Today, 9To5Mac reported a significant update to the legal battle between Apple and Epic Games – “Project Liberty”.
According to Apple, Epic Games hired PR firms in 2019 to work on a media strategy called “Project Liberty” aimed at portraying Apple “as the bad guy.” In October 2020, Judge Yvonne Rogers had concerns that Epic knew exactly what they were doing with the controversial Fortnite update, so this doesn’t come as a surprise.
Here is a quote from Apple:
Epic’s monopoly maintenance claim is premised on the notion that the antitrust laws preclude Apple from imposing conditions on the licensed use of its intellectual property, and impose on Apple a duty to deal with Epic on the terms preferred by Epic – to the detriment of other developers and consumers alike. But Apple has no obligation to license its intellectual property, aside from a limited exception not applicable here, businesses are free to choose the parties with whom they will deal, as well as the prices, terms and conditions of that dealing.
CNBC provided a summary of what Apple, and Epic, will argue in court. The case could be heard on May 3, 2021, (but the date could change due to the pandemic).
Apple will argue:
- Its 30% commission is essentially the same as other online software stores like Google Play or stores for video game consoles and Apple’s fee has decreased over time.
- It faces competition both for iPhones as well as other platforms to play games.
- Its App Store policies have led to a boom in the software industry and result in greater safety and security for users.
- The App Store is a core, integrated feature of the iPhone, and that using Apple payments for digital purchases is a key feature.
Epic will argue:
- Apple forces consumers to bear high switching costs to stop using Apple products, locking them in.
- As Apple has accumulated more customers and locked them in, the importance of selling software to Apple customers has grown.
- Apple controls the only way to install software on an iPhone through the App Store.
- Apple uses its App Review process, which manually screens individual apps, for anti-competitive purposes, removing apps for business reasons under the pretext of security.
- Because some developers have chosen to raise iPhone software prices because of Apple’s 30% fee, it causes consumers to pay more, and Fortnite is an example.
The battle between Epic Games and Apple continues, this time in North Dakota. According to CNBC, the North Dakota legislature voted on a bill that – if passed – would require companies that make more than $10 million per year through app stores to be required to offer alternative payment processors for purchases through the app store, allowing developers to avoid Apple or Google’s cut. The bill would only apply to companies based in North Dakota.
Epic Games headquarters is in Cary, North Carolina. As such, I don’t see how this North Dakota bill would do them any good – even if it was passed into law.
The New York Times reported that in January of 2021, a lobbyist approached North Dakota state senator Kyle Davidson, who is a Republican.
Mr. Davidson said he had been given the draft legislation by Lacee Bjork Anderson, a lobbyist with Odney Public Affairs in Bismark. Ms. Anderson said in an interview that she had been hired by Epic Games, the maker of the popular game Fortnite and the plaintiff in lawsuits against Apple and Google over their app policies. She said she was also being paid by the Coalition for App Fairness, a group of firms, including Epic, Spotify, and Match Group, that has protested app commissions and is leading the push for app-store bills.
CNBC reported that the North Dakota Senate voted 36-11 against the bill. That means the legislation did not pass. If the North Dakota Senate has passed the bill, it would have then gone to the North Dakota House to be debated and voted on. The outcome of the Senate vote means the bill will not go to the House. CNBC describes the vote as “a victory for Apple”.
This isn’t the end between Epic Games and Apple. Apple Insider reported that there is a court date set on May 3, 2021, in the U.S. District Court of the Northern District of California. The court will hear the case of Epic Games v. Apple, Inc. It is a bench trial, not a jury trial. In short, the battle between Epic Games and Apple is not over yet!
In a move that should surprise absolutely no one, Apple has filed a countersuit against Epic Games. TechCrunch reported that Apple’s lawsuit alleges that Epic Games is in breach of contract. Apple is asking the court to award damages and prohibit Epic Games from attempting anything like this again.
This is the latest move in an ongoing battle between Epic Games and Apple. To make a long story short, this whole thing started when Epic Games created a direct payment option for its players. That decision could be interpreted as a way to get around Apple’s 30% payment that it collects from consumer payments made in Fortnite.
You can view an embedded copy of Apple’s countersuit on Scribd. Here is a small piece of it:
Epic’s lawsuit is nothing more than a basic disagreement over money. Although Epic portrays itself as a modern corporate Robin Hood, in reality it is a multi-billion dollar enterprise that simply wants to pay nothing for the tremendous value it derives from the App Store. Epic’s demands for special treatment and cries of “retaliation” cannot be reconciled with its flagrant breach of contract and its own business practices, as it rakes in billions by taking commissions on game developers sales and charging consumers up to $99.99 for bundles of “V-Bucks”.
Apple is demanding a trial by jury “on all issues so triable”. Apple also has a list of things it wants the Court to do, including decreeing that Epic is liable for breach of its contractual obligations under the license agreement.
Apple also wants the Court to “enter a permanent injunction enjoining Epic, and all persons and entities in active concert or participation with Epic, from facilitating, assisting, or participating in (a) the continued operation of Epic’s unauthorized external payment mechanism in its apps, including Fortnite (b) the introduction of any further unauthorized external payment mechanism into any iOS apps, including Fortnite, and (c) the removal of IAP as an available payment mechanism for in-app purchases through any iOS apps, including Fortnite.”
If the Court decides to grant Apple that permanent injunction, I think it could have implications not only on Epic Games, but also on other gaming companies who have games on the App Store. To me, it sounds like a warning to other gaming companies about what Apple might do if they decide to make their own direct payment systems.
There is a battle brewing between Epic Games and Apple. It started when Epic Games created a direct payment option in which Epic Games lowered the prices for consumers who used it. In short, the direct payment option could be seen as a way for Epic Games to get around the 30% payment the company collects from consumer payments made in apps like Fortnite.
Apple responded by terminating the Epic Games account on the App Store, The Verge reported. If you had Fortnite or Infinity Blade on your iPhone or iPad… well, you don’t have them anymore.
On September 5, 2020, the Epic Games Newsroom Twitter account tweeted:
Today we asked the Court to stop Apple’s retaliation against Epic for daring to challenge its unlawful restrictions while our antitrust case proceeds. This is a necessary step to free consumers and developers from Apple’s costly, anti-competitive control.
The tweet included a link of a PDF of Epic’s most recent legal request.
Previously, Epic filed a lawsuit against Apple. Bloomberg reported that U.S. District Judge Yvonne Gonzalez Rogers ruled that Apple did not have to immediately reinstate Fortnite on its App Store. She also granted a temporary order blocking Apple from limiting game developer’s ability to access the Epic Games Unreal Engine.
The judge ruled that Epic’s problem is “entirely self-inflicted”, and that the sensible way to proceed would be for Epic Games to comply with the App Store guidelines and continue to operate as the case proceeds.
There is a difference between Epic’s new request and the previous one. The Verge reported that Epic claims that “Daily active users on iOS have declined by over 60% since Fortnite’s removal from the App Store”. Epic also said that iOS is the biggest platform for Fortnite, and that 63% of Fortnite users on iOS access the game only on iOS.
It remains to be seen what happens next. One thing is for certain. This back-and-forth between Apple and Epic Games is unlikely to come to a resolution that makes both companies happy. I think what it comes down to is whether a judge sees Epic’s loss of customers on iOS as self inflicted or as something caused by Apple.
Sony Corporation and Epic Games Inc. announced that Sony has agreed to make a strategic investment of $250 million to acquire a minority interest in Epic though a wholly-owned subsidiary of Sony. The investment cements an already close relationship between the two companies and reinforces the shared mission to advance the state of the art technology, entertainment, and socially-connected online services.
The investment allows Sony and Epic to broaden their collaboration across Sony’s leading portfolio of entertainment assets and technology, and Epic’s social entertainment platform and digital ecosystem to create unique experiences for consumers and creators. The closing of the investment is subject to customary closing conditions including regulatory approvals.
Venture Beat reported that the relationship between Epic and Sony was strengthened when Epic first showed the Unreal Engine 5 graphics running on a PlayStation 5. Previous to Sony’s investment, Epic raised $1.58 billion in three previous rounds of funding. In 2012, Epic received a $330 million investment from Tencent for a 40% ownership stake.
Epic Games is the developer and publisher of Fortnite, a game that is incredibly popular. This popularity was enhanced by Ninja (Tyler Blevins) who started streaming Fortnite on Twitch, then moved to Mixer, and then moved to YouTube. Fortnite, according to Hollywood Reporter, has 350 million registered users.
So, what is Epic getting from the Sony investment? Business Insider reported that Sony’s $250 million investment puts Epic’s current valuation at just under $18 billion.
What is Sony getting from this investment? Hollywood Reporter suggests that Sony will benefit from Epic’s Unreal real-time gaming engine, which is growing in use in Hollywood animation, VFX and production communities. Unreal was used in Jon Favreau’s The Mandalorian. So, the collaboration between Sony and Epic could benefit Sony Pictures.
Epic Games, the creator of the incredibly popular Fortnite game, has reportedly made $3 billion in profits in 2018. This number comes from unnamed sources who spoke to TechCrunch. Epic Games itself did not respond to a request for comment from TechCrunch.
Epic Games had a good year in 2018 as any company in tech. Fortnite became the world’s most popular game, growing the company’s valuation to $15 billion, but it has helped the company pile up cash, too. Epic grossed a $3 billion profit for this year fueled by the continued success of Fortnite, a source with knowledge of the business told Tech Crunch.
Personally, I’m always a bit skeptical of information that comes from anonymous or unnamed sources. However, in this specific case, I think there is good reason to believe that Epic Games made a lot of money in 2018 from Fortnite. While I haven’t played the game myself, I do find it entertaining to watch people stream it.
Forbes reported that Fortnite is free-to-play. Players can choose to purchase a seasonal Battle Pass which allows players to unlock epic loot. In addition, players can spend real world money on cosmetic items. But, no one has to spend money if they don’t want to or cannot afford to.
There is another thing about Fortnite that I believe is increasing its popularity. As Anoop Ranganath posted in an informative thread on Twitter: “Fortnite isn’t a game, it’s a place.” Kids are using Fortnite as a place to hang out and talk with their friends, much like people of my generation used to hang out in shopping malls.
Epic Games is the creator of the Unreal series of games, the Unreal Engine, the Gears of War franchise, the Infinity Blade series, and Fortnite. Epic Games announced that it will provide $100,000,000 for Fortnite eSports tournament prize pools in the first year of competitive play.
The Fortnite Team posted a blog on the Fortnite website with more details.
Grab your gear, drop in and start training. Since the launch of Fortnite Battle Royale we’ve watched the passion for community competition grow and can’t wait to empower you to battle with the best.
In the 2018-2019 season, Epic Games will provide $100,000,000 to fund prize pools for Fortnite competitions. We’re getting behind competitive play in a big way, but our approach will be different – we plan to be more inclusive, and focused on the joy of playing and watching the game.
The post ends by telling players to stay tuned for more details about competitive structures and eligible platforms. It appears that information will be released in the weeks ahead. Fortnite is playable on PC, Mac, Xbox, PlayStation, and iOS.