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Epic vs Apple: Beyond App Stores

On August 14, 2020, Epic announced that their latest Fortnite update would allow players to make in-app purchases directly through Epic with a 20% discount. This was clearly against the rules dictated by the Apple App Store and Google Play Store, which generally require games to pay a 30% commission. On the very same day, Apple responded by removing Fortnite from their App Store and terminating Epic’s Developer Program Account entirely. Within hours, Epic filed a lawsuit against Apple. Everybody in the industry rapidly understood this would not be an ordinary case and that it could substantially alter the status quo.

First, this case affected the US market, unlike previous cases that took place in much smaller markets. Second, the sequence of events showed that Epic had planned and prepared for a high-profile lawsuit; and that Apple would not shy away from enforcing its rules, even when it involved one of the biggest games in the world. Clearly, both parties were ready for an all-out fight, and a settlement was very unlikely.

To further establish their position, Epic simultaneously launched a similar lawsuit against Google and its Google Play Store on Android, which had taken similar steps as Apple and removed Fortnite from their store.

The Lawsuit

In September 2021, the trial concluded, with the ruling primarily siding with Apple. Apple was allowed to keep Fortnite out of the App Store, the App Store was officially not considered a monopoly, and it did not have to open up the App Store to third-party payment providers or iOS to third-party App Stores. However, Apple did lose on an important point: they would no longer be able to forbid apps from linking to a website that included alternative means of payment.

Apple and Epic appealed the ruling, but in January 2024, the Supreme Court of the United States declined to hear the appeals, leaving the lower court's ruling to stand. This means that, in the US, developers can now include information about alternative payment options within their apps–a big win for the anti-App Store camp. Despite this, it is too soon for developers to celebrate since Apple is clearly not giving up the fight.

Apple’s Interpretation

Apple quickly reacted to the ruling by arguing that only 3% of their 30% App Store commission is related to payment services. Because of this, they still want developers to pay them 27% of user purchases made on their websites when the user comes from a mobile app. Furthermore, they have set very strict requirements on how and under which circumstances developers may inform users about alternative payment methods.

This requirement makes payments outside the App Store essentially pointless since it erases any potential margins gained from moving payments outside the App Store. Not unexpectedly, many people have expressed outrage at Apple’s interpretation of the ruling.

Regardless of personal opinions, Apple’s interpretation remains consistent with their arguments in related cases (e.g. dating apps in the Netherlands). So, it is clear that this is not a panicked reaction to an unexpected setback but rather a well-thought-out position that Apple is ready to continue fighting for.

What’s Next?

On the positive side, this ruling gives developers and users more choices. Most importantly, it increases transparency. Developers are now allowed to communicate to users that alternative payment methods exist outside the app stores. Hopefully, this will empower developers to negotiate better deals with platform holders.

The case has also further fueled discussions about antitrust concerns and platform dominance. This increased awareness will likely lead to greater regulatory scrutiny and accountability for Apple, Google, and other platform holders.

However, Apple’s interpretation still leaves a lot of open questions. It is unclear where to draw the line when attributing web purchases to a mobile origin. It is also very unclear how Apple can practically enforce its 27% commission fee on web purchases (they lack the ability to track them, and auditing the entire App Store doesn’t seem feasible). Finally, as developers and regulators grow increasingly unhappy with Apple, Apple’s new position will likely be challenged again in the near future.

Beyond Mobile App Stores

These events have added more uncertainty to the mobile gaming industry, which was already struggling post-COVID, pushing mobile developers to look beyond the mobile app stores. However, most alternatives fundamentally present the same type of deal as mobile app stores. Whether it is console or PC stores, there is always a strong gatekeeper who ultimately holds all the cards, leaving developers with little leverage.

To avoid this, developers need to build a direct relationship with players. And this is only possible on the Web, the only platform without an established gatekeeper. This is why the Web has been getting increased attention from mobile developers. However, the Web is still a somewhat nascent gaming ecosystem and can be confusing to navigate for developers without a particularly strong web DNA..

At Pley, we are working to solve these issues. With our toolchain and cloud distribution platform, we provide a one-stop solution for mobile developers to bring their games to the Web. If you are a developer who is deciding on whether to expand cross-platform, do consider talking with us.

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