Epic Games vs Apple: the court case explained well

Epic Games vs Apple

Let's try to explain well the court case that sees Epic Games and Apple against each other in the United States. A process that started for economic reasons, but which could have major repercussions on how the two most important operating systems for mobile devices are structured. And to do this he is revealing some of the video game industry's most hidden secrets.

It all started with Epic Games openly challenging Google and Apple by adding a direct payment option to the mobile versions of Fortnite. , with discounted prices compared to those of the payment systems managed by the two managers of the largest mobile stores on the planet: Google Play Store and App Store. It was mid-August of 2020 and Tim Sweeney, the owner of Epic, knew exactly what he was going to face. Indeed, he hoped that exactly what happened would happen. At that moment he needed a casus belli to start fighting.

Apple and Google did exactly what they were expected to do: they banned Fortnite, despite being heavily played on both ecosystems, with millions of active users. Epic responded without hesitation by launching the #freefortnite campaign, evidently studied well in advance, to try to bring all those players who had been deprived of the game from morning to night to its side, especially those who had paid to buy items in the internal store.

Tim Cook, Apple's CEO In the midst of mounting protests and raging controversy, Epic later announced that it would take Apple to court, accusing it of running the App Store as a monopolist (the possibility of doing cause also to Google decayed immediately because in reality there are various shops for Android applications and if you want you can also have the applications installed directly, without going through intermediaries).

The crux of the legal battle between Epic Games and Apple is that 30% of commissions that the Cupertino house takes on every transaction that is made on the App Store. Over the last few years Sweeney and associates have tried to find agreements with Apple (and Google), especially after the success of Fortnite, but there was nothing to be done, so we arrived at the definitive break, which has transformed in the largest process that has ever involved the entire video game industry, the first first apex of which was seen with the text of the complaint itself, where, in addition to highlighting the monopoly of Apple, screenshots of the comments from angry players, as if to underline how unfair and authoritarian the behavior of the Cupertino house had been, so much so as to damage and dissatisfy its own customers.

Meanwhile, a highly annoyed Apple tried to completely cancel Epic Games from the App Store by banning the Unreal Engine, a decision blocked by the court pending the end of the trial, mainly to protect development studios and publishers who use Epic's engine for their products. Be that as it may, after the initial flare-up, the situation seemed to have calmed down. As we will see now in explaining the court case between Epic Games and Apple, it was just the classic quiet before the storm, that is the actual trial.

What does Epic Games want to prove? And Apple?

Tim Sweeney, head of Epic Games The Epic Games trial against Apple began on March 3, 2021 in front of federal judge Yvonne Gonzalez Rogers, attracting the interest of the entire industry for the implications that may have the ruling, not only for the two main actors, but also for all the others. Meanwhile, an expected fact happened: there was a big leak of news, that is, many of the documents in the hands of the lawyers mysteriously ended up in the hands of journalists, giving the general public access to some confidential secrets, as well as some really interesting background. . Thus the interest has doubled: on the one hand there is the process itself, while on the other there is this enormous amount of information, coming from certain sources, which helps to better understand the functioning of the sector.

Let's try to understand what the two companies are trying to prove: where Epic Games aims to affirm that with the App Store Apple acts in a de facto monopoly regime, harming partners and customers in order not to give up the its status quo, Apple is trying to pass the idea that the closure of its operating systems, which makes it impossible to install external stores, and the capillary control of the applications published on the App Store, are essential elements for having an ecosystem safe for users.

One of the fundamental questions that the court will have to answer is whether iPhones and iPads are general purpose or special purpose devices, that is, are they closer to personal computers or consoles. For Epic Games, Apple should open its mobile systems, making them more like macOS, which guarantees security and freedom for users to install third-party software without necessarily having to go through the Apple store. The lines followed by the two companies on trial are finding wide representation in the testimonies. It is no coincidence that other large companies, such as Microsoft and Valve, were also called among the witnesses, in order to give a picture as complete as possible of the functioning of the video game market.

Microsoft at the bar

Xbox are sold at a loss The testimony of Lori Wright of Microsoft, the head of the Xbox Business Development division, served Epic to try to make a clear distinction between what is a special purpose device such as a console (which is theoretically dedicated only to video games, despite the presence in recent years of applications of various kinds), from what should be a general purpose device such as a smartphone. Wright has clearly identified iPhones and iPads as general purpose devices, then underlining a key aspect of Microsoft's console business to make the distinction even better: Xboxes have always been sold at a loss, with the gains coming from sales. of games and services.

Apple was very upset by Wright's testimony, to the point of asking not to trust her due to the lack of documents that would prove the claims made about the Xbox business. Even Gonzales does not seem to have been completely convinced by Wright, whose distinction expressed above seemed perhaps too clear-cut and, in a certain sense, targeted (Microsoft has an interest in winning Epic Games, in order to be able to bring its services to the App Store ). Be that as it may, Apple's lawyers have countered by pointing out that Microsoft also adopts a closed operating system for Xbox, instead of using an open one like Windows 10. So why shouldn't Apple be able to do the same?

Epic Games fight for everyone or just for itself?

Fortnite: Epic Games takes advantage of compulsive user purchases to make money When Judge Gonzales asked Tim Sweeney if he would accept a special treatment from Apple, namely a agreement for lower commissions on Fortnite purchases that did not involve all the other developers, the head of Epic candidly admitted that yes, he would have accepted. The question is not as trivial as it seems, because in this way it was clearly demonstrated how the legal war was born around the economic interests of Epic Games and not to favor all developers. In short, in this story there would be no revolutionary heroes, but only businessmen who think about their pockets and who are ready to compromise to fill them as much as possible.

After all, from the documents of the trial it had already emerged how Epic had tried to convince Google to apply a preferential rate to the Fortnite microtransactions, promising in exchange the arrival of the game on Stadia, the cloud gaming platform of the giant of search engines. Another element that sheds a not-so-heroic light on Sweeney's intentions is the admission of exploiting compulsive player purchases to make more money with Fortnite.

As explained in the classroom, Epic could have circumvented Apple's rules by moving purchases of V-Bucks (Fortnite's virtual currency) outside the game, for example in a shop accessible from a browser. If it was not done it is for a very simple reason: in this way several additional steps would have been created to get to the purchase, which could have made users desist from spending money, making them lose their enthusiasm. Being able to sell directly in-game reduces the clicks needed to get to spend, giving users less time to calm down and think. Also in this case, therefore, we are faced with a convenient choice that has nothing to do with everyone's freedom or business, but only with those of Epic Games and the most rapacious publishers, who exploit the weakness. of users to accumulate fortunes.

Apple and the moralist line

Peely, the banana man The defense line chosen by Apple's lawyers is very clear: to demonstrate that control over the App Store and on mobile operating systems it has the advantage of allowing greater attention to content, avoiding distortions. Which? Scams aside, the moral ones, of course. Some of the points raised by the defense aimed to demonstrate how the Epic Games store, that is the Epic Games Store, is poorly maintained and even allows you to install pornographic material. Incidentally, the lawyers pointed out that the store's top 20 actually contains 25 games (actually 20, since the other 5 are free-to-play ed) and the ability to download the itch application. I give users access to many pornographic video games, even defined unnameable in court. Epic defended itself by saying that in reality the EGS only allows you to download the itch.io application and that what users download using it is subject to licensing agreements with them, over which Epic has no direct power. However, Apple's lawyer has repeatedly retorted on this point, as if to demonstrate that the problem arises from the lack of controls and poor care of the store.

Another subject of moral discussion was the banana man of Fortnite, Peely, of which the Apple lawyer emphasized the nudity at stake, calling it inappropriate for a court, so much so that he only showed an image of it in a tuxedo. Epic defended itself by stating that Peely has nothing inappropriate about him when he's naked, as he's just ... a banana. Amazed? In truth, what appear to be absurd, almost ridiculous exchanges, show how lawyers often aim to underline the ethical and moral implications of certain choices, relying on the ignorance of the judge with respect to the topics dealt with, as well as his education.

Apple's prison, for an economist

iPhones: closed devices for a closed market One of the most interesting testimonies of the trial was that of economist David Evans, called to testify by Epic Games. His was a strictly technical opinion aimed at demonstrating the closure of the market created by Apple with the App Store. Evans spoke of a two-sided market: on the one hand there are consumers who want applications, on the other hand there are developers who want to give them to them. The market created by Apple is closed in more ways than one and involves high costs for anyone who wants to leave, such as buying a new smartphone, the inability to access certain applications, even those for a fee, the difficulty of entering into a new ecosystem and more. In fact, it is as if Apple gave its users no choice, imprisoning them, so the prospect of moving away from its mobile systems would simply be harmful. For Evans, Apple's monopoly is a real monopoly, given its market share and the restrictions imposed on its devices, which would hold back innovation to the sole advantage of the Cupertino house, which would thus receive higher commissions.

The secrets (and lies) of the video game industry

Cross-play was imposed by Epic on Sony The trial is still ongoing and there will be many more testimonies before come to a verdict. In the meantime, however, as already mentioned, there are many small and large secrets that have emerged from the documents in the hands of the lawyers, some of which reveal a certain way of relating between the big names in the industry. For example, from an email exchange, we learned how Epic Games has essentially forced Sony to cross-play Fortnite, offering in return a rich counterpart in terms of image and monetary advantages, including an agreement for which the hardware manufacturer receives some compensation in the event that cross-play reduces its share of revenues.

Games price table given away by the Epic Games Store Some figures that emerged from the process are also very interesting, such as those expenses by Epic Games to be able to give away some games. The table shows not only the price of the individual games, but also their real goal: the acquisition of new users. Many reading it have focused only on how much Sweeney and cronies paid for each single game, without paying attention to two much more relevant columns that justify the whole operation: the one on the new accounts registered for each single game and that of the unit cost of the single acquisition. For example, reading carefully it turns out that giving Celeste was not a good deal, not only for the price of the game ($ 750,000), but also for the unit cost of the new accounts ($ 12.00). In this sense, a very expensive gift like that of the Batman Akham series ($ 1,500,000) proved to be cheaper in terms of the number of new users acquired, with a unit cost of the same of only $ 2.44.

Another very interesting document is the one that revealed the price of the exclusive time of Borderlands 3 on the Epic Games Store: 115 million dollars in total. Essentially Epic Games has covered all the risks of the PC version of the game regardless of sales, making the deal particularly affordable for 2K Games and Gearbox. This figure also makes us understand how much an exclusive time can cost: in fact even more than producing a triple A game. After all, Epic itself has offered 200 million dollars to Sony to have its PC games exclusively on the EGS. (and he would have also wanted those of Microsoft and Nintendo).

To close, we mention the exchange of emails between Tim Sweeney and Phil Spencer (the head of Xbox), which reveals not only the great confidence between the two , but also of how at certain levels the steps that the economic partners are taking are known in advance. For example, the owner of Epic Games knew that Microsoft was studying how to make the multiplayer of free-to-play titles free, eliminating the constraint of the Live subscription, and that it was trying to get the Xbox Game Pass, via xCloud, too. on other consoles. On the other hand, Spencer was made aware that something was about to happen and that Epic Games would move against Apple and Google (confessing in fact the premeditation of the whole).

Usually users think that these companies are islands, that is, that they have no contact with each other, while the papers of the process show that it is exactly the opposite: the relationships are there and they are very frequent, because their business is so intertwined that it is impossible not to talk, even between rivals.

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