“Most app stores position themselves similarly. It just happens that Apple, because of its dominant market share, it comes off a little differently,” attorney Matt Belinsky says
Epic Games’ recent lawsuits against Apple and Google could inspire other top publishers to file their own similar claims, though they have a slim chance of winning in court, legal experts say.
In question is the so-called “Apple Tax,” a 30% commission Apple skims off every transaction in its App Store. Google has a similar policy. Epic Games and several other publishers have claimed the 30% fee is too high, while Apple argues that it covers not only hosting a game or app on the App Store but access to developer tools, support and a huge audience of potential buyers.
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Epic and Apple are trading legal barbs: The latest developments in the case include a ruling from Judge Yvonne Gonzalez Rogers, who responded to a temporary restraining order requested by Epic Games Aug. 24.
Epic filed the order in hopes of allowing developers to still use the tech, and the court blocked Apple from removing Epic’s access to its developer toolkit. Apple previously said it would remove Epic’s access to its developer tools by Aug. 28, which means that developers using Epic’s proprietary game development software, the Unreal Engine, would be unable to work on Apple platforms. Judge Rogers only partially agreed with Epic, though: She ruled in Apple’s favor that “Fortnite” can remain banned on the App Store.
Microsoft’s manager of game development Kevin Gammill recently filed a statement to the court in defense of Epic, noting that Microsoft uses the Unreal Engine to develop mobile versions of its Xbox games.
Music streaming service Spotify filed its own antitrust lawsuits in the European Union against Apple in April with similar complaints. Apple takes 30% of a Spotify user’s first-year subscription, and 15% of each subsequent year.
“There has been increasing scrutiny of the position that the app stores occupy in the mobile games market and the 30% fee that they charge on all transactions,” Newzoo market analyst Guilherme Fernandes told TheWrap. “It first started with Spotify suing Apple, back in March 2019, which led to EU investigations into whether Apple’s practices violate its antitrust laws in June.”
On a website dedicated to the case, Spotify said, “Apple makes it harder and harder for companies like Spotify to bring the best we have to offer to our fans — all for the sake of tilting the field to favor its own services and disadvantaging those it is playing against.”
Attorney Matt Bilinsky of law firm Weinberg Gonser said that Apple’s fees aren’t exactly unusual.
“Any centralized app store is considering itself the retailer; whereas, the gamer is the wholesale,” Bilinksy said. “Most app stores position themselves similarly. It just happens that Apple, because of its dominant market share, it comes off a little differently.”
Bilinsky said Apple views itself as a big-box retailer, but the game publishers see the company as less than that, and often one of several platforms. Epic distributes “Fortnite” on the App Store to huge download numbers, but also offers the game on consoles and for free on PC through its Epic Games Store marketplace.
“The app providers and the publishers look at it much more so as a pass through, a temporary valve through which they can present their apps,” Bilinsky said, adding that the sales work is still done by the game publishers. “(Apple) isn’t doing any marketing, or any sales.”
Bilinsky noted that U.S. antitrust regulation has “loosened up” over the last few years and that there is no precedent for a case like this. Bilinsky also said that sometimes tech companies become so successful that they inevitably become the subject of antitrust complaints even if their activities are above-board.
“Sometimes you simply become so dominant — just like Google — that you end up becoming a monopoly regardless, and then your practices, if you had a smaller market share, that might be considered benign are now considered monopolistic because it prevents the competition and the variety of choice within the marketplace that allows your vendors to operate freely,” Bilinsky said.
Tech companies aren’t the only ones taking note of this lawsuit. Several top publishers look to have been inspired by Epic’s lawsuit, with a trade body representing outlets like The Washington Post, The New York Times and The Wall Street Journal sending a letter to Apple CEO Tim Cook last week, pushing for more favorable splits.
“The terms of Apple’s unique marketplace greatly impact the ability to continue to invest in high-quality, trusted news and entertainment particularly in competition with other larger firms,” said the letter from the trade body Digital Content Next.
Whether the publishers get what they’re looking for is another matter.
David Cohn, Chief Strategy Officer for subscription-based publishing startup Subtext, which is on the App Store, said it’s unlikely these outlets can get what they want — especially on their own — because they don’t carry the same weight as Epic Games. Banding together is their best bet, but even that will likely fall short.
“There is only one Epic; there is no local version of Epic that can give you ‘Fortnite.’ The competitive landscape is different, and Epic itself is a little bit of a monopoly, essentially,” Cohn said. “Their brand and product is so unique that they really can hold it back and say, ‘No, we’re not going to give it to you’ and Apple really loses something. Whereas, you would really need all the publishers to unite to have the same effect. And they don’t because they’re in competition with each other.”
A united front is the best bet for these publishers, Cohn argued, because there are enough big players that if one of them were to play hardball and ditch Apple, its void would be immediately filled by other national outlets. There isn’t enough separation, in terms of quality, between the national outlets and their competitors that would lead one of them to be confident enough to pull a move similar to Epic.
From a strategy standpoint, Cohn said it makes a bit of sense why the publishers sent the letter. It’s a low-risk move that could potentially lead to a better deal.
“[The top outlets] would have to show a united front in order to get the same effect as one epic company, no pun intended,” Cohn added. “What one Epic company could do, you would need all the major publishers to agree on to do together because the product itself is not differentiated enough from paper-to-paper.”