So Epic Games is taking on Apple and Google – but can it win?

    
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Last week, Epic Games kicked off both an internet drama and a lawsuit when it instigated legal action against both Apple and Google over barring Fortnite (and more specifically, barring Epic’s proprietary payment system that subverted the platforms’ cut) from their respective stores, which Epic deemed “unfair and anti-competitive actions” – essentially, monopolies in the mobile market. Epic isn’t actually demanding damages, merely “injunctive relief” to allow everyone fair competition in those markets, all of which would set it up nicely for its own mobile store.

The question at this point isn’t why Epic’s doing this or whether it can afford it but whether it will succeed. And it just might. Polygon did an explainer this weekend quoting multiple antitrust legal experts; one said Epic’s suit relied on “strong legal theories” and isn’t just bullshit meant to whip gamers into a frenzy like the looped video that played in Fortnite last week. A second said suggested that Epic’s in a good spot thanks to public opinion (which we assume is why the company is clearly attempting to win gamers to its side). The US House of Representatives’ chairman of the antitrust subcommittee called Apple’s “tax” literally “highway robbery” that “would not exist in a competitive marketplace.”

“[Apple] is saying that if you’re going to use the App Store, then you have to use our payment processing service; you can’t use your own,” the fourth legal expert said. “It’s not a problem to be a monopoly. It’s not a problem under the law to have market power. It’s when you use that to restrain competition.”

Source: Polygon
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Zero_1_Zerum

If someone wants to sell lemonade on my lawn, they better give me a cut of the profits. They better not try to sell lemonade and then complain that I’m trying to make them pay for using my real estate. They better cut me in on the action, or get their own lawn to sell lemonade.

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Utakata

…but if them selling lemonade increases the value of my property, I’m not going to complain. As long as they’re respectful and clean up after themselves.

Besides, it would be bad for the image if I looked like I was nickel and diming kids. It’s all about optics. o.O

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Arktouros

Okay so lets go with this Lemonade scenario.

Most importantly this isn’t kids it’s the CEO of Coca Cola demanding to sell lemonade on your lawn because it exists and you’re popular and lots of people like to visit your house.

In Apple’s case, you don’t even have a lawn. You have a house and a driveway. So you’d have to basically tear down some of your house, re-arrange things, and create an area to even have a lawn for them to sell on. They probably will also expect that you provide them plumbing (an API) beyond just what exists in your home which again also doesn’t exist outside of your home.

You also would have zero say over whether or not they were respectful or clean up after themselves. In this scenario they’re specifically arguing that you should have no say over the Lemonade stand area and they should be able to do whatever they want within the confines of that Lemonade stand.

There’s also basically no value add to your property. The people living in your home who work at Hot Dog on a Stick in the mall also selling Lemonade can even move out and stop paying you rent and go live in the Lemonade stand decreasing your home value/income.

So pretty shitty all around.

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traja

These analogies are so stupid because you can always format them in a way that supports your narrative the best. Like here is one version:

You control where the whole neighborhood can shop (iOS install base), and you dictate that they can only shop on your lawn (the Apple store), and then you take a 30% cut off all the sales. You could let them shop anywhere they want to but instead you maintain your monopoly over the neighborhood.

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Utakata

In my such narrative, in addition to the one I stated above, would have said kids raid the lemonade coffers of my wealthy neighbors and redistribute it among the poor. With a special emphasis on pink lemonade that goes with the shirt I am wearing… <3

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Arktouros

It’s always perilous drawing analogies from physical reality to tech because they don’t obey the same laws. For example the “house” in the analogy where the lemonade stand would go is basically infinite in it’s capacity. However everything I analogized represents something that’s true about the scenario.

Epic Games Studio is a massive juggernaut in the gaming industry. They not only have Fortnite but they also provide the engine in which many games are built that takes a chunk of those games’ revenue. They also run a marketplace store on PC that also takes a chunk of games’ revenue. Now they are upset they can’t create another store on mobile devices to get even more money there. That isn’t “nickel and diming kids” like Utakata said it’s like the Coca Cola.

As for not having a lawn, Apple has no existing method for developers to side load software in their iOS. Everything is done through their App Store for development. What Epic wants is the ability to run their own rival storefront (IE: Sell/Install/Manage other Games/Software on the device) and there’s just nothing else that exists like that right now. That’s not impossible to create, but it would likely mean hefty renovations to their current setup. As noted this problem is specific to Apple.

The purpose of this lawsuit is also to determine whether or not Apple has total control or say over what goes onto it’s device and/or if they have to allow a rival storefront into their ecosystem they wholly control. If they lose the ability to control what can and can’t be installed on the devices then that’s pretty analogous to having no control if the people are respectful or clean up after themselves.

The lack of value add is admittedly fairly speculative as there’s really no way to know until you see the numbers after the fact. However since Epic’s complaint is specifically against Apple’s control over payments and that there’s no alternatives and we’ve seen them try to work out deals with OEMs to setup an alternative Epic Mobile App store with Google it’s not a huge stretch to guess their intent is setup a rival store. Rival store means employing the same kinds of tactics we’ve also seen in the PC store where they buy out exclusives to games people want or looking forward to. So other developers could/would swap over to Fortnite’s store thereby denying Apple not only the Fortnite revenue but also other developer revenue cuts as well. This is all a net loss for iPhone/Apple.

So my analogies are pretty on point here. They all relate back to real facts in the scenario even if using a lemonade stand is a little silly.

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traja

I find it a little too easy for companies if not supporting competition is all that it takes to protect yourself. Meaning that Microsoft would have been in the clear if they never even made it possible to install a browser other than IE.

Analogies fall apart in some aspect in all cases. For example here you compare a house to a device but Apple doesn’t own the device, the user does.

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Robert Mann

I wonder if somebody will turn around and file a lawsuit against Epic for anti-trust in paying for exclusive games.

It is, technically, within the definition. At which point this snowballs even more out of control.

There’s several other issues where Epic should be treading a thin line on this topic, honestly, and I wouldn’t be surprised to see some lawsuits hitting them soon over it, given that Sweeney spends a bit too little time controlling his impulse to insult people.

*I see more lawyers expecting Epic to lose in court than to win… but at the same time they do expect some shift outside the courts over matters.*

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Jim Bergevin Jr

Exclusivity is nothing new. You see it in retail all the time from music to kambucha drinks. You want a particular song? Gotta go to Walmart. You want your Cherry flavored GT, you can only get it at Target. And this is just minor stuff. This is a business practice that has been going on for decades.

So there’s really nothing wrong with what Epic is doing. People need to get over themselves with this nonsense about Epic. I gladly installed them for my free copy of Subnautica. I gladly paid them for SnowRunner, and a handful of other games on sale. And I gladly took my free copy of Troy this past Thursday.

They are no better nor worse than any other corporate gaming entity out there. So ya’ll can sod off about that nonsense.

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Robert Mann

Except it hasn’t been worth money to pursue to this point. In this case, it might just be worth the money to pursue. It is technically the same thing as bribery to stifle competition, which falls under anti-trust. Companies won’t fight it if it’s not worth the cost of the lawsuit. This time… it probably is worth that cost, and Apple is so tech unfriendly with other companies that they likely don’t have similar dirt for a counter-counter suit against them to be made. Only differences involved.

There are several applicable rulings, and where a direct contract to sell only at one place without any extra payment is probably fine based on those, anything where money is on the table beyond just the sales is probably not. One of the rulings likely would be more relevant against Steam if they did what Epic has done, as it’s about preventing a new competitor… but others are specifically about buying out goods or services that have no equivalent competition (which a specific game title would equate to).

That’s just the exclusivity stuff. There’s a lot more than that which Epic could see as backlash here.

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Jim Bergevin Jr

But it takes two to tango. The dev studio doesn’t have to make an exclusivity agreement with Epic, or any other platform. Sony didn’t have to realeae Horizon Zero Dawn on PC, let alone release it both on Steam and the Epic store. Sure, it would be more beneficial if they did, as they reach a wider audience, but there is nothing inherently wrong with them wanting to stick to one specific source for distribution.

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jealouspirate

https://www.forbes.com/sites/davidthier/2020/08/17/apple-dramatically-escalates-its-war-with-fortnite-developer-epic-games/#2604d254190c

Apple has escalated the situation since this article was posted. They are now saying that if Epic doesn’t capitulate by August 28th they will prevent Epic from being able to develop any products for iOS. This includes the use of Unreal Engine, so no 3rd parties would be able to use Unreal Engine for iOS either.

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Schmidt.Capela

Not just iOS; this would also cut Epic’s access to Mac development tools. Which is more than a bit problematic now that Apple is going forward with a huge architecture change for its Mac line, meaning without access to Mac development tools the Unreal engine might simply not work on the Macs to be released later this year.

And, mind, this loss of access is part of the agreement Epic entered into when it decided to develop for Apple products; Apple has control over who can even use their development tools, and for obvious reasons prevents entities which have broken its TOS from accessing them.

Also, torpedoing Unreal also deals a blow to the Epic store, because Epic is using the royalty requirements of Unreal as a bargaining chip to get more developers into the Epic store (in that Epic waivers the Unreal royalties for any copy of a game sold through the Epic store); if Unreal becomes undesirable, devs lose one big incentive to use Epic instead of Steam.

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Mark Jacobs

For what it’s worth, I wondered why Tim went out and raised another swag bag full of cash. Now we know that it wasn’t just about money for expansion of Epic. Having this much additional cash gives him a truly epic (sorry, couldn’t resist) warchest for this fight.

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Arktouros

I think their lawsuit against Google has more merit than the one against Apple.

In the Google scenario there are situations where Google interfered with the ability for Epic Games to setup their own deals with OEMs and install their own shop/software outside of the Google Play store. That’s actually anti-competitive because you have someone in a position of power within the industry (providing the operating system for all the devices to various OEMs) trying to control what business dealings can happen at those OEMs.

The Apple situation is different because not only are they that same position of power but they’re also the only OEM that make the devices that it runs out. They are an entirely closed loop ecosystem. There’s really no anti-competitive practices going on within their own market nor do they have a monopoly share of the mobile market as Android devices actually make up the majority of that market. Past lawsuits like with Nintendo generally tend to go in the favor of the company that wholly controls the market they created and control everything about.

Apridise
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Apridise

I don’t think you read the entire article then, the very end disputes what your saying about apple:

the fourth legal expert said. “It’s not a problem to be a monopoly. It’s not a problem under the law to have market power. It’s when you use that to restrain competition.”

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Arktouros

I did actually read the article and if you look at what was said right after that:

And Epic Games has alleged that that’s exactly what the restrictions do, at least in the case of Apple — you can’t just move to a different app store on iOS, because Apple doesn’t permit them to exist.

However we’ve seen in other scenarios, such as in Ars Technica’s excellent breakdown of the Console comparison, consoles are generally given the freedom to be the sole marketplace in their environments. Sweeney himself has even gone on record supporting Consoles and defending their 30% because the costs and development of designing their own devices something that Apple similarly does as the only OEM. Past examples such as Nintendo exerting control over it’s system/marketplace have also all been found to be acceptable even when they’ve gone to court.

So it’s a very odd argument here that they’re going after Apple for the exact same thing that they say is okay that Console manufacturers do.

Apridise
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Apridise

Again, I want you to focus on what I said. “This is the last line in the article” So when you say this “if you look at what was said right after that”, this appears again that you actually are not reading what the article said, but also that you’re not reading what I said.

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Mark Jacobs

You’re both right. Apple is different from Google but consoles are quite different from phones and acting as a monopoly can get you in a lot of trouble. But as Ark says, Tim defending the 30% isn’t going to help his cause but won’t decide it.

I haven’t had the time to read through all the filings but one thing is for sure, Tim prepped for this brilliantly, win or lose.

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Robert Mann

Maybe. He may have made a grave error, since it also opens Epic up to similar suits by many companies that are rather unhappy with them in turn (including counter-suits by both companies given several matters that fall into the same legal umbrella of anti-trust).

I am not sure if it was brilliantly prepped, or half thought out folly. I will probably not be certain until I see what else comes of the fallout from all this.

In either case, I’m really cheering for both sides to lose in some ways, and to win in others… a sort of mixed result that won’t favor either direction.

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Mark Jacobs

RM, it was brilliantly prepped, at least in broad strokes. I’ve been too busy to read through the filings, research the court/jurisdiction he filed in (that was a big deal for us when we tangled with Microsoft), etc. but it looks smart.

I think he hoped Apple would do to Epic what it is threatening to do. If they really remove the Unreal Engine from the marketplace, they will be making a major tactical mistake. I assume Tim was counting on this, I know I would be. As per above, if Apple is seen acting like a monopoly, it’s more trouble for them. Plus, the ill will that will be generated by it, the loss for revenue for other developers could lead to them joining Epic in the lawsuit. Tim is way too smart, not to have expected this. Trying to bait the other side into a bad move is a classic game of legal chess. I know this from experience and law school. :)

Apple needs to be very careful what their next move is, very careful. If I were their attorney, I’d tell them to hold fire on any action that could cause them to be seen as monopolistic, petty, and mean.

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Arktouros

@Mark The narrow definitions that define our technology simply aren’t up to the task anymore. Arguing that an iPhone does too much and has to be considered a multimedia device like our phone while ignoring the fact that many consoles can stream video, music as well as offer apps for things like Skype and other phone/video services is really splitting hairs.

The part of Tim’s argument for Consoles that undoes his argument against Apple is he excuses the 30% because of the research/development costs that goes into the Hardware. Obviously this is also the case for Apple as well as they are the sole OEM of their ecosystem.

However I think long term this is just a prelude for Tim over all. The vast majority of their revenue on Fortnite comes from consoles. In addition Epic probably has a number of deals regarding their control of their Unreal game engine as well. Going after the consoles in the opening salvo would be a huge risk. However if he wins against Apple then he has incredible leverage against Console makers and he can take them to court as well backed up by precedent.

Real question is when does Epic get so big that they start to also attract the eye of anti-trust legislation. Their game engine is almost the standard game engine for much of the game industry it feels like. On top of this they also now run a huge store and are willing to buy out exclusivity deals in that market. On top of this now they want to create additional stores in multiple mobile markets (Android and Apple) while offering their own payment processing/deals. The whole thing is really ridiculous when you think about it.

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Mark Jacobs

Ark, I agree wholeheartedly that Epic’s move could backfire on them especially if Tim/Epic uses any language that could bite him in the butt in the future. OTOH, you’re spot on that he could try to sue the console makers as well but given the things he’s said in the past, I don’t think he’ll do that unless somebody sours his relationship with them.

As to your real question, yep, Tim could find himself in a similar position in the future depending on how things shake out.

And if MOP’s formating puts this message below your other one, I know the comment about not reading the article was directed at Apridise. :)

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Arktouros

@Mark that’s also why I put an @Mark to specify that reply but was too late to edit the other when I noticed the formatting.

The only reasons I could see him not also going after console makers would be the deals they get for Unreal Engine are too good to jeopardize (imagine if console makers started pushing game developers towards a different engine) or because Microsoft/Sony already bent the knee and gave them some amazing revenue share deal. Apple is claiming that’s what Epic wanted but rejected it and of course Epic says not at all. That’s the tricky thing in all these scenarios, there’s often times deals here going on behind the scenes we can only speculate at.

Otherwise he’d have fresh run at multiple markets. Even if he doesn’t have a run at MS/Sony the legal precedent could mean another party could take them on and force console makers to allow for multiple storefronts as well. Honestly whole thing is really the nuclear option and no matter what the outcome there’s likely not going to be any real winners.

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Arktouros

Actually that line in the article was a quote taken from Polygon’s article linked under sources.

So, in fact, it is you who have not read the article. Maybe you should be less concerned with what other people are reading and focus up on learning how to read articles and understanding where their sourcing comes from rather than just taking the bite sized chunk of the original source where this information comes from.

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Robert Mann

But what exactly is restraining competition, and where are those lines drawn. Based on legal precedent, the app stores are unlikely to be voted down on this matter. That said, the courts would probably note that a competing store could not be discredited by the companies Apple and Google… but that neither company has any responsibility to share their own stuff on them.

Meanwhile, if Apple and Google are smart they will cite some of the issues where Epic is not only supporting similar behavior, but also where Epic engages in behavior that falls within the bounds of anti-trust via countersuit. Not only does that mean that Epic would have issues with several of it’s products, but there’s the claim that intentionally directing players to avoid the app stores was a measure of anti-trust, which could result in fiscal payments from Epic over lost customers for the life of the game.

There’s a whole slew of potential fallout here, and it all depends on how the courts look at the law. I’d expect this to be appealed all the way up to the Supreme Court, which may or may not take the matter… regardless of any decisions to that point, as all parties have too much money both on hand and at stake.

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Robert Mann

I think their lawsuit against google will fall, since there’s the ability to install via other stores on Android. I believe that you are correct about closed markets.

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Arktouros

The only reason I’m skeptical at the Google deal being open and closed is that they’ve gone in and made deals with OEMs against the idea of supporting other storefronts. That was basically the smoking gun in the Microsoft Anti-trust case where they actively made deals with OEMs to block other browsers being included.

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Dug From The Earth

Its like being a lowly peasant, as 2 HUGE hill giants fight each other, near your village.

You dont give a damn why the giants are fighting… but if one giant manages to keep the other giant from stepping on your village (even if unintentionally) then thats probably who you are going to root for…

… unless they both stumble and smash your village… which is often the case.

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Schlag Sweetleaf

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GARBAGE IN GARBAGE OUT.jpg
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Utakata

…that almost implies they’re are happy to see each other! o.O

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Schlag Sweetleaf

It’s Non-Cansensual…

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Bryan Correll

And both are full of garbage.

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Dystopiq

They’re not trying to “win”. FAANG are being investigated for antitrust reasons and these two lawsuits against Apple and Google add to the fire. If they can give more ammunition the government’s case against them it helps Epic in the long run.

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Sorenthaz

https://youtu.be/v96QyJczIi4 Sums it up for the most part, minus the parts where he’s injecting his political rhetoric into it.

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Hravik

This sounds a whole lot like going into a restaurant, setting up your own taco stand and then getting mad when you get kicked out.