began in a garage and had a motto of “Don’t be evil” for years doesn’t make it the good guy either. And though I’ve been an Apple user for most of my life, I’m more than happy to see people calling it out when it’s getting things wrong.

This is particularly true in the area of games. It’s something that Apple has never quite got to grips with; a legacy of the Steve Jobs era. Now offering its own subscription-based games service, Apple Arcade, it looked dodgy in throwing roadblocks in front of Microsoft and Facebook. It’s a sore point that Epic has targeted, and it’s one in which Apple could do with reviewing its practices.

I’m just not convinced that there’s much more to this fight than money. There’s a possibility of a more even playing field that delivers benefits for consumers emerging from this spat, but believing in that takes optimism that’s in short supply in 2020. Epic wants more money, and it believes that it can force Apple and Google to the table. Time will tell if it’s calculated correctly, and in the meantime Fortnite users will be the ones to pick up the tab.