Platform Deal Fortnite #1

Taken from DealBook Briefing August 14, 2020 

Fortnite picks a fight

Apple and Google have kicked Fortnite out of their app stores, making the wildly popular and hugely lucrative video game unavailable to many iPhone and Android device users. It follows moves by Epic Games, the maker of Fortnite, encouraging the game’s mobile-app users to pay it directly rather than going through the online stores, which take a cut of sales.

The tech giants insist on handling app payments and take a 30 percent commission on transactions via their stores. This gatekeeper policy is at the center of antitrust complaints against Apple and Google in the U.S. and Europe. After the Fortnite ban, Epic sued Apple and Google in federal court, with its C.E.O., Tim Sweeney, promising “a hell of a fight.”

• Epic’s argument: Apple and Google collectively dominate mobile platforms and cannot be trusted to charge “fair” prices. • Apple and Google’s argument: They built and maintain their platforms and should be allowed to charge whatever they want. In other words, they aren’t public utilities. It’s a gutsy gambit by Epic, and probably a losing one, at least in the short term. Neither Apple nor Google is likely to capitulate: If they did, they’d have to offer the same terms to everyone on their platforms. (“These guidelines create a level playing field for all developers and make the store safe for all users,” Apple said in a statement.) However, a protracted legal battle could put more pressure on the tech giants in Washington, Brussels and other places that are looking closely at their market power. If Epic rallies app developers to get behind its cause, that could be a problem for the platforms, too. • Since March 2018, Fortnite has been downloaded more than 130 million times on iPhones and iPads, generating about $360 million in revenue for Apple, according to Sensor Tower. It’s easier to download apps on Android devices outside Google’s store, so it has made less in commissions from sales of Fortnite, which has appeared in its online store only since April. Fortnite can also be played on other devices, computers and consoles, giving it leeway to lose iPhone and Android users without going completely dark. This is not a genuine negotiation. For Epic Games, it is as much a public relations event as anything else. Within minutes of Fortnite’s being banned by Apple — something that Epic clearly anticipated — it released a slickly produced video parody of Apple’s famous “1984” ad. Mr. Sweeney, the game maker’s chief, framed the dispute as no less than “critical to the future of humanity,” citing the risk of submission to “corporations who control all commerce and all speech.” • Spotify, which has waged a similar battle with Apple, issued a statement in support of Epic and against what it called Apple’s “unfair practices.” • It’s worth noting that Epic brought out its own app store in 2018. It charges developers a 12 percent commission, which it says is still comfortably profitable. Which is worse for Apple: No Fortnite or no WeChat? Losing the mostly young fans of Fortnite is bad, but the Trump administration’s threat to ban U.S. companies from doing business with China’s WeChat could affect vast numbers of iPhone users. Whatever the case, the longer these disputes endure, the bigger the risk that people who feel they can’t live without a certain game or messaging app will think twice about buying Apple devices.