Apple stopped offering Epic Games’ prime game Fortnite on its Appstore on August 13, and within hours Epic Games slapped the tech company with an antitrust lawsuit.
The reason for the fallout was the 30 percent fee Apple takes on digital transactions made via its iOS platform, including those made within Epic’s incredibly popular game Fortnite.
Epic added fuel to the fire by launching a stylized video parody of Apple’s 1984 commercial. Along with that, Epic came up with the brilliant move of offering its own currency at 20 percent discount for in-app purchases. One thousand V-bucks used to cost earlier $9.9, and now they cost $7.9 if bought within the Epic format and much cheaper for bulk purchases.
The company, in its blog post about the discount, pointed out succinctly— pay $9.99 in Apple store or $7.99 in Epic direct payment. “Choose Epic direct payment to get the best deal on V-Bucks and real-money purchases,” the company not-so-subtly explained.
A $2 discount may not seem much, but any consumer will naturally opt for the cheaper option. And when you multiply such purchases into millions, the advantage for Epic is huge.
Central to the issue is the bigger question of Apple’s monopoly on its App Store, which it says keeps things safe and secure for people coming to its platform.
Removing Fortnite from the Apple
Edward Castronova, a Professor of Media at Indiana University Bloomington, who specializes in virtual economies, says that this fight is happening is in itself very revealing. He says that when we put Epic games and Apple in the same sentence, it is a revelation as Apple has a market cap of $2 trillion and Epic Game raked in a revenue of $17 billion last year.
He believes that Epic has a serious shot at either winning the lawsuit or, if not, then at least the public debate will permanently affect the industry.
Castronova says that Epic has a “scale of operations that makes Apple care about what they do.”
“It’s like that old saying,” Castronova adds, “If you owe the bank $1,000, the bank owns you. If you owe the bank a million dollars, you own the bank. … I don’t think this is going to hurt their bottom line very much. Apple can’t do anything to them.”
Apple and even Google’s removal of Fortnite from their App Stores is not going to affect Epic Games much as they themselves offer a free download of the game. And in today’s world, players find a way to download much of what they want. It does not matter that they press the download button on an Apple platform or an Epic button. In 2018, Epic launched its own web-based store for pc games, where it takes a 12% cut from developers.
Gaming companies make most of their money through in-app purchases and Epic’s discount of $2 is a brilliant move. They have nearly 350 million registered players and when they go on a buying spree with added merchandise every few days, and a $2 discount at their disposal, the game makers can laugh all the way to the banks.
Fortnite raked in $1.8 billion in app merchandise sales in 2019.
So what is at stake is the inherent value that one associates with appearing on the Apple store. The advertising push and legitimacy that it lends. But Epic Games now can afford to ignore this brand push. It has grown big in the gaming world. Smaller developers need to be on the App Store as it gives them legitimacy, reviews, and a push in searches.
Castronova thinks that companies like Apple are going to run into Epic-like tensions more and more as gaming’s popularity grows.
“Game companies are bigger than anyone realizes,” he said in an interview to a digital magazine. “People should pay attention to the transition that’s been underway for more than a decade. The role of games in daily life and the economy is getting bigger and bigger, and it ain’t gonna stop.”
The war between Epic Games and Apple is only the tip of the iceberg. The gaming industry is evolving with streaming, in-house teams, battle championships, and arcade venues with live gaming tournaments all taking off; more clashes of interests and tug-of-wars for attention are bound to happen.
For Apple, this run-in with Epic games is not new. It has faced several anti-trust suits. App developers and companies from Airbnb to Match Group have protested Apple’s monopoly. Complaints from Spotify, a music-streaming service, and Kobo, which makes an e-book reader, have led to antitrust probes by EU countries. Spotify and Match both have lent their support to Epic Games.