What Happens After the Epic Games vs Apple Battle in Mobile?
The future of mobile gaming remains somewhat uncertain following a lawsuit between developer Epic Games vs. Apple. However, to understand the ramifications of this trial in the future, it’s important to understand what took place and why this trial is big news for the mobile gaming industry. To give you a deeper understanding of the nature of this battle and what it means for mobile gaming, the following is a breakdown of the Epic and Apple fight. We’ll discuss how the trial began, the events that transpired over the course of the trial, the final verdict, and implications for the future.
Before the Trial and What Led Up to It
Nearly 12 years ago, when the App Store was first opened, the platform contained approximately 500 apps. Eventually, Apple decided to charge 30% of each of these apps’ sales via the App Store. Over the years, the App Store featured a growing number of apps, but Apple didn’t change the percentage it charged for app sales, even though other payment platforms such as Stripe only charge as little as 3% for sales. As a result, there are now millions of apps in the App Store, but Apple still receives 30% from each sale. This 30% is also a huge source of revenue for Apple.
While most apps need to pay the fee, there are some that are exempt from this rule. For instance, online retailers and restaurants don’t need to pay the fee for sales earned through the app store, as the rule pertains specifically to digital goods. Subscriptions can also pay smaller portions of the fee in certain cases. This means that the Epic and Apple fight is more vital to the future of mobile gaming than apps in general.
On August 13, 2021, the developers of the popular game Fortnite, Epic Games, made an update to the mobile app. Specifically, this update included a feature that would enable consumers to pay Epic in exchange for in-app currency at a reduced price, when consumers would normally pay through the mechanism on Apple’s App Store. This feature gave Epic the ability to bypass the need to channel payments for paid apps through the App Store, in turn allowing them to avoid the 30% fee. They also made the same update for the Android version of the app, which violated the Google Play Store’s own fees and policy regarding sales commissions.
Due to Epic’s violations, both Google and Apple removed the app from their respective app stores. Apple pulled the app within hours to prevent iOS users from downloading the app, while Android users can still play Fortnite through other third-party app stores and directly through Epic.
During the Trial
Following Apple’s removal of the Fortnite app, Epic officially filed a lawsuit against Apple for removing the app through the U.S. District Court for the Northern District of California. Epic then filed another lawsuit against Google for the same action.
In the lawsuit, Epic claimed that Apple had developed into a monopoly that attempted to “control markets, block competition, and stifle innovation.” Instead of determining whether Epic adhered to Apple’s guidelines, the lawsuit is an attempt to combat Apple’s guidelines and change the 30% commission rule.
Apple Fights Back
On August 17, Apple threatened to terminate all of Epic’s developer accounts and restrict the company’s access to Mac and iOS development tools as of August 28. Epic revealed this threat via their Twitter account. In response to the threat, Epic then requested a temporary restraining order against Apple to prevent the company from following through with this action. Additionally, the restraining order request asked courts to keep Apple from making the Fortnite app and subsequent updates unavailable to consumers. The grounds for this request was that Epic offered in-app payment processing through third parties outside of Apple’s App Store.
It’s understandable why Epic would fight to ensure that they still have access to Apple’s developer tools, as they supply the Unreal Engine to many game developers. If Apple were to eliminate access to these tools, Epic would be unable to support others who rely on Epic to preserve the Apple OS components of the Unreal Engine.
Seeking Support in the Epic Games Fortnite Lawsuit
To help support its claim, Epic sought assistance from other companies who also had problems with Apple’s rule. Thankfully for them, Epic was far from alone in its problems with Apple’s 30% commission. Regarding the commission, consumers and app developers such as Spotify launched complaints.
“Either we lose because we have to pay them a 30 percent tax just to operate and raise our prices for consumers as a result, or we lose because it becomes much more expensive to convert users from free to premium,” Spotify’s chief legal officer Horacio Gutierrez stated in June to reporters after European regulators had initiated an antitrust investigation into Apple based on Spotify’s complaint.
Additionally, Facebook spoke up against Apple, complaining about how the mobile giant collected 30 percent of sales for its new live events service, which enables people to sell fitness classes, expert talks, and cooking tutorials through Facebook’s app. A spokesperson for Facebook stated the company wanted to process the payments directly, which would allow it to pass on all of its sales to the small businesses selling the talks and classes. Despite this complaint, Apple declined.
Bringing Apple’s Anti-Steering Policies into Question
Apple is known for implementing anti-steering policies that prevented apps from directing users to other third-party platforms to make purchases. These policies had been deemed acceptable following the U.S. Supreme Court case Ohio v. American Express Co. in 2018. Epic had argued that these anti-steering policies enabled Apple to unfairly take even greater shares of app revenues, and should therefore be eliminated. This would turn out to be one of the biggest factors impacting the judge’s ruling in the Apple vs. Epic lawsuit.
The Results of the Apple vs. Epic Games Lawsuit
Following the arguments from both sides throughout the Apple-Epic lawsuit, Apple and Epic ultimately lost. The judge in the case, Yvonne Gonzalez Rogers, determined that Apple wasn’t yet a monopoly with total control over the mobile app space, while Epic was in violation of its agreement with Apple. This decision led to the demand for Epic Games to pay $3.6 million to Apple, which was 30% of the revenue kept from Apple in an attempt to get around the App Store. At the same time, Apple can no longer force developers to use Apple in-app purchasing.
One big takeaway from the ruling was that Apple isn’t quite a monopoly—not yet. Gonzalez Rogers determined that both Andoid and iOS are essentially a duopoly, but they saw future competitors in cloud gaming services and the Nintendo Switch. On the other hand, Apple is on its way to becoming a monopoly based on its incredibly high profit margins and 55% of the share in the mobile game transaction market.
Gonzalez Rogers ultimately noted that although Apple could become a monopoly based on its performance in the market, Epic’s claims that the company maintains a monopoly were unsubstantiated. The same goes for Epic’s claims that Apple was allowing for unlawfully restrained trade under the Sherman Act. However, Gonzalez Rogers still had issues with the App Store, mainly because it had minimal competition. In the ruling, Gonzalez Rogers stated that “nothing other than legal action seems to motivate Apple to reconsider pricing and reduce rates.”
Gonzalez Rogers had other complaints against Apple, including problems with the company’s mediation of disputes between the company and its customers, along with its slow adoption of automated tools that could optimize the performance of its app review process.
What the Future Looks Like
The ruling in the Epic and Apple fight has led to speculation regarding the future of mobile gaming and Apple’s App Store. One major concern is that Apple could collect a kind of “Apple Tax” even if they can’t force in-app payment (IAP) charges. For example, developers could choose to use Apple’s tools and intellectual property without paying a cent, enabling them to avoid a commission. However, Apple may still be able to audit developers to make sure they maintain compliance with policies around commissions, along with other strategies, which would enable them to essentially charge an “Apple Tax” for using Apple platforms, even if they bypass the IAP.
Apple could also find other ways to charge app developers via the App Store, which could make it even more costly for developers to offer iOS versions of their apps. Generally, the future of mobile isn’t entirely certain, as Apple could continue to grow and demand more from its developers. There’s always the fear that Apple could monopolize the mobile industry and deprive developers of chances to look for alternatives, which would force developers to be subject to whatever charges and rules Apple imposes.
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