On Epic's Fortnite Gambit

This morning, Fortnite pushed an in-app update (that did not require updating from the App Store or Google Play) that allowed customers to either pay for v-bucks using in-app purchase or at a discounted rate by paying directly to Epic. This is an explicit violation of both the App Store and Google Play Store rules, and many spent the morning speculating what Apple and Google would do.

Source: Epic's filing again Apple

This left Apple with a number of options, but only two that I think were truly possible:

  1. They can remove Fortnite from the store until they change the payment system back to just iAP.

  2. They could let it be while attempting to silently negotiating with Epic, causing people to speculate about Apple not applying rules fairly across developers.

The reason I feel these are the only two options is that everyone had a feeling what was happening here. Epic and its CEO Tim Sweeney have been relentlessly pursing turning Epic into the world's platform for games with its Epic Games Launcher. Using aggressive tactics like 12% fees and free games like GTA V, Epic has already started to topple the longtime ruler of PC games, Steam.

The next obvious venue for Epic to control games is mobile. When it came to Android, Epic enacted a similar strategy to what they did with Steam - forgoing the Google Play Store and releasing Fortnite in 2018 as a direct download you could side load onto your Android device in the mobile Epic Games Launcher. At the time, Sweeney told The Verge:

Epic wants to have a direct relationship with our customers on all platforms where that’s possible… The great thing about the Internet and the digital revolution is that this is possible, now that physical storefronts and middlemen distributors are no longer required.

He went on to discuss Google's 30% fee and how he felt it was not comparable to similar fees demanded by the major gaming platforms:

"The 30 percent store tax is a high cost in a world where game developers’ 70 percent must cover all the cost of developing, operating, and supporting their games… There’s a rationale for this on console where there’s enormous investment in hardware, often sold below cost, and marketing campaigns in broad partnership with publishers."

“30 percent is disproportionate to the cost of the services these stores perform, such as payment processing, download bandwidth, and customer service,” he says. Sweeney adds that Epic is “intimately familiar with these costs” from its direct distribution of Fortnite on Mac and PC.

Despite this logic being equitable to both iOS and Android, Epic opted to launch Fortnite on the iOS App Store, 30% fee included. Then, in April of this year, Epic decided to release Fortnite on the Google Play Store, saying in a statement to Polygon:

Google puts software downloadable outside of Google Play at a disadvantage, through technical and business measures such as scary, repetitive security pop-ups for downloaded and updated software, restrictive manufacturer and carrier agreements and dealings, Google public relations characterizing third party software sources as malware, and new efforts such as Google Play Protect to outright block software obtained outside the Google Play store.

Epic decided that Google's security warnings advising against side loading were causing enough harm to justify paying the 30% fee, and noted that it hoped Google would make an effort to either change it's rules to be fairer to developers or make Android differentiate between legitimate and illegitimate side loaded apps (which is an objective nonsense complaint in my opinion - here was the process for installing Fortnite directly from Epic).

It is notable that, as far as I know, today was the first time Epic ever involved Apple in their public attacks against app stores.

Apple opted for option one and removed Fortnite from the App Store this afternoon, coupled with a message to Epic and to the press with their standard 'App Store provides so much value to this app' schpeel. To be clear - Fortnite should not be allowed to break the rules, and in isolation, it was correct to remove Fortnite from the store.

However, a few minutes later, it became clear that this was indeed a planned attack on the App Store in general when Epic announced it was suing Apple. The lawsuit correctly points out that on all other major computing platforms you are able to side load apps, a point I've been pushing for some time, and that Apple's tying of the in-app purchase system to the locked down App Store is inherently anti-competitive (which I am less sure about). They also soon premiered a parody of the classic 1984 ad to indoctrinate children into using #FreeFortnite to help free them from the Apple 'monopoly'.

As a legal matter, this is one of the worst lawsuits I can recall in tech history. Things aren't a monopoly just because you write 'unlawfully maintains its monopoly power' before every business action Apple takes. As a PR matter though, this is a huge move, and will inevitably cause drastic public scrutiny on Apple as a brand on the App Store in particular. (The filings even read as press releases, and are much clearer than the average court writing in my opinion.)

The fantastically talented Rene Ritchie tweeted that he felt Epic was being ridiculous, which I replied I was unsure about. His response surprised me:

At the time, I wasn't exactly sure what he was saying. I truly feel it is important for big names to take a stand against Apple publicly if these rules are ever going to be made more equitable and reasonable - but Rene felt that their interests were not in my best interests.

This became clearer to me tonight. Google decided to remove Fortnite as well, and Epic is now suing Google on even shakier grounds than their suit against Apple. In the filing, Epic attempts to argue that when Epic tried to make the Epic Launcher successful, it went to OEMs like LG and OnePlus, who would not make deals with them because their agreements with Google prohibited it. This is not illegal behavior - this is running a business. Google does not prohibit Epic from self distributing its own apps or even its own app stores, but it is suing because they didn't like the popups and Google got exclusivity deals before they could.

So the question for me now is this: Epic's primary motivation, in an ideal world, is clearly to be allowed to distribute the Epic Games Launcher on both iOS and Android - but based on their previous actions and these filings - it is clear to me they know this is unrealistic. So, now they are aiming to be able to use their own payment processing on mobile platforms. This too is unlikely to happen - but perhaps there is some legitimacy in attempting to argue about it.

Is Rene right, and Epic doesn't have my interests in mind? Definitely. But, that doesn't mean the pressure is bad. Apple has put itself in a position where a big name can take advantage of their App Store failures, regardless of their true intentions, and they will now be forced to address it or face the wrath of Fortnite fans.

I also think this lawsuit in its current incarnation is mostly nonsense and, given the response, could evolve into something more realistic.

So what should Apple do?

I'm going to sound like a broken record, but the cure to all of these problems is to enable side loading. This is a scary term to some, but Apple could enable a system with nearly identical protections from the App Store where developers sign and notarize apps and can distribute them directly. If you break privacy or data rules, certificate pulled. No loading unsigned apps. That simple.

If this system, which is available on the Mac, Windows, Android, and all other major personal computing platforms were enabled, Apple could do whatever it wanted in the App Store because there would be choice. It would also force Apple to make the store more competitive and rates more attractive, because as is evident from the Mac App Store, developers will leave when this becomes an option.

And while this doesn't solve Epic's problems, I don't care about Epic's problems. They are trying to become a monolith in gaming and they are taking advantage of legitimate issues without legitimate personal harm. But when it comes to argue against them in court, if Apple had this system enacted, there would be no argument to be had.