In the fight between Apple and Epic Games, there are no good guys.
Apple is a $2 trillion company with a years-long reputation for arcane developer policies that are only now coming to a head. Epic Games’ Fortnite uses social engineering and collective peer pressure to sell fake money to children so they can buy cosmetic features. While both may have you think they’re fighting for you, the consumer, this issue really just comes down to greed.
Greed is why Apple so brazenly and villainously tried to go for Epic’s throat when this suit started, threatening to revoke Epic’s developer license for both its game and the incredibly important Unreal Engine. The Unreal Engine is so ubiquitous in the gaming industry, in fact, some of Apple’s own products rely on it. This action was thankfully halted by the case’s presiding judge.
It tried to go straight for the kill.
Greed is also why Epic started this mess to begin with. Yes, thirty percent is a lot to take from any transaction, but Epic was hardly suffering as a result of it. Plenty of mobile games, from Clash of Clans to Candy Crush, earn their developers millions. Epic and Apple were splitting a ridiculous pile of money 70/30 — and Epic decided it wanted to have one-hundred percent of ridiculous. To suggest otherwise is an exercise in pure naïveté.
With the trial not expected to begin for several months, things appear to be calming down for the moment. Until it begins, it's unlikely we will see any concrete details regarding exactly how much money is being fought over, but the speculation and debate about the impacts this case will have on the wider tech industry will rage for the years it plays out.
Putting the money aside, let's examine the best case Epic Games can make in court to benefit most developers and end users — not just line its pockets with more V-bucks.
The most notable case in United States antitrust law with regards to tech is, of course, United States v Microsoft. If you’re unfamiliar, Microsoft’s practice of bundling Internet Explorer as the default browser with every Windows License it sold was found to give the company an illegal and anti-competitive advantage over competing browsers like Netscape. The end result was that Windows OEMs could pre-install any browser they wanted (or made a deal to distribute) and Microsoft could no longer mandate that Internet Explorer be the default choice. What’s important to note, however, is that Microsoft, to this day, is the sole monopoly with the power to license Windows. U.S. antitrust does not make monopolies illegal, it makes abusive practices by those monopolies illegal. And herein lies Epic’s best chance of getting the courts to side with it.
It can be argued in good faith that Apple only allowing apps onto the iPhone through its own store is the best way to protect users. Aside from a few notable instances of poor policy choices (please let users play emulators or Game Pass on the iPad Pro’s 120Hz screen), there aren’t as many clear cut examples of consumer harm coming from the App Store's monopoly.
Therefore, Epic needs to argue in court that the App Store and the various ways Apple forces developers to monetize their apps once they’ve been installed is a separate entity from the initial transaction; that the App Store is fine as a neutral vendor but that Apple has used its power over the store to push anticompetitive practices. The evidence for this is enormous.
Epic’s grievance is specifically regarding the requirement that all apps that sell digital goods use Apple’s own In-App Purchase product (IAP). Since supposedly Apple charges 30 percent of all single transactions, with special rates for subscriptions (30 percent of the first year, 15 percent of every following year), Apple can talk all it wants about IAP keeping the playing field fair for all developers and safe for consumers. But that argument holds little water under even the slightest scrutiny.
To start, let’s call IAP what it really is: A payments processor. There are plenty of third-party payment processors out there and they're all a hell of a lot cheaper. Amazon, Paypal, Stripe and other third-party payments processors charge an industry-standard rate of 2.9 percent + 30¢ per charge. Because rates are standardized, they have to compete on convenience to the merchant and the end-user — and many big companies develop their own payment tools to avoid this commission. For the wider developer community, one of the best results from Epic’s suit would be to make Apple, either through settlement or judgment, allow developers to integrate those other payment vendors into their apps.
They have to compete on convenience.
Despite what Apple has said on the subject, this wouldn’t compromise security. That’s pure bunk. Third-party payment methods have existed for years on iOS in retail apps that sell physical goods without issue. Apple has decided, however, that digital goods vendors are not worthy of this privilege — and it's not arbitrary.
In 2017, as iPhone sales were starting to flatline, Tim Cook assured his investors that Apple would make up for lost growth by focusing on growing services revenue, promising to double it by 2020. Apple succeeded. But how?
Most of this is speculation, as Apple has yet to break down the services piece of its balance sheet, but it’s doubtful that the services growth was driven by more than the App Store and IAP. Apple TV+ has yet to make a big cultural impact outside of the tech world, despite coming free with every Apple product sold. Apple News+ and Apple Arcade have completely failed to gin up enthusiasm in their respective industries despite some initial promise. Apple Music reportedly has over 70 million subscribers — but we still don’t know if that’s enough for Apple to even turn a profit.
The App Store is the only thing that could have driven that revenue doubling, with anything else only serving as icing on top. If forced to allow third-party payments, Apple will need to lower its 30 percent cut to stay competitive, and with that will go the lion's share of "services" growth of which it's been so proud.
If Apple is going to fight the easiest solution, what about some of the others that have been proposed?
Alongside allowing third-party payment platforms, Sideloading is the solution argued for the most. While the appeal of sideloading is understandable, it isn't best solution for everyone if it’s the only solution. Sideloading would certainly solve the issue of Apple completely disallowing certain apps on the store (hello again, Apple, please let users play xCloud) and may even be a good way for developers to encourage their most ardent users to buy directly from them. Unfortunately, this idea wouldn’t see much real-world use.
Fortnite was available on Android for more than a year via sideloading but so few people downloaded it that Epic eventually threw its hands up and put it on Google Play. Epic argues this was because Android makes it too difficult to sideload apps, thanks to a series of warnings in the OS that caution against it, but it's not likely that Apple would make the process much easier. Regardless, the years of Android’s existence show that sideloading won’t become a popular avenue for enough users to make a difference.
In fact, Apple is probably hoping that sideloading is all it have to allow. If apps can be downloaded directly from a developer’s website and authenticated by an iOS version of macOS’ Gatekeeper, Apple is going to be able to argue even more strongly that the 30 percent cut through its App Store is fair.
Sideloading will also open the can of worms that is “alternative app stores,” the real endgame for Epic Games. Alternative stores have also long been on Android – but with limited success. If you want a preview of what alternative stores will do on iOS, just look at the world of PC gaming after the Epic Games Store launched.
Charging a 12 percent fee compared to Steam’s 30 percent, the Epic Games Store promised to kick-off a mass exodus of games from Steam by developers desperate for a better cut. Except that didn’t happen. The only concrete result of the Epic Games Store has been a string of exclusive games that Epic needed to pay for; no developer of note has gone exclusive to the EGS for free. These exclusivity deals have done nothing but frustrate fans who have spent years building libraries in Steam and aren’t going to switch platforms just because it will give a larger portion of their purchase to developers. Convenience is real and you can’t blame people for prioritizing it.
If Epic couldn’t drive rates down with competition on PC, where there is no friction to downloading a new launcher or store, why would mobile be any different? Epic would try its hardest to snag as many exclusive games to its new store to convince users to go through whatever hurdles there would be to sideload on iOS and, inevitably, users would end up confused and frustrated.
Forcing Apple to separate its IAP product from the rest of its App Store rules, and really compete with in-house or third party vendors, is the best solution for the most people. Epic will get to sell fake money to children without needing to cut Apple in on the pie, while smaller developers will finally be able to monetize their apps without needing to worry about always losing nearly a third of their revenue per transaction. Not to mention, the elimination of the Apple Tax will mean apps like Kindle, Spotify, and Netflix will finally be able to sell their products in-app again. It won’t solve every problem, but it would be the biggest change to developers’ avenues for revenue since the App Store launched.
Neither company here is a good guy. It’s unfortunate that it took a company like Epic, and not a collective of smaller developers, to challenge the App Store’s policies. But those smaller players can hope that Epic chooses a path in court that leads to a resolution which benefits everyone, not just a big gaming company.