Apple claims it competes with Nintendo and Microsoft, Epic outlines Apple iMessage’s cross-platform blocking

    
19
why does this continue

We’re still about a month away before the Epic vs. Apple legal fight moves to its May 3rd bench trial, which means we’ve still got weeks left for both Epic Games and Apple to continue their legal filing-based slap-fighting. Freakin’ yay.

We’ll begin with Apple’s argument that the assertion of having no competition is false because the case should take into account the broader video game market, which means Apple is in direct competition with Nintendo and Microsoft. Incidentally, this means that Apple customers have ways of purchasing virtual tokens from devs on other platforms such as Windows PCs and using those tokens on iPhones, thereby circumventing the “Apple tax” that’s at the heart of Epic’s argument.

Meanwhile, Epic has filed a brief with testimony from Apple execs regarding the iPhone’s iMessenger app. Statements in the brief include word from 2013 that iMessage could also have an Android version of the app to let users of both platforms “exchange messages with one another seamlessly,” but plans to do so were tamped down by other Apple execs’ concerns that doing so “would simply serve to remove [an] obstacle to iPhone families giving their kids Android phones.” This sentiment apparently is held as recently as 2016, with another quote from a former Apple employee stating, “The #1 most difficult [reason] to leave the Apple universe app is iMessage […] iMessage amounts to serious lock-in” — a comment affirmed by Apple exec Phil Schiller, who wrote, “Moving iMessage to Android will hurt us more than help us, this email illustrates why.”

Of course, what these two developments mean for the upcoming case isn’t certain: Readers will note that the judge hearing the case, Judge Yvonne Gonzales Rogers, had pointed out that this legal fight could have “significant and serious ramifications for Sony, Nintendo and Microsoft and their video game platforms,” while Epic’s testimony documents might be a connection –however tenuous — to Epic’s assertion that Apple is a monopoly.

We’ve got several more weeks of this, folks.

sources: Reuters via Gamasutra, Courtlistener.com and Reddit via Gizmodo. Cheers, Onyx!
Advertisement

No posts to display

19
LEAVE A COMMENT

Please Login to comment
  Subscribe  
newest oldest most liked
Subscribe to:
Reader
Bryan Correll

Apple – “We’re not a monopoly, but that is our goal.”

Reader
Utakata

Sometimes I wonder though that their insistence to overprice their products is the reason they have difficulty achieving full monopoly. A debatable silver lining, for what’s that’s worth… >.<

Reader
Arktouros

It’s a goal of most businesses to be a monopoly.

Also interesting: It’s not illegal or against the law to be a monopoly.

It’s generally speaking what you do with your position as a monopoly that becomes problematic. For example when Microsoft got hit with this early on over Internet Explorer it’s only because it was interfering with other browser companies such as Netscape.

Reader
Schmidt.Capela

For me the most interesting new reveal was just how much money Epic is losing with its Epic Store.

The Epic Store has lost $181m in 2019, and is expected to have lost $273m in 2020 and to lose $139m in 2021, the last number being Epic’s own projection.

As for me, this makes me even less likely to purchase games that have ever been Epic timed exclusives; after all, Epic is already paying publishers for lost sales.

Reader
Bruno Brito

Maybe that’s a good showing of why they’ve chosen to pursue litigation instead of trying to compete directly on the Iphone debacle.

Reader
Arktouros

Yep. Their failures in Dakota and then Arizona as well as this whole debacle is pretty much summed up as “It’s cheaper to throw some lawyers/legislators at this than launch our own Fortnite phone.”

I don’t really expect any of this to work and for them. The whole case rests on whether or not Apple’s store can be considered a whole market of it’s own and Epic is just not even trying to make that case.

Reader
Bruno Brito

I’m wondering how hard can this shit bite Epic’s own ass. I’ve been thinking about the possibility of, if by the slim chance they win, all storefronts now will need to allow competition, including digital ones, which means Origin, Battle.net, etc etc.

I kinda wanna see every major company sharpening their pikes against Epic.

Reader
Arktouros

The lawsuit isn’t over storefronts having to allow competition.

The primary lawsuit is that Epic thinks Apple’s ecosystem is it’s own relevant market. They argue because an iPhone is a general computing device that Apple can’t restrict who can and can’t open a store on it and doing so abuses Apple’s monopolistic control over it’s own system. The key distinction there is that a smart phone is a general computing device because they argue that consoles (Xbox, Playstation, etc) aren’t the same because they aren’t general computing devices. There are many direct competitors to EGS on the Windows 10 platform (Steam, Windows store, Bnet, Origin, etc) but zero direct competitors to Apple on it’s phone.

The issues there are many. For example is Apple’s device ecosystem it’s own relevant market for antitrust purposes? Apple argues no, you can sell games on multiple other platforms they compete against. Another example is while Epic tries to make a distinction between consoles and smart phones most consoles are capable of many features a smartphone is (they have browsers, can buy/watch movies and TV, they have game offerings, voice/VOIP capabilities, etc). Epic also alleges Apple abuses it’s position in the market but the 30% is pretty standard on every platform except Epic’s Game store. The judge also indicated as much and said such a ruling would likely apply to consoles as well.

The only thing Epic really has to lose here, other than more money than you and I will ever see in our lifetime in lawyer fees, is that eventually Apple could pull the plug on unreal engine for Apple devices as well. They already tried this and a judge made them stop temporarily but long term that isn’t going to stop Apple from just cancelling working with them entirely.

Reader
Kickstarter Donor
Greaterdivinity

Sorta kinda not really? This is the acquisition phase, the “burn” phase, they know they’re losing money and that’s the point. This is all to build a userbase, so they’re paying for free games every week (sometimes multiple, sometimes some pretty big names), plus taking smaller cuts of each sale compared to Valve (lower revenue per-sale), plus likely eating losses with the discount coupons. On top of buying timed exclusives (which they seem to be moving away from, and instead funding development for store exclusives).

As much as I may hate that this is an “intentional” part of business, this is a part of business.

Reader
Arktouros

The multi hundred million dollar question is are they really building a user base that will be loyal though? As of last year they estimated they had roughly 15% marketshare of the PC market. However how much of that 15% when presented a game that appears on both Steam and Epic at the same time would choose EGS?

What does Epic really do for it’s customers other than give away free stuff? If they stop that, then why have any loyalty to the platform? This is the entire flaw of trying to buy an audience. It only works while you keep paying.

Reader
Kickstarter Donor
Greaterdivinity

Who knows, they remain private so we don’t really get any info unless they want to share it. But given that they’re still spending big money and are apparently moving to funding development vs. buying exclusives indicates that however things are playing out, they’re happy/content with it.

The point is that they get customers in the ecosystem and used to loading it up alongside any other storefronts (I usually have Steam/Origin/uPlay/EGS/Bnet all active at once) so that users don’t just default to Steam for everything, and use EGS for some sales etc. The EGS itself still has a long way to go in terms of features, but the point is simply to get folks using the storefront regularly so that the initial “purchase” barrier is lower. It getting the first few purchases that is usually the most difficult, and it gets easier from there.

Reader
Arktouros

They shared a ton of info as part of their lawsuit.

I have access to a lot of other storefronts (Origin, BNet, Steam) but I only open them when I go to play a particular game on the platform. Otherwise they remain entirely closed. Like I’ll reopen BNet when I play D2R but otherwise why open it? I agree getting someone to download it at all is the big hurdle, but keeping people engaged constantly with the platform or choosing your platform over others when presented with a choice is a whole other level.

Reader
Schmidt.Capela

The big money drain seems to be exclusives.

Their exclusivity deals rely on upfront “minimum guarantee” payments based on what Epic expects the game to sell, with the upfront payment being returned from the publisher’s cut as the game sells; if it doesn’t sell as much as predicted then Epic is left holding the bill.

And how big is the difference between what Epic pays and what it gets back? Epic sold in 2020 about $265m in third party games — which includes everything, not just timed exclusives — but spent $444m on minimum guarantee payments. When you take into account Epic’s cut and the fact many of those sales are for games that aren’t exclusive, it’s clear that most of the Epic Store’s loses were from exclusivity deals.

Reader
Kickstarter Donor
Greaterdivinity

Oh totally, exclusives plus the free games they give out. I think they’ll save some money (and reputation) by moving to fund development rather than buy exclusives, but with ongoing investment like this it’s pretty clear they can continue eating losses without harming their other revenue streams (Fortnite/UE licensing) anytime soon.

Reader
Utakata

So it seems a case of pushing this crusade to line their own pockets is with irony burning a hole into them instead? Somehow that seems quite fitting if this being the case.

Reader
Jeremy Barnes

I mean they had to know they’d be spending a massive amount of cash for it. I’m wondering if it’s even more than they expected which given what I believe to be the general incompetence of their management team wouldn’t surprise me.

If they believed they were going to be spending anything less than a billion (and that’s being optimistic) on their strategy to ‘buy’ market share without a product that has any other reason than massive giveaways for people to use it… well, that’s very shortsighted.

I used to be in the print media business and the 1st thing you learn is never give away ‘free’ advertising based on the idea that you can turn it into ‘paid’ advertising later. Giveaways do not generate business. The same lesson has been learned over and over.

Remember all the deal sites where you get like $20 of food at a restaurant for $10 and then all the businesses learned that it was massively expensive and the people never came back when they didn’t have a deal.

Seems like epic is well on their way to learning once again that if you turn your product into “giving stuff away for free” then it becomes pretty difficult to find a way to make money off that later.

They’re going to need more features and reasons for people to use it other than “here’s free stuff” and despite promises…the pace of them adding features and functionality is painfully slow.

Reader
Kickstarter Donor
Greaterdivinity

I’d place money on this all being planned/expected. The only real change seems to be that Epic has realized how badly buying timed exclusives looks for them and given them a less than shining reputation, so they’re apparently moving to fund development instead (Alan Wake 2 ppppplllllssssssss).

It’s not like there’s a shortage of other examples to look to for storefronts that didn’t spend as huge like uPlay or Origin, neither of which even really seems to have any exclusive games anymore as they’re all released on Steam as well. Entering an established market is expensive as hell, especially when you’re hoping to compete with a player that has absolutely dominated the market in every regard for nearly two decades.

Which is why I imagine they decided to push for it off the success of Fortnite once that proved to be more than just a flash in the pan. UE licensing makes them some money for sure, but nowhere near enough to fund this kind of ambitious plan. They need those Fortnite billions to fund this, because that’s the kind of money you need when you’re hoping to compete against the likes of Steam.

I mean shit, they’d lose less if they stuck with the standard 30% cut like Steam does (even the “The cut goes down as you sell more!” approach that Steam does which only really benefits AAA’s…the developers that arguably need it the least) and could potentially even turn a profit, too. This is a long-game play. This is Amazon/Netflix/whatever new tech company spending years burning warehouses of cash before they start turning around tidy profits.

Reader
Jeremy Barnes

As I stated, they had to know they were going to be burning cash.

However, I don’t think Amazon or Netflix are great comparisons. They were both startups who used the common funding routes with investors willing to gamble.

If Bezos failed, everyone walks away onto the next thing. Sure some ultra wealthy people lost a lot of money, but they’re looking to their other investments that might actually succeed.

Epic is an establishing functioning corporation owned by another corporation.

I’m not sure that established corporate executives who won’t be with the company in 10 years have the same patience that early investors do with startups. Especially since there’s no other options. Either egs succeeds or they lose a lot of money. There’s no, but hey, our startup that builds flamethrowers onto baby strollers is rolling out an IPO next week.

There was nothing like Amazon in retail (or more importantly, data centers) when they started out. The same thing for Netflix. They had a transformative product to sell. Epic does not.

You’re more looking at with egs, it being something like cbs all access. A poor service with a couple of ‘hits’ trying to force it’s way in against competitors that disrupted a previous market to gain that market share and now you have a company with nothing to offer trying to ‘me too’ their way into the market.

Netflix and Amazon weren’t just throwing money at trying to acquire users. They had something that was new and different. Something people wanted outside of throwing freebies at them.

I don’t see anything that epic has to offer that attracts any users beyond here’s some gobs of cash. I don’t see any plan for the egs other than continue to burn gobs of cash. If they stop the ‘buying’ exclusive and fund development…well, origin had a lot more established IPs.. and, as you said, they’re on Steam now.

Everyone knows that the egs model isn’t sustainable and it’s mad dash to throw cash to try to acquire enough users to force people to the table to negotiate about how much money epic gets. The lawsuit is the same thing. Both are expensive and keeping up corporate support for burning that much cash on anything is going to be difficult.

Reader
Kickstarter Donor
Greaterdivinity

Epic is an establishing functioning corporation owned by another corporation.

It’s not. Tencent has a minority stake, Epic (I believe Sweeney himself) still controls a majority stake and makes al the decisions.

Beyond that, the Netflix/Amazon comparison you made doesn’t work. Rather than seeking outside investment as those companies did (which Epic may still be doing), they’re taking from one of their own internal revenue sources. That actually places less risk on them, because they can financially afford the burn while still potentially turning an overall company profit. And if it doesn’t pan out, they at least don’t have angry investors demanding some return on their investment.

I’m not sure that established corporate executives who won’t be with the company in 10 years have the same patience that early investors do with startups.

My understanding is that Sweeney has been there since day one, and is unlikely to go anywhere anytime soon. I’m not sure about the rest of their leadership, but as long as Sweeney remains in charge I don’t see things suddenly changing.

They had a transformative product to sell. Epic does not.

It wasn’t about a transformative product that I was getting at. It’s that the “Get investor money, spend years with high burn-rates going deeper and deeper into debt to establish yourself and grow, then worry about making a profit later.” approach that a LOT of companies take, even with traditional products.

Netflix and Amazon weren’t just throwing money at trying to acquire users.

Yes they absolutely were. Not “just”, but that was a huge goal for them, and if you look at Netflix valuation while it was in its burn years the stock rose/fell more based off the growth of users than it did how much the company lost. Amazon is a bit less direct as they’ve radically changed directions with their business models over the years (as you say more cloud hosting and non-amazon.com offerings), but a big part of their ability to do that was built off of building a massive userbase for their original product and getting them to buy into other things like Amazon Prime.

I don’t see anything that epic has to offer that attracts any users beyond here’s some gobs of cash.

Eventually, I imagine things like store exclusives and whatever other features they add. They’re just looking to offer a proper competitor to Steam, and it’s far more developer friendly with their cuts so honestly if I had a choice I’d probably go with EGS, even if I’ve got like 1K+ games on Steam.

If they stop the ‘buying’ exclusive and fund development…well, origin had a lot more established IPs.. and, as you said, they’re on Steam now.

EA never made anywhere near the kinds of investments into Origin that Epic has with EGS. Their own games were exclusive, sure (mostly), but beyond that they did very little to really sell the storefront to users. Same with uPlay, both companies seem to have thought that, “Users will come because we’re Ubisoft/EA!”

Everyone knows that the egs model isn’t sustainable and it’s mad dash to throw cash to try to acquire enough users to force people to the table to negotiate about how much money epic gets.

Longterm no, and I don’t think they’re planning on this longterm. They’re building a third revenue source (UE licensing, Fortnite/games, EGS) so that they’re in a more financially secure place should revenue from any individual source take a big hit.

Force who to what table to negotiate about what? Epic takes a 12% cut of every sale, period. It’s not a sliding scale like with Valve/Steam where the more you make the more you get of every subsequent sale, there’s no negotiating. You get 88% of each sale and that’s it. If you want some comarketing help (not paid, but ad-value equivalent) you can negotiate with them on that. If you want your game to be given away for free to attract users you can negotiate with them to see if they’ll take it and how much they’ll pay you too. But that’s it.

keeping up corporate support for burning that much cash on anything is going to be difficult.

I disagree hard here. The lawsuit is silly IMO, but it’s a VERY longterm play on the part of Epic, who are still flush will billions in Fortnite bux that they can spend with reckless abandon.

As long as Fortnite is generating billions and Sweeney wants to pursue the Apple lawsuit and/or more burn to grow the EGS userbase, they’ll keep it up. And none of that seems apt to change anytime soon.