Presentation
In the 2000s, all software publishers and computer hardware manufacturers began transitioning their systems to mobile devices—laptops, then smartphones and tablets—opening up new horizons. The video game industry is continuing this same development today, with mobile devices representing a rapidly expanding market.
In fact, revenue from video games released on smartphones and tablets reached over €50 billion in 2019, representing a third of the total revenue for the entire video game industry that same year.
With the rise of cloud gaming platforms, players’ hardware needs have been significantly simplified, as most tablets and smartphones now offer the necessary performance for seamless gameplay. The advantages of mobile devices—accessibility, user-friendliness, cost-effectiveness, and more—have given video games unprecedented global reach, including in some technologically underdeveloped regions.
This market, however, is channeled through the only two major mobile operating systems: the Google Play Store and the Apple App Store. These platforms impose a 30% commission on all revenue generated by in-game transactions, such as the purchase of items, bonuses, or virtual currency.
A flagship title in video games and esports for the past two years, Fortnite has rapidly gained immense popularity since its launch in 2018, generating over $1.8 billion in revenue in 2019 and boasting more than 250 million users—all for a game that, it should be noted, is free to play. Its publisher, Epic Games, has been attempting since the game’s integration into mobile platforms to retain all revenue from in-app purchases made by its player community. This culminated this summer in an economic and political standoff between two of the tech giants and one of the largest video game and esports studios today.
freefortnite: The autonomy demanded from Google and Apple’s commissions
Android without the Google Play Store. Since 2018, the publisher of Fortnite refused to offer its game on Google’s Play Store, allowing it to be downloaded via sideloading—downloading and installing apps from a web browser or alternative app stores. This exclusion allowed Epic Games to avoid paying the 30% commission Google takes on in-app purchases.
Epic Games frequently denounced Google’s unfair practices regarding apps distributed outside the official store, which were presented as malware, potentially blocked by the Google Play Protect app. By massively and constantly informing its users of security messages related to content outside the Play Store, as well as “agreements with carriers and manufacturer restrictions,” Epic Games helplessly witnessed the harmful and deterrent effect of this approach. In April 2020, Epic Games finally gave in and officially joined the Play Store, conceding the 30% commission to Google, adapting its content monetization system accordingly.
Read our article on video game monetization.
A recent update bypassing in-game transactions. The issue stems from a recent update to the game Fortnite, released in early August 2020. Version v14.00 now allows game users to pay and make transactions, including V-Bucks, the game’s currency, either by using the in-app purchase mechanisms integrated into both systems or by paying the publisher directly, with a price difference of around 20%.
By offering a way to bypass the payment platform and, by extension, the app store commissions, Fortnite violates the terms of service of the App Store and the Google Play Store, which are traditionally penalized by blocking the application or even removing it from the store for non-compliance.
In response to this update, Apple immediately removed the application from its online store, but left the game in its original version still playable. Shortly after, Google removed Fortnite from the Play Store, also requiring that payments involving additional content within distributed applications and games be made exclusively through the Play Store and be subject to the Google tax.
Unreal Engine, the collateral victim. Epic Games’ violations of its terms of service have prompted Apple to shift its fight to another crucial product: the Unreal Engine. The world’s leading 3D engine, along with Unity, this software is used by a vast number of developers across a wide range of industries, from video games and virtual reality applications to medical imaging and audiovisual production.
In the ensuing standoff, Apple has threatened to exclude Epic from its Developer Program, which grants access to Apple’s development tools for distributing applications on the Apple Store. As a consequence of this ban, all video game publishers and application developers using the Unreal Engine would see their games blocked on the Apple Store, including those available through Apple’s Apple Arcade subscription service.
Epic Games, Apple, Google, and others: A legal battle royale
Faced with the removal of its app from mobile platforms and serious threats to its access to the Developer Program, Epic Games has launched legal battles by filing several lawsuits against Apple and Google in California courts for abuse of dominant market position.
By using Android and the Apple App Store as vehicles to consolidate their dominant position, the two tech giants are depriving consumers of the benefits of genuine competition in the important mobile device market. More specifically, Apple is accused of preventing users from offering apps on iOS without going through the App Store.
In Google’s case, Epic also reiterated its previous criticisms regarding the warning messages Google systematically displays for apps not listed on the Play Store and denounced the Play Store’s dominant position in the Android app store market, for which Google has already been penalized.
Epic Games also mentions in its complaint the partnership signed with LG and OnePlus concerning the pre-installation of an “Epic Games” application, allowing users to install games, apply updates, and purchase content. According to the publisher of Fortnite, Google intervened with the brands to discourage this installation.
Google has already been sanctioned in Europe. In July 2018, the European Commission fined Google €4.34 billion for abusing its dominant position on its Android mobile operating system and violating European Union competition rules.
Since 2011, Google has effectively imposed restrictions deemed illegal on Android device manufacturers and mobile network operators in order to consolidate its dominant position in the general internet search market. These companies were thus required, in order to obtain a license to operate within the Google Play Store, to install Google applications—eleven applications in the form of an inseparable bundle—and to feature certain of its products.
The Commission concluded in its decision that Google holds a dominant position, particularly “in the markets for licensed smart mobile operating systems and online application stores for the Android mobile operating system.”
Fortnite excluded, Unreal Engine maintained. On August 24, California Judge Yvonne Gonzalez Rogers partially sided with Epic Games. Recalling that Epic deliberately violated the contractual terms of the Apple Store, the latter is not obligated to reinstate Fortnite in its app catalog. However, she requires Apple to allow Epic access to Apple’s development tools to protect access to and use of the Unreal Engine, which is used extensively by numerous video game developers and publishers, partners. Apple.
Fortnite’s ambitions. Through these actions, Epic Games’ objectives may be multiple. Above all, the operation allows for a massive communication campaign, notably resulting in a parody version of Apple’s historic Macintosh launch advertisement and the organization of #FreeFortnite tournaments with prizes including Apple-themed skins.
Epic may also be seeking the launch of its own app store within mobile operating systems, but especially a specific contractual agreement on video game monetization. Since April 2020, “premium” video apps such as Prime Video, Altice One, and Canal+ have been able to negotiate the elimination of commissions on online content purchases.
Fortnite mobile: Behind the taxes, an antitrust battle against Apple and Google
The heart of the dispute between Epic Games and the two tech giants goes beyond the mere operation of Fortnite, with the video game publisher fiercely denouncing what it sees as the harmful monopolies these two companies represent.
Since its announcement and the launch of its antitrust campaign, several companies have expressed their support for Epic Games, notably the Match Group, publisher of the Tinder and ProtonMail apps, and Spotify. Spotify had already denounced Apple’s anti-competitive practices in the music services sector, as Spotify is subject to a 30% transaction fee, unlike Apple’s direct offering. A complaint was filed with the European Union in 2019, launching an official investigation into these practices.
A fraternal battle between tech giants. Two tech giants have joined Epic’s cause against Google and Apple: Facebook and Microsoft. Facebook, in its latest app update, included an article explaining Apple’s commission system, along with a feature allowing online purchases with the message “Apple takes a 30% commission on this purchase.”
On August 13th, Microsoft also published a statement of support for the video game studio. This unexpected ally comes amidst the ongoing conflict between Microsoft and Apple, with Apple recently announcing it would ban Microsoft’s upcoming online gaming service, Xbox Game Pass, from the App Store and its mobile devices. Apple accuses the platform of unilaterally managing the addition and removal of games from its catalog and indirectly controlling the applications accessible to Apple users. Other video game streaming services, such as Nvidia GeForce Now and PlayStation Now, will likely have little chance of offering their services on Apple’s mobile devices.
Pandora’s box. Epic’s overall victory in its fight against Apple and Google’s controls could have unforeseen consequences, notably the widespread opening of download platforms to uncontrolled third-party applications. By removing their control, new categories of applications could emerge on phones: shocking or illegal content, spyware or counterfeit apps, and so on. In Apple’s case, this would also end one of its defining characteristics since its inception: the provision of a closed system entirely controlled by Apple.
