When Tim Cook, the Apple CEO, was asked by the House Judiciary Panel in July if the company had ever retaliated or bullied developers who publicly voice their frustrations with the App Store, his reply was a clear and straight one. Apple does not bully or retaliate against people since it is against the company’s culture.
The events leading up to the Cupertino’s based giant’s legal battle with Epic Games (the maker of Fortnite) are certainly putting these claims to a trial by fire.
In what is turning out to be an intense legal battle, this Friday, Apple did actually follow through on its decision to block Epic Games (the maker of Fortnite) from mobile development tools required to update games on its mobile devices.
For many tech insiders like me, it is very interesting to witness the world’s most valuable company and one of the world’s biggest gaming industry players having a go at each other to decide who gets to keep a huge pile of cash. The result will have far-reaching consequences for the industry and could give us an insight into the shape of things to come.
The Story Thus Far….
For the uninitiated, here’s a brief on how things came to head between these two very large, very rich companies. When you purchase an app from Apple’s App Store, the developers earn 70% while Apple retains 30% as commission. Apple enforces that all payments be received through its own payment system which then allows it to track the revenues that the apps are generating. Many developers, in the past, have raised their voices stating that the App Store rules are unfair and the company’s charges are just too high. But, given that the App Store is such a vital source of users and revenues, most of the dissenting voices are quite muted.
Trouble started when Epic installed its own payment system in its blockbuster game Fortnite. Apple immediately saw this as an intentional effort to bypass its in-app payment system and a serious breach of the existing rules. It threatened to pull the plug on Epic by stopping it from submitting new apps or updates to the App Store. Also, Fortnite is no longer available on Apple’s App Store.
The Legal Battle
Apple did initially indicate that it was willing to discuss and sort out the issue with Epic, However, the latter’s all-in crusade has ensured that the tone is no longer sanguine. Apple believes that if developers are allowed to avoid the digital checkout, it is akin to shoplifting since Apple does not get paid.
Expecting a reaction along these lines from Apple, Epic sued citing anti-competitive behaviour. It asked the judge to force Apple to reinstate Fortnite on its App Store while allowing Epic to run its own payment system. However, the court, last week, denied Epic’s motion but also asked Apple not to terminate the developer account that Epic uses for Unreal Engine, a graphics technology that is used by many game developers.
A War Where There Are No Winners
While Apple’s stand and actions are in line with its longstanding App Store policies, it does raise some uncomfortable and larger questions on whether Apple should have the power to control pricing on a platform that has become an integral part of our lives and hence, so critical for developers. Several other large companies with long-standing angst against Apple’s pricing policies are jumping into the fray in support of Epic. Spotify voiced its support while Facebook accused Apple of hurting small businesses by refusing to let go of the commission fee during the current pandemic. Even Microsoft has joined in the chorus supporting Epic in its fight.
To be fair, Apple’s App Store practices are no different from other platforms. It does need to retain a method to implement its business model and recoup the significant amount of money that it invests in developing the platform. But, optically, this controversy comes at a time when Apple is fighting antitrust scrutiny in the US and elsewhere. And that cannot be good news !!
While Fortnite is in a much stronger position compared to its peers and hence better equipped to take on Apple’s might, it does stand to lose substantially in this battle. According to estimates from Sensor Tower, Epic mobile games have been downloaded more than 159 million times through the App Store, generating about $1.2 billion in consumer spending, with roughly $360 million of this going to Apple. More importantly, this battle has become existential for Epic, because after removing Fortnite from the App Store, Apple targeted Epic’s other developer accounts tied to its game engine, putting the company’s licensing business at risk by threatening to cut iOS and macOS support.
For now, Round 1 has gone to Apple.
What Happens Now?
Even if you don’t belong to either of the camps, it is enthralling to witness both these companies have a go at each other. With Epic not willing to back down from its claim and Apple ready to put its entire firepower to work to ensure that it does not set a precedent for other developers to follow, the result of this tussle will be a keenly watched event.
Watch this space for now….
About the Author
Tushar is a serial entrepreneur with a background in software development who brings over 25 years of industry experience to Big Kitty Labs. Tushar has been the co-founder of more than four different companies, including Big Kitty Labs, which has gained a multinational presence. He holds an MBA from University of Phoenix and is a physics enthusiast…
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