On Apple, Google vs. Epic Games/Fortnite
Last week, Apple and Google removed Fortnite (an online game with over 350 million users) from their respective online stores, and Epic Games (the game's developer) responded by filing lawsuits in U.S. District Court - San Francisco. These actions relate to the 30% fees Apple and Google charge app developers.
Apple's comments on its action against Epic include:
"Today, Epic Games took the unfortunate step of violating the App Store guidelines that are applied equally to every developer and designed to keep the store safe for our users, As a result their Fortnite app has been removed from the store. Epic enabled a feature in its app which was not reviewed or approved by Apple, and they did so with the express intent of violating the App Store guidelines regarding in-app payments that apply to every developer who sells digital goods or services.
“We will make every effort to work with Epic to resolve these violations so they can return Fortnite to the App Store.”
Google's comments on its action against Epic include:
“The open Android ecosystem lets developers distribute apps through multiple app stores. For game developers who choose to use the Play Store, we have consistent policies that are fair to developers and keep the store safe for users. While Fortnite remains available on Android, we can no longer make it available on Play because it violates our policies. However, we welcome the opportunity to continue our discussions with Epic and bring Fortnite back to Google Play."
Epic's response to Apple include:
“For over a decade, Apple has single-mindedly crafted and proliferated a tangled web of rules and policies to impose a 30% tax on apps while preventing competitors from offering a better deal. That’s around 10x more than what a typical transaction may cost on competing payment processing services such as Visa, Mastercard, and PayPal, which charge rates of 2.5% to 3.5%. When competition is stifled, the customer always loses.
“Apple cannot rightly control the terms of physical and digital commerce and use their monopoly power over devices to prevent competition in payment processing, stores, and app curation. Apple has artificially restricted iOS so that there is no competition, so that creators earn less, and so that consumers are forced to pay higher prices. There’s no reason why smartphone app stores and payment processing should function any differently than a personal computer."
Epic's response to Google include:
“Notwithstanding its promises to make Android devices open to competition, Google has erected contractual and technological barriers that foreclose competing ways of distributing apps to Android users, ensuring that the Google Play Store accounts for nearly all the downloads of apps from app stores on Android devices.”
OUR TAKE
The fees Apple and Google charge on their app stores may be excessively high, but Epic’s comparison to fees from Visa, Mastercard, and PayPal (2.5% to 3.5%) seems unrealistically low. Consider that seller fees on Amazon are mostly between 8% to 20% and Google Shopping commissions (recently reduced to be more competitive) are between 0% - 5%.
Given the scale of Epic Games’ Fortnite franchise, the firm’s actions 1) are being closely followed (and perhaps cheered on) by large organizations (i.e. Microsoft, Samsung, Facebook, Spotify) and small and medium-sized app developers, 2) affirm monopoly/anti-trust concerns by members of the US Congress and the European Union and 2) may reshape how on-line applications are sold/distributed.
With 2020 "year-to-date" revenue for Apple’s App Store at about $39 billion and the Google Play store at about $21 billion, any changes to the existing models will have a significant impact beyond the video game market.
Note: Epic Games' parody on Apple's 1984 video is accessible here