Inside 'Fortnite' Creator's Epic Legal Battle With Apple and Google

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Inside ‘Fortnite’ Creator’s Epic Legal Battle With Apple and Google – And Who Has the Upper Hand

by Samson Amore | August 14, 2020 @ 3:36 PM

“Fortnite” has made $1.2 billion on mobile since it launched on the App Store two years ago, SensorTower analyst Craig Chapple tells TheWrap

Epic Games’ decision to sue Apple and Google over the removal of its wildly popular “Fortnite” game from their app and gaming sites is an unprecedented move that could completely change how the tech giants pay third-party developers, but legal experts say a lack of prior antitrust rulings will make the case difficult to win in court.

“This is a game of leverage being fought on the legal battlefield,” Matt Bilinsky, business attorney at Los Angeles law firm Weinberg Gonser, told TheWrap. He noted that Epic — which reported $4.2 billion in revenue in 2019, according to VentureBeat — is one of the only game developers with enough money and clout to challenge goliaths like Apple and Google.

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The companies got into a public feud on Thursday shortly after Epic started offering a discount on the “Fortnite” in-game currency called V-Bucks. If customers purchased the currency directly from Epic instead of through the App Store, they saved roughly 20% — and Epic pocketed all the cash instead of paying Apple’s standard 30% commission on App Store transactions. Apple promptly booted “Fortnite” from the App Store, and Epic responded with a lawsuit accusing Apple of antitrust violations for a fee structure that amounted to an unfair monopoly. Later on Thursday, Epic filed a nearly identical suit against Google for removing “Fortnite” from its Google Play store.

Apple said in a statement Thursday it planned to work with Epic to get “Fortnite” back on the App Store soon — which Bilinksy said was a sign of just how much power Epic Games has in this battle. “A lesser publisher wouldn’t get that response, they’d get the response from Apple to pretty much screw off,” he said.

Also Read: Epic Games Sues Apple for Removing 'Fortnite' From App Store

SensorTower mobile analyst Craig Chapple also noted the timing of Epic Games’ lawsuits — and its willingness to take the risk on its most lucrative property. “It’s interesting they’re using the popularity of ‘Fortnite’ to pull the game and try to put some pressure onto Apple at a time when governments are scrutinizing the practices and also some other big games companies are scrutinizing those practices,” he said. “Fortnite” racked up $1.8 billion in sales last year, according to Nielsen’s SuperData — more than 40% of the company’s overall revenues.

Epic’s San Francisco-based law firm, Faegre Drinker Biddle & Reath, didn’t return TheWrap’s requests for comment about why the lawsuit was filed now. But experts noted that while U.S. antitrust enforcement has lapsed in the last decade, the European Union has been more aggressive in recent years cracking down on big tech. In March 2019, the EU investigated Apple for antitrust complaints after Spotify sued the company.

“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,” Fernandes said. “It is reasonable to believe that Epic Games had been preparing for this legal dispute for some time and it saw this as a good moment to act.”

Bilinksy said there is very little legal precedent to draw from in this case, partly because the United States’ overall laws on antitrust remain vague. “Generally, American antitrust and anti-monopoly law has really loosened up over the past 25 to 30 years,” Bilinsky said. “The government is far more hesitant, whether under Democrats or Republicans, to impose restrictions for monopolistic practices than they were 50 years ago and that really has come to a head in terms of the tech companies because they’re so hard to regulate, because they’re not based in the physical world.”

Bilinsky added, “There’s the argument to be made that all these major tech companies are establishing de facto monopolies, and the government hasn’t really done anything about it.”

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The gaming industry has long complained about the commissions that Apple and Google have charged — which Epic’s lawsuit described as “exorbitant” and “anti-competitive.”

“This is also not the first time that Epic Games has tried to circumvent the app stores transaction fees,” Guilherme Fernandes, market consultant at games and esports analytics company NewZoo, told TheWrap. He noted that “Fortnite” wasn’t available on the Google Play Store for over a year. “For 18 months, (Epic) offered ‘Fortnite’ on Android devices through direct download, outside the (Google) Play Store, until it caved in in April, citing the influence that having it available on the official store has on consumers,” Fernandes said.

Apple has argued that the 30% fee not only covers hosting a game, but also offers exposure to a wider user base and tools that let developers launch their games quickly. “A 70-30 split plus all the things you get, and you can easily release your game is a lot better than it was” when the App Store first launched, Chapple said. “Apple and the App Store have actually done a lot to really grow the mobile games industry into what is now the biggest segment of gaming.” Reps for Apple and Google did not respond to repeated requests for comment about the lawsuits.

Others noted that while the fee may seem high, it’s not outside the norm within the industry. “For a centralized repository of apps and app stores that 30% is definitely on the higher end,” Bilinsky said, “but it is within the gap of what is considered standard.”

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Epic has another advantage in this fight: Unlike other gaming publishers, it also distributes “Fortnite” on PC, consoles and Android phones. Epic also operates its own marketplace, the Epic Games Store — where 80% of each transaction returns to the developer. Sweeney has claimed its 20% fee is a fairer deal.

Fernandes noted that competition from the Epic Games Store motivated competitor Valve to reconsider how it priced fees on its PC game marketplace, Steam. Epic “has also taken a similar stance on PC; it introduced its very own Epic Games Store on PC as an alternative to Valve’s Steam and its 30% fee on every transaction that took place on PC’s largest games platform,” Fernandes said.

But even though Epic has a strong infrastructure of its own, it still needs the App Store and could lose a significant amount of money the longer “Fortnite” is banned. The company said in April that the first-person shooter game reached 350 million players globally. SensorTower estimates the game has been downloaded 133.2 million times on the App Store to date. “Since it launched in 2018 on the App Store, we estimate it’s made $1.2 billion on mobile alone,” Chapple said.

There’s a good chance Epic will resolve its dispute with Apple and Google long before its case reaches a courtroom — which could take up to six years, Bilinsky said. For both sides, the risks of a trial may just be too great given the lack of legal precedent. “In terms of (a court saying) we now determine that this fundamental nature of your business model is an anti-competitive, monopolistic practice that violates antitrust law, and you need to cease… nothing’s coming to mind,” he said.

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Apple TV+ finally launches on Friday with four original series, some kids' programming and a little non-fiction content. But Apple's forthcoming streaming service, which is the tech giant's attempt to compete with the likes of Netflix and Amazon, will begin to roll out even more programs in the coming months from star players like M. Night Shyamalan and Octavia Spencer. TheWrap has rounded up all the shows that have been set for the streaming service so far, or are currently in development, so you know what you'll get if you subscribe for $4.99/month. We've also noted which series will be available with the Nov. 1 launch.

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Tech giant’s attempt to compete in SVOD space launched Friday

Apple TV+ finally launches on Friday with four original series, some kids' programming and a little non-fiction content. But Apple's forthcoming streaming service, which is the tech giant's attempt to compete with the likes of Netflix and Amazon, will begin to roll out even more programs in the coming months from star players like M. Night Shyamalan and Octavia Spencer. TheWrap has rounded up all the shows that have been set for the streaming service so far, or are currently in development, so you know what you'll get if you subscribe for $4.99/month. We've also noted which series will be available with the Nov. 1 launch.

Also Read: Apple TV+: How a Tech Company Built a Streaming Service From Scratch by Going All-In With Originals

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