Apple vs. Epic Games: What Does It Mean For The Future Of Apps?
Isadora Teich wrote this article
It’s no secret that a lot of app developers, innovators, and companies, have been having issues with the Apple Store.
In a previous blog post, we mention some of the issues developers are having with Apple, some of the issues the European Union has been having with Apple, and the explosive legal battle between Apple and Epic Games.
The fight between Apple and Epic games, the giant behind the incredibly popular Fortnite, is a very interesting case that will have widespread effects on developers, consumers, platforms, and companies.
As 2020 winds down, there have been some big developments in this case. I think it’s important that we understand why this has happened, and what it might mean for the future of apps.
Fortnight Works Around Apple’s Transaction Fee
As of now, it looks like the lawsuits and legal battles between Epic Games and Apple are likely nearing their end. A trial has been set for the spring of 2021. However, this year has been a wild ride of legal fillings and controversy.
It all started this summer when Epic Games introduced an update to Fortnite on iOS and Android devices.
Essentially, this update allowed them to circumvent the Apple Store’s in-app purchase transaction fees.
It gave players the option to purchase V-Bucks directly from Epic Games themselves, instead of going through the App Store or the Google Play Store. Usually, Apple takes 30% of app revenue from in-app purchases.
This move made in-app purchases cheaper for users but angered Apple by breaking their rules.
The Fight Begins
Fortnite is one of the most popular games in the world. So, of course, this removed a huge potential revenue stream from Apple. They responded almost instantly.
On the same day, Apple delisted Fortnite from their app store.
In response, Fortnite released a parody video called Nineteen-Eighty Fortnite, which painted Apple as an evil corporate overlord.
They also filed a lawsuit against Apple in California which had huge implications for the future of app development. They want to get their own storefront on iOS devices, which would crack everything open on iOS.
Remember, as of now, developers have no option but to play nice with Apple if they want iOS users to be able to access their products. There are other many other app stores out there compatible with Android devices, however.
If Epic Games legally gets the right to have iOS devices open to their non-Apple store, it will be possible for smaller developers to do the same.
Apple Wins The Battle, But Not The War
In August, headlines were flooded with news about Apple’s big win over Epic Games in court, but things were actually a little more complex than that. US District Court Judge Yvonne Gonzalez Rogers ruled that Apple did not have to immediately put Fortnite back in the Apple Store.
However, she also ruled that Apple could not block Epic Games’ access to the Unreal Engine, their popular commercially available game engine used by many other creators.
According to the ruling, they could continue to make updates whether Fortnite was back in-store or not.
However, this was far from the end. It was announced in October that Epic Games and Apple will face off in court on May, 3rd, 2021. This trial will take a look at Apple’s dominance as a monopoly over app distribution.
Why Is This Trial Such A Big Deal?
There are a few reasons why the results of this trial will be huge for developers, users, and the trajectory of app development in general. A few big questions will be answered.
For one, it will decide whether one of the biggest games of all time will ever be able to return to iOS.
While Apple has held a long-time grip on being a symbol of wealth, status, coolness, and the brand for cutting-edge creatives, many people may depart from Apple if they can no longer access their favorite game on it. Also, being seen as being hostile and vindictive to creators may sour their brand and hasten the alternative app store race, which has already started.
While currently, Epic Games can still access their Unreal Engine on iOS even though Fortnite has been removed, this trial may change that. In Unreal Engine is banned from iOS, it will have a profound impact on all of the small creators who use this engine to power their own games.
Or, if it is left in store, but Epic Games is locked out and unable to perform updates or bug fixes, that would be a disaster for both the company and the Unreal Engine users.
If Epic Games can prove that Apple is an unlawfully operating monopoly, it will have vast consequences for app developers. Currently, the only app store that iOS users can access is the Apple Store.
If Epic Games wins, their own app store may be readily available to iOS users. This means that other app stores would become accessible on iOS as well.
The Controversy Around Apple as a “Monopoly”
Currently, developers who want iOS users to be able to access their apps have no choice to deal with the Apple Store. Over the years, their list of complaints has grown longer and longer. One major complaint is that Apple takes a 30% cut of all app sales, as well as in-app purchases.
For years, there have also been widespread complaints that they leverage a lack of competition that they create. Representative David Cicilline (D-RI), who recently chaired Congress’s hearing with CEOs of four Big Tech companies, said on a recent appearance on The Vergecast:
“Because of the market power that Apple has, it is charging exorbitant rents—highway robbery, basically—bullying people to pay 30 percent or denying access to their market. It’s crushing small developers who simply can’t survive with those kinds of payments. If there were real competition in this marketplace, this wouldn’t happen.”
While this might sound dramatic, it is important to keep in mind that, comparatively, Apple does charge developers an incredibly high price.
Developers have been distributing, and currently distribute, software online at rates much lower than 30%— we are talking more like 3% to 8%.
Spotify vs Apple
Other complaints about the “Apple Tax” revolve around it not being evenly applied.
While some developers are forced to pay all of it, others pay nothing at all. There seems to be widespread misunderstanding about who does or does not have to pay this fee, and why. Regardless of who is in the right or wrong, it is a big problem that Apple has not communicated or applied its policies clearly on a wide scale.
Spotify recently claimed that Apple made them pay the fee in order to directly harm them as a competitor to Apple Music. Many have claimed that the Apple Store’s decisions on who pays and who does not seem to be wholly random.
Spotify claimed that them having to pay the Apple Tax while apps like Apple Music, Deliveroo, and Uber do not is clear favoritism and an attempt by Apple to crush the competition.
While incredibly popular, this argument does not actually hold up. Apple does have a history of applying rules unevenly and confusing developers. However, it never applies the 30% tax to real-world goods and services.
That’s why Uber, which provides physical real-world services to people does not pay the fee, while Spotify does.
Also, complaining that Apple does not charge itself the 30% transaction fee does not make sense. In this case, Apple would charge itself, only to pay itself.
Apple’s Failed Olive Branch
In response to all of this criticism, and perhaps fearing for its reputation, Apple has tried to do something to ease tensions: A recent Apple release cuts fee to 15% for developers who make less than one million in annual app sales.
While this helps many of our partnered clients monetize their future apps and is positive overall for app developers everywhere, this has been criticized by Epic Games and many other developers.
Epic Games CEO Tim Sweeney told CNBC:
“This would be something to celebrate were it not a calculated move by Apple to divide app creators and preserve their monopoly on stores and payments, again breaking the promise of treating all developers equally.”
Andy Yen, founder and CEO of the ProtonMail email app said:
“What small businesses need is not a slightly cheaper monopoly, but a real choice of payment methods in the App Store. It is only through allowing real competition in app store payments that truly competitive fees (not 30% nor 15%) can be assured.”
Is This The End Of The Apple Store?
It is incredibly unlikely, even in the case of Fortnite succeeding against Apple and proving them a monopoly in court, that Apple will just disappear.
However, it will likely open the door to competition for the Apple Store, in the form of other stores being available on iOS. This will likely force Apple to improve their policies, store, and communication if they want to keep developers and users selling and purchasing apps through their store.
So, long story short, keep your eyes peeled for May 2021!
Do you think that Apple is an unlawful Monopoly and in the wrong? Or do you think that Epic Games should have followed Apple’s rules if they wanted Fortnite to stay in their store?
Talk to me.
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