Apple vs. Epic Games: 2020 Continues

2020 is certainly going to go down in history as one of the worst years of the century.

The world was hit with the Coronavirus, devastating lives across the globe, countries all over are struggling with civil unrest and natural disasters, the West Coast is experiencing multiple record-breaking wildfires and the Southern Coast is preparing for a double-hurricane, the second most disappointing election in U.S. history is just three months away, and, as if all of this wasn’t enough, Fortnite has been banned from the App Store.

Well, maybe Fortnite being banned isn’t quite in league with the other tragedies plaguing this year, but it’s definitely not good if you were looking forward to competing in Season 4 on iOS. On the other hand, if you’re a fan of dramatic legal battles between billion-dollar corporations, then this could be the high point of your year.

Oh boy.

Apple vs. Epic Games: What’s going on?

If you’re even remotely plugged into tech and gaming, then you’ve at least heard of the beef between Epic Games and Apple, even if you’re not quite sure what’s going on. While this fight has been in the making for several years now, Fortnite finally poked the fruit-shaped bear on August 13th.

The Players

Epic Games is the company that produces the game Fortnite, one of the most popular video games of all time. It’s a free game in which 100 players fight to be the lone survivor, and despite how often it’s referred to as a “kid’s game”, a third of Fortnite’s players are over the age of twenty-four.

Apple, as you no doubt know, is one of the largest companies in the world, responsible for iconic products such as the iPhone and iPad. To download apps on these devices you have to use the App Store; there is no alternative to the App Store for iOS users (I’m repeating this because it’s important).

The Setup

Since both the App Store and Fortnite are free for consumers to use, each uses somewhat indirect methods of raising funds. For Fortnite, its income comes from in-game purchases (i.e., you can play for free, but giving your character a new outfit costs money). You could technically play Fortnite for the rest of your life and never spend a dime, but you’d be missing out on special events and character costumes, which is how games like Fortnite make money.

The App Store, on the other hand, makes money from fees paid by apps on the App Store. For example, when someone buys a new costume in Fortnite on their iPhone, Apple gets 30% of that money. This goes for every app on the App Store that sells digital goods (apps that sell physical goods, like Amazon or Etsy, do not pay a 30% fee).

We’ll get into the ethics of this in a bit, but all you need to know for now is that Epic Games only sees 70% of the revenue it makes from sales on iOS.

The Fallout

As you might imagine, Epic wasn’t too jazzed about all of the revenue it’s been sharing with Apple. So, on August 13th, Epic Games added a feature called “Epic Direct”, a payment system inside the Fortnite app that would allow users to make purchases directly from Epic, circumventing Apple’s 30% fee. This goes against Apple’s terms of service for developers, and the Fortnite app was swiftly removed from the App Store.

Similar to the Flappy Bird scandal of 2014, iPhones that had Fortnite installed before it was banned still have the Fortnite app. However, they can no longer receive updates for the app, and if they delete it they will not be able to re-download it.

Does this mean that Fortnite, like Flappy Bird, is doomed? Probably not. In fact, Fortnite might have a future on iOS yet.

Nineteen Eighty-Fortnite: The ad, the hashtag, and the lawsuit

On the same day that Fortnite was banned from the App Store, Epic Games unveiled “Nineteen Eighty-Fortnite“, a parody of Apple’s famous “1984” Super Bowl ad, which announced the launch of the original Macintosh in 1984. In the original advertisement, Apple was portraying itself as the underdog, with Macintosh coming in to bring down soulless corporations like IBM.

The goal of Fortnite’s ad, which was paired with “#FreeFortnite”, is to paint Apple as the same kind of soulless corporation they used to stand up to. The idea being that Apple’s App Store fees are monopolistic and unfair to smaller companies (particularly gaming developers) and that Fortnite is the new underdog here to revolutionize the App Store and bring peace and harmony throughout the galaxy.

Of course, most of us know that this is primarily about money. Apple wants its 30%, as does Epic Games, and neither is willing to budge. On the same day that Fortnite was banned and the Nineteen Eighty-Fortnite parody was released, Epic filed a lawsuit against Apple, claiming that the tech company is using anti-competitive practices in the App Store.

The papers start with an easy-to-read opening, clearly meant to garner popular support. Since the filing, Apple has issued a few statements that more or less amount to, “We disagree with Epic Games and will ban anyone who breaks our Terms of Service.”

Epic Games and Apple: What each company believes

Like any good story, each character in this situation views themselves as the hero. So let’s take a moment to look at each company’s stake in this lawsuit.

For Epic Games, there are a few goals. The developer doesn’t claim that Apple’s fees are inherently wrong, only that they are too high and too inescapable. They believe Apple should allow other app stores on iOS. This would allow developers to avoid the App Store’s fees (and benefits), providing more freedom on the platform. Epic claims that by limiting every iOS developer to the App Store, Apple is forcing its fees and rules upon anybody who wants to release on iPhone and iPad.

This is not entirely untrue.

Apple, on the other hand, believes that the App Store is a valuable service for both consumers and developers. Consumers can download apps without worrying about scams or malware. Apps are constricted by rules, but for the most part, these rules greatly benefit users.

Additionally, Apple offers development tools to programmers, a massive distribution platform, and routine promotion. Apple feels that all of this, plus the maintenance costs of the App Store, are worth the 30% commission they charge developers.

This is also not entirely untrue.

So… who’s right?

Ah, the multi-billion dollar question. For now, that’s up to you to decide, and over the coming months, it will be up to the courts as well. Many of these questions don’t have clear answers, and both sides have made questionable decisions throughout this process, especially Epic Games, who decided to turn the lawsuit into a public spectacle.

That said, we can still look at a few of these points and explore them in greater detail.

Is the “Apple Tax” unfair?

I don’t think anyone believes that Apple should stop charging developers altogether. Even though Apple makes actual tons of cash from the App Store, they spend tons of cash on it as well. Like YouTube, Facebook, or Amazon, the App Store hosts millions of pieces of software, provides advertising, and has created an entire ecosystem for consumers and developers alike. So it’s certainly worth something.

But is it worth 30% of every digital sale? That’s the real question here, and it’s a question that has been brought up in the past. It’s tough to know from the outside if 30% is a fair percentage or not. It’s safe to say that entire companies wouldn’t exist without the App Store, and can you really put a price on that? This is something that Epic and Apple hope to answer by the end of the lawsuit.

Is the App Store a monopoly?

Another question that’s been circulating is whether or not the App Store is a monopoly. A monopoly exists when a company has exclusive control over a particular good or service. The claim here is that because the App Store is the only way to download apps on the iPhone, Apple has a monopoly on the distribution of iOS apps.

This is a tricky thing to pin down because, at first glance, that does sound like a monopoly. But then, is it really a monopoly if it’s on a market that Apple owns? For example, does Walmart have a monopoly on Walmart because they decide which products are sold in their stores? Apple Stores certainly market Apple products more than the other products they offer – is that a monopoly?

In other words, the App Store is a service nested inside of a product, which is a fairly new kind of business model that doesn’t clearly fit into the previous definition of a monopoly.

The problem is that iOS is by far the dominant mobile platform, if not in numbers than certainly in influence. Any developer would be crazy not to try and get their app on the iPhone, and many develop exclusively for iPhone, never even bothering to put their app on Android. With Apple controlling so much of the mobile app market and further controlling it through the App Store, which has no alternative on iOS, it could be that the App Store is a new kind of monopoly, one that only exists in digital sectors.

Apple vs. xCloud

Another segment of the App Store debate, which was quickly overshadowed by Epic Games’s stunt, was Apple preventing xCloud from coming to iOS. xCloud is a gaming project from Microsoft that offers video game streaming. Think of it as Netflix for video games.

xCloud will be launching on Android September 15th, but it will not be launching on iOS. This is because Apple denied the xCloud app, saying that it breaks the ToS for the App Store. Microsoft and Apple have gone back and forth on this for a while, and earlier this August Microsoft decided to end all testing for xCloud on iOS, saying “[W]e do not have a path to bring our vision of cloud gaming with Xbox Game Pass Ultimate to gamers on iOS.”

In other words, because Apple won’t budge, Microsoft has figuratively thrown its hands up, leaving the ball in Apple’s (and iOS users’) court.

Why Apple is so strict when it comes to gaming

By this point, we’ve covered several examples and dramas surrounding Apple’s App Store policies and explored the various arguments from multiple angles. However, we still haven’t covered the underlying question, the thing Apple fans and haters want to know: Why does Apple bother being so strict in the first place?

These sorts of issues do not arise on other platforms nearly as often as they do on Apple’s. xCloud and Fortnite are both still available on Android (Fortnite was banned from the Play Store the same day it was banned in the App Store, but Android allows apps to be sideloaded, so it’s still available on the platform). Not to mention that Apple is historically unfriendly towards gaming, while Microsoft computers are the default choice for gamers.

There is more to unpack here than we have time to discuss, but in short, it comes down to control. Calling “control” an integral part of Apple’s identity would be an understatement. In some ways, this obsession is beneficial, as it allows Apple to maintain the high levels of quality and security that are synonymous with the brand.

On the other hand, we see in instances like video games, which are complex, lengthy, and often user-controlled apps, that Apple would rather avoid them altogether than work to accept them. Apple is just as strict with games as it is with everything else, but those strict policies just don’t scale with the gaming industry, and so the two are caught in a constant state of obstruction.

How will the Apple and Epic Games battle end?

Though it’s too soon to be completely sure, it is likely that Apple will win the Fortnite lawsuit. Apple has clear guidelines in place that Epic Games knowingly and intentionally broke, which makes it difficult to imagine an outcome in which Apple doesn’t win the suit.

However, winning the battle doesn’t always mean winning the war. While the stunt itself was questionable, Epic has done an excellent job of shifting the public’s perception of Apple even further towards a monopolistic gatekeeper that bullies smaller companies. Even if Apple wins this suit, I wouldn’t be surprised if we start seeing serious changes come to the App Store over the next few years.