Apple’s and Google’s spats with app developers over their cut of revenues exploded into a high-stakes clash Thursday when the tech giants kicked the popular game Fortnite out of their app stores and the game’s maker hit back with lawsuits.
The fight began Thursday morning with a clear provocation. Epic Games, the maker of Fortnite, started encouraging Fortnite’s mobile-app users to pay it directly, rather than through Apple or Google. The companies require that they handle all such app payments so they can collect a 30% commission, a policy that has been at the center of antitrust complaints against the companies.
Hours later, Apple responded, removing the Fortnite app from its App 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,” Apple said in a statement. “We will make every effort to work with Epic to resolve these violations so they can return Fortnite to the App Store.”
Within an hour, Epic opened a multifront war against Apple that appeared months in the making.
First, it sued Apple in federal court, accusing the company of violating antitrust laws by forcing developers to use its payment systems.
“Apple’s removal of Fortnite is yet another example of Apple flexing its enormous power in order to impose unreasonable restraints and unlawfully maintain its 100% monopoly over the” market for in-app payments on iPhones, Epic said in its 62-page lawsuit.
Then, Epic rolled out a sophisticated public-relations campaign that depicted Apple, one of industry’s most image-conscious companies, as the stodgy old guard trying to stifle the upstart. To do so, it used Apple’s own imagery against it, mimicking Apple’s iconic 1984 ad from its own fight against IBM 36 years ago. This time, Fortnite characters were defying Apple’s totalitarian regime. Within hours, #FreeFortnite was the top trend on Twitter.
Later Thursday, Google also removed the Fortnite app from its official Android app store, the Google Play Store, saying the app violated Google’s policies. Epic replied with a similar lawsuit.
Apple’s confrontation with Epic has much higher stakes than Google’s because Fortnite remains available for Android devices. Google’s Android software allows people to download apps outside Google’s app store, unlike Apple’s approach with iPhones, and Epic had added Fortnite to the Play store only in April.
In Epic, Apple has met arguably its toughest adversary in years. The game maker has calculated exactly how to hit Apple where it hurts: by making iPhones less attractive and Apple less cool.
Epic, a North Carolina company that is valued at roughly $17 billion and is partly owned by Chinese internet giant Tencent, now appears poised to sacrifice millions of dollars in revenue in a fight that will keep Fortnite off iPhones. That immediately makes Apple’s flagship devices far less attractive to millions of people across the world — just ahead of Apple’s most prominent iPhone introduction in years.
Apple, on the verge of a $2 trillion valuation as its stock has soared in recent weeks, now faces a battle with one of its most lucrative partners over a crucial issue for antitrust regulators investigating the power of Big Tech.
How Apple polices the App Store has drawn intense scrutiny over the past year. App developers have complained that Apple is taking an unfair cut of their business while, in many cases, also competing with their apps with its own offerings.
European regulators, Justice Department officials and state attorneys general are investigating Apple’s control over the App Store, and House lawmakers interrogated Apple’s chief executive, Tim Cook, on the issue in a hearing last month. Google has faced more scrutiny for other issues, in large part because of its more liberal app policy on Android.
For Apple, the world’s most valuable company, there are few easy options. Apple has largely staked its future on its services business, which has become its second-largest source of revenue after sales of the iPhone, at $51.7 billion over the past year. But that business is mostly built on its cut of other apps’ sales, so enforcing its 30% commission is crucial to keeping its business growing.
As a result, backing down to Epic would set a dangerous precedent for Apple, while standing up to the gaming company would prolong a fight that risks shrinking its iPhone sales and damaging its carefully crafted image.
In practical terms, kicking Fortnite out of the App Store means that new users will not be able to download the app, but it will continue to work on iPhones that already have the app installed. Yet Epic now cannot update the Fortnite app, meaning it will eventually become obsolete as Apple updates the iPhone software.
For Android users, there will be much less of an impact; they can still download Fortnite from Epic’s website. As a result, hordes of Fortnite fans could now favor Google’s devices over Apple’s.
Suing Apple, in particular, serves two goals for Epic: winning in legal court and winning in the court of public opinion, said Rebecca Haw Allensworth, a professor of antitrust at Vanderbilt Law School. Epic is more likely to succeed in the latter, she said. “There is growing business pressure against Apple,” she said, noting an antitrust case would be more complicated and difficult to win.
Fortnite has become an enormous enterprise and announced in May that it had more than 350 million registered players. The game generated $1.8 billion in revenue last year, according to analysis firm SuperData.
Since March 2018, Fortnite’s app has been downloaded more than 133 million times on iPhones and iPads and brought in roughly $1.2 billion, according to Sensor Tower, an app analytics firm. Apple has taken $360 million of that revenue as part of its commission, Sensor Tower said.
On Android devices, people have been much more likely to download Fortnite from outside Google’s Play Store. Since April, Fortnite’s app has been downloaded 11 million times on the Play Store and generated about $10 million in sales, according to Sensor Tower. Google took about $3 million of that.
“Epic could likely have worked out a privileged deal with Apple — as other big tech companies have,” said Matthew Ball, the managing partner at Epyllion Industries, which operates a venture capital fund. “Instead, it is fighting for the marketplace.”
Apple has had a series of recent spats with app makers. The music service Spotify has complained to regulators in Europe and the United States. Blix, which makes an email app that competes with Apple’s service, also sued Apple on antitrust grounds last year. And last week, Microsoft ended a pilot of its mobile gaming app and Facebook watered down its gaming app on iPhones because of Apple’s rules.
Apple has said that all app developers are subject to the same rules and that its commission is fair. Apple has argued that it spends billions of dollars on the App Store and iPhone technology, creating business opportunities for companies like Epic.
“Epic has had apps on the App Store for a decade, and have benefited from the App Store ecosystem, including its tools, testing, and distribution that Apple provides to all developers,” Apple said in a statement Thursday. “The fact that their business interests now lead them to push for a special arrangement does not change the fact that these guidelines create a level playing field for all developers and make the store safe for all users.”
In past disputes that led to bad publicity, Apple tweaked its rules to let complaining app developers back into the App Store. But Epic’s fights appear to be about more than just its app.
In 2018, Epic released its own app store and began charging developers 12%. Tim Sweeney, the chief executive and founder of Epic, said in an interview last month that the Epic Games Store had processed more than $1 billion in transactions. Even with the lower fee, he said, Epic still makes a profit of 5% to 7%.
Sweeney said he felt obligated to “make this industry a better and fairer place.”
“It’s critical to the future of humanity,” he said. “Otherwise you have these corporations who control all commerce and all speech.”