The Truth About Epic’s Fortnite War on Apple

Epic Games, the company behind the massively popular Fortnite franchise, declared Battle Royale on Apple and Google this week, flagrantly defying both platforms’ locked-down in-app payment policies. In retaliation, Apple and Google kicked Fortnight off the App and Play stores. Which is… pretty much exactly what Epic was waiting for. Because they sued. Instantly. Not for money. Not to get back onto the stores. Not even to get their own payment options. No. But to get their own store.

Yeah, it’s just so much drama. So much spin. So. Much. Money. And I’m going to explain all of it to you, tell you exactly what’s really going on, and I’m going to do it right now.

Previously on Fortnite…

Almost exactly two years ago this week, back in August of 2018, Epic Games announced they weren’t going to be putting Fortnite into the Google Play Store. No. Just hard no.

Fortnite, especially it’s Battle Royale incarnation, is Epic’s mega-hit survival shooter game. Some initially dismissed or derided it as a PUBG knock-off, but it has gone on to become one of the most successful online games ever for both players and streamers alike. Ninja Tifu much?

Now, Epic had put Fortnite into Apple’s iPhone App Store, because they had no choice. And they’d already made like $15 million dollars no-choice bucks off the in-app purchases, but they had to give Apple 30% of that, and there was no way their CEO, Tim Sweeney, was going to give Google 30% as well, not if he could help it, not with side-loading, blessED side-loading on Android as an option. Epic were confident they didn’t need Google, that they could have their launch and eat up every V-Buck of in-game profit too.

So, pause, why did they have a problem with Apple and Google taking 30% and not Microsoft, Sony, and Nintendo taking the exact same 30%?

Sweeney’s answer is that the iPhone and Android are general purpose computers while the Xbox, PlayStation, and Switch are not. That the Xbox, PlayStation, and… ok, sure, the Switch hardware is often sold at cost or at a loss, and the big gaming platforms will invest far more in marketing and partnerships with the big game studios, so they’re more dependent and deserving of the 30% cut. And that iPhones and Android Phones are typically sold at higher margins and don’t help market or partner with the bigger studios anywhere nearly as much.

Others, of course, would point out that Xbox, Playstation, and Switch have web browsers, some have video conferencing, video and music streaming services, messaging — in other words, apps,” and could run pretty much any app or any App Store Microsoft, PlayStation, or Nintendo allowed. The differences between general purpose computers and consoles are largely anachronistic and arbitrary now.

Also, consoles stay on the market for years, for ever in technology time, distributing those initial costs more effectively than many phone companies that swap out products year-over-year or few, and that most developers aren’t big game studios who even get, much less benefit, from those kinds of marketing and partner pushes. Where, big game studios do get plastered over the front pages of those mega popular stores.

And, that Sony owns a 1.4% stake in Epic, which isn’t as big as Tencent’s 40% stake, but isn’t nothing. Nintendo now uses Epic’s Unreal engine, so they have a development partnership beyond most game companies, and that after some initial scuffles, Epic now loves Xbox, whatever that means.

For that 30%, though, Apple, for example, invests heavily in everything from Swift to iOS Frameworks to Xcode beyond the hardware as well. They also handle hosting and delivery for apps, if not in-app purchases, taxes internationally from the U.S. to Japan and back, which is apparently as complex as it sounds, transaction processing, review, developer relations, and editorial features, which, in fairness, some developers find super thin if not opaque or downright hostile, they handle support, even while intermediating the customer relationship, and provide access to massive customer bases with credit cards or other payment methods on file, who trust and are used to transacting through through those stores. Trust built on over a decade of transactions. And Google does similar with Android.

So, the value proposition, the benefits and the drawbacks, are complex and messy to begin with… and it got even more so quick.

Because, according to Epic, Google played hardball and pressured Android vendors like OnePlus, maybe LG, not to pre-install the Fortnite launcher on their phones, not if they wanted to stay in Google’s good graces.

But, Samsung did include Fortnite on their phones, starting with the very high-profile Galaxy Note 9 launch, both with Epic’s installer built-in and Fortnite on the Samsung store.

So, maybe Samsung was just too big to pressure or just didn’t give a flying floss about Google’s hardball.

Epic also claimed Google uses scary, repetitive pop ups, conflates side-loading with malware, and launched Play Protect to block it, all to make side-loading basically non-functional as a realistic, viable alternative.

Side-loading on Android is kinda, sorta like Gatekeeper on the Mac, where you can choose to install app outside the official App Store, you just have to click through the warnings about the potential risks.

Android nerds laughed at the idea of it being difficult or scary in any way, but for mainstream customers, it’s legitimately harder to find and more cumbersome, and stressful, to install apps than it is on the Play Store.

Either way, Epic gave up on side loading and, in April of 2020, released Fortnite on the Google Play Store, giving Google 30% of their incredibly lucrative in-app purchases revenue.

Now… there’s still just a lot to unpack here, like why does this all sound so strangely like an old Sopranos rerun?

Well, let’s address it… with what happened this week.

The Drop

Last Thursday, Epic announced the Fortnite MegaDrop. A permanent 20% discount on all-in currency. On Xbox, on Playstation, on Switch, on PC… even on iPhone and Android.

The latter two by breaking App Store and Play Store policy and offering alternative payment options — credit card and PayPal.

If you used any of those methods, you saved 20% on v-bucks. Yes, seriously, v-bucks. If you felt more comfortable sticking with Apple and Google payments, well, Epic said, you get no savings because Apple and Google collect what they called an exorbitant 30 percent fee on all payments.

The Cut

Why beef with Apple and Google’s 30% and not Xbox, Playstation, or Switch? Well, again Epic thinks those are fair given what they claim are different cost structures, and, again, Sony owns part of Epic, Nintendo partners with them, and who even knows what’s going on with them and Microsoft these days.

Why only 20% savings on V-bucks for players if Epic is saving 30% on revenue sharing? They didn’t say. Maybe to cover costs for their own transaction processing. Maybe just to increase their own profits, maybe both.

Now, Fortnite is free-to-play, or freemium, or whatever you want to call a game you can download and kinda enjoy without spending a dime, but can only kinda really enjoy by spending all your dimes to get more stuff faster. Like surfing on funny tasting water and stale bread vs. ordering just all the Big Macs. With bun and special sauce upsets.

See, it turns out, people won’t spend $5, one time, up-front for a premium game but they’ll spend $5 a day, every day on a freemium game’s loot boxes or to have a better skin than their friends, or to get their cars back on the track faster, or whatever. Ego and instant gratifications, and the big games run psi-ops at a scale that make even the big casinos drool. They even use the same terms for their biggest spenders — whales.

And Epic doesn’t think it should have to share any of that whale cheddar with Apple or Google. Because other types of apps don’t have to share any of their revenue.

Specifically, for physical goods and services, Apple and Google don’t take a cut of in-app transactions. Basically, because they can’t. Physical goods require real money to produce and deliver. A book from Amazon, sneakers from Nike, a drone from Best Buy, a burger from McDonalds, the driver’s time and gas on lift. So, even early on, apps selling real-world goods and services used their own payments systems, typically their own account and billing services, with the apps as more mobile-friendly, convenient, functional proxies for their website front ends. There was just no way Apple or Google were ever going to get any of that.

Digital goods, though, well, for those the apps and games had to share revenue. All of them on iOS, and while I’m not 100% sure about all the when’s and where’s on Android, games as well. Games have to pay their 30% tithe.

Now, that has caused some problems over the years. Specifically, with apps that re-sell their own digital content.

If you’re Amazon taking 30% of a Kindle sale, or Spotify paying a fraction of a cent per song play, turnibf around and paying Apple that same 30% on that same Kindle sale or subscription… it’s just a non-starter.

Basically, there’s room for one middle-person, one broker, not two, not multiple. In other words, you can’t aggregate ebooks or songs in an app and then have a platform aggregate apps in a store, with 30% being charged all the way down.

So, over time, Apple made exemptions for what’s now commonly referred to as Reader apps. Most recently, even letting apps like Amazon Prime charge your Amazon account directly. But it’s still huge opaque and controversial, and I’d need another whole video to dive into it why and what can be done about it, so let me know if you want that in the comments.

Games, though… games for both Google and Apple get no exemptions.

Now, sure, in-app purchases aren’t for physical goods, so there isn’t the same real-world overhead, and they’re not aggregating anything like books or music they’re paying creators for, so there’s no double or multiple agency. There’s just code once, charge everyone. They’re delivered from the company’s own servers, though, so there are infrastructure costs they’re paying instead of the platform.

But, it’s mostly pure profit for everyone involved. I mean, so much profit. Ridiculous, unfathomable, genius for some, borderline immoral for others… profit.

Apple and Google want a taste, a piece of the action, and Epic wants just all the action.

The Kick

Ok, so, I’ve already said I think Apple’s wrong about streaming game services because they’re just inevitable. And I have a lot of personal opinions about the 30%, side-loading or Gatekeeper on iOS, alternate payment options, the disparity of API access between first and third party apps, and the ongoing transition of apps from scarcity to abundance, from unit pricing to subscription and, yeah, streaming. But, that’s another video entirely.

For this video, what happened next was both predictable and… completely bananas.

Once Fortnite dropped their drop, or sucker punched their service agreement, or whatever you want to call it, Apple had four basic options. Whether they chose to negotiate with Epic behind the scenes or not, and depending on how much leverage they wanted for those negotiations:

They could have done nothing, letting Fortnite occupy app street. They could have blocked future updates to the Fortnite app but leave the current version available. They could have revoked Fortnite’s certificate and rendered every existing version of the app already installed just completely inoperable. Yeah, basically the nuclear option. Or they could pull the Fortnite app off the App Store, preventing new installations, but leaving the millions of current installations working as-is.

And that last one is what Apple did. They kicked Fortnite off the store but left it on all those billion phones in everyone’s pockets. At least the ones that had downloaded it beforehand. They could even keep using Epic’s 20% off payment options. Just no one else could download it, even if they’d downloaded it before on a different or the same device.

Should a platform, any platform, have that power? Does it depend on how they use it, like to punish a social network for spying on us, or quickly remove an app or dozen that used some malware-laden code from off the web, or is order by China to remove VPNs or America to remove TikTok? That’s a huge part of what all of this is all about, so let me know your opinion in the comments below.

What Apple said was that Epic games had violated the App Store guidelines, guidelines that are applied equally to every developer.

Now, as we just went over, that’s not entirely true. Or, at least, requires the very Obi Wan Kenobi defense of: from a certain point of view. The guidelines are applied equally to all game developers. Physical retailers and even some content providers are subject to different guidelines for different payment types. Something Epic is super salty about.

Apple also said these guidelines are designed to keep the store safe for their users. But, again, retailers and some other content providers have shown, in an approved way, the App Store can be safe even with alternate payment options. And Apple has shown pretty much the same thing with all apps using notarization and trusted developer certificates on the Mac with Gatekeeper.

Anyway, Apple accused Epic of enabling a feature that wasn’t reviewed or approved, which is true, and violating the App Store guidelines Epic had agreed to, which is also true. You can think those guidelines are reassuring, perfectly acceptable, problematic, unfair, or complete BS, but Epic still violated them.

Also, that Epic had benefited from the App Store for a decade, which, I mean, they’d been up on Apple’s special event stages plenty, parts of demos, featured. And that makes it sound like they used Apple and the App Store to get them through college and now want to dump them for a younger, hotter deal. But it could also mean they hated their position, that dependency, the whole time, so just bided their time until they could do something about it.

Apple said those benefits include the tools, testing, and distribution that Apple provides to all developers. Which is true and I covered a minute ago. And that these guidelines create a level playing field for all developers.

Which is… kinda murky? I mean, again, rightly or wrongly, different categories of apps are treated differently, though games are all treated the same. But they do allow a brand new company, one that doesn’t have Epic’s billions and can’t afford their own store, to sit side-by-side Fortnite on the iPhone or Android and compete for our attention and time.

So, of course, this all immediately became a huge Apple story. With some slinging their well-worn, but still sparkle-coated rent-seeking monopolist signs, and others dunking on wanting access to a high-value, high-trust market place while biting the hand that fed it.

And it looked like it would stay that way… until just a few hours later when Google kicked Fortnite off the Play Store as well. Same as Apple, leaving current installations in place but preventing any new ones.

Google said the Android ecosystem was open, with multiple stores, but those that chose to use the Play Store had to follow the consistent policies that are fair to every developer and keep customers safe.

Basically, a shorter but openy-touting-er version of Apple’s statement.

So, yeah, turned out Apple and Google had the lightsabers.

But, Epic… they had the lawsuits.

The Lawsuit

Epic sued so fast that it’s impossible to believe this isn’t exactly what they were waiting for, certainly prepared for, maybe even hoping for. With Apple, no question. With Google, who knows?

They had a video ready too. A parody of the most famous ad video ever, Steve Job’s 1984, introducing the Macintosh. Which… ok for boomers if completely without context to zoomers.

Also, a threat that iPhone users in specific and mobile users in general might now miss out on the next season of Fortnite, when, of course, Palpatine might just have another broadcast for us all or… who knows.

The law suit against Apple invoked the same 1984 symbolism. Against Google, their old, lost and lamented, don’t be evil mantra.

The suits were filled with all the killing words — or buzz words, depending on how you feel about them — accusing Apple and Google of having monopoly control over the App Store and Play Store respectively, and their in-app payment systems, and being anti-competitive when it comes to iOS and Android app distribution.

And yes, Google too, because, remember, Epic accused them of bullying other Android phone makers and of scaring people away from, and effectively blocking side-loading.

The timing was perfect for Epic as well. So perfect they may just have been waiting for it. Because both Apple and Google are currently being scrutinized by both the US and EU for anti-competitive practices, and Apple and Google’s CEOs, Tim Cook and Sundar Pichai, both just testified before the U.S. congress where they had to face serious questions about how they treat partners like developers and competitors like… Epic might want to become?

So, are Apple and Google monopolies? I try to avoid the word in this specific context because I find it non-useful. You can engage in anti-completive behavior without being a monopoly, and that behavior can be legal or illegal depending on how you engage in it. There are also legal monopolies, including many infrastructure companies. It usually depends on how big you are, how much control you have over the market, and how much regulation that market has in place.

For example, the US tends to favor lower prices for consumers. So much so, they spanked Apple, but hard, over ebook prices, handing Amazon almost 90% of the market as a result. The EU tends to favor more competition, even if, like with the Microsoft browser ballot, it didn’t really help Opera or Slepnir, or ultimately Firefox, and just handed the internet over to Google’s Chrome. So, instead of a choice between a half-dozen rendering engines, we’re now down to basically two and a fork. And one’s one life support.

It’s also incredibly dependent on who gets to define the market and how they get to define it. Apple has a minority share of mobile operating systems globally. There are far more Android devices in the world than iPhones. In some countries, they’re absolutely tiny. But, in the U.S. they have a roughly equal share to Android, maybe a little more. And they have a majority share among U.S. teenagers who just love iMessage, AirDrop, and FaceTime. The App Store has also traditionally been the most lucrative market for developers than the Play Store, even though the Play Store typically has more downloads. But I’ll just leave it to you all to argue over whether or how much Apple’s policies contributed to that lucrative-ity?

Now, Google does allow other stores and side loading on Android, but Google Play is by far the most popular, most lucrative store on Android, and as I’m repeating ad nauseum infinitum now, Epic found side-loading to be a non-starter because the vast majority of mainstream customers can’t even find it or want to be bothered with it, maybe wouldn’t even trust it if they did. And again, you can argue over how much Google has to do with that.

As to Google bullying Android vendors, that’s something they’ve been accused of in search with Yelp, mapping with Skyhook, and mobile with Epic and others for years now. Openness advocates just ignore it because Google has a reality distortion field that’s like 100x anything Steve Jobs ever enjoyed in his prime. Just like Apple fans ignore all sorts of distasteful things about Apple as well.

It’s the problem that comes from being loyal to companies rather than demanding companies be loyal to us.

The Lawyers

CRAVATH, SWAINE & MOORE, the lawyers representing Epic in their suit are the same ones that represented American Express vs. Ohio, and won it at the Supreme Court. The ones that represented Time Warner in the AT&T merger. The ones that most recently represented Qualcomm vs. the FTC, so far winning on appeal.

Which means they’ve usually been on the other side of these types of anti-trust cases… but maybe that means they know where all the attack skeletons are buried?

Of course, it’s a safe bet Apple and Google’s have top notch in-house and external councils as well.

And, while Apple and Google haven’t yet commented on the suits, Epic CEO Tim Sweeny just could help but tweet all over it.

Now, this might make it feel like I’m picking on Epic more than Apple or Google here, but seriously, Apple and Google have put out one statement each. Epic and Sweeny just keep marketing, filing, and tweeting. So there’s really just more stuff from them to pick on. So much more….

Sweeny said Epic is fighting for the freedom of people who bought smartphones to install apps from sources of their choosing, the freedom for creators of apps to distribute them as they choose, and the freedom of both groups to do business directly.

Though he previously said side loading on Android was unacceptable due to the nature and number of steps it took, which Android experts dispute, and which keeps people safe from malware, which was and is a huge problem on PCs that lack warnings, certificates, and other protections, which is the model Epic seems to want.

But, others would argue what Epic really wants is to collect just all the money without any of the friction, responsibility, or care or consideration for any of the users beyond their money.

Sweeny also said we all have rights, and we need to fight to defend our rights against whoever would deny them. Even if that means fighting a beloved company like Apple.

But not Microsoft, Sony, or Nintendo, because he thinks they’re not general purpose computer makers but Apple and Google are, and that their Xbox, PlayStation, and Switch business models deserve a higher revenue share than the iPhone or Android. And, of course, are part-owners, development partners, or just beloved by Epic.

That the fight isn't over Epic wanting a special deal, but about the basic freedoms of all consumers and developers.

This could well be completely sincere and true. Or it could be another billion dollar company hijacking a common cause to knock down and replace an incumbent.

It’s clear from their legal filings that what Epic really wants is their own store, the newly renamed Epic Game Store, on the iPhone and on Android so that they’re no longer paying Apple or Google 30% but having other developers pay them, much as other developers do on the PC version of the Epic Game Store today. In other words, they don’t want to remove the gatekeeper — they want to become another one.

And yes, absolutely, Epic currently charges less for their gatekeeping than Apple or Google, but also provides far less in return. Far less reach and exposure, and far more demands around exclusivity deals. And their model could also change at any time.

Either way, some think it would just mean more competition that benefits everyone, others, more fragmentation that is both a blessing and curse.

Sweeney finished by saying there's nothing wrong with fighting about money. You work hard to earn this stuff. When you spend it, the way it's divided determines whether your money funds the creation of games or is taken by middlemen who use their power to separate gamers from game creators.

Which is great and all, but Epic has been controversial in their own right, and was sued back in 2018 for using dance moves without credit or compensation to the creators. In other words, using their power to separate dances from dance creators, the people who worked hard to earn that stuff. Which, even if copyright ends up not protecting at all, maybe doing what’s right should, especially by a company so vocal about demand it for themselves?

The Fallout

Now, it might seem I’m being harder on Epic here than Google or Apple. But that’s not the case. Epic has simply done more so far. Apple and Google have put out one statement each. Epic has been talking and talking for days. So, there’s just more to comment on when it comes to them.

When I asked you all in a poll on the community tab, 16 thousand of you answered so far, and as of right now 40% of you think Apple’s in the right, 18% think Epic, 17% think they both have valid points, 3% of you think both should just stop, and 21% honestly have bigger problems to worry about right now. Fair enough.

But, should be fairly clear by now that I don’t find Epic’s or Apple’s or Googles statements in all this all that compelling. At least not fo far.

I think going after Apple right now, right at this specific moment, was strategically smart. Especially with the Hey and Xbox Game Pass Ultimate controversies still so fresh, and the US and EU just champing hot on big tech’s tail.

Co-opting long-standing developer gripes about revenue sharing and distribution and payments options, while under threat of regulation, even break-up is TIGHT.

But, going after Google as well, even though the US and EU are just as hot on their tails, but where the developer gripes are very different… might have not been anywhere nearly as strategically smart. Nowhere nearly as tight.

Not only did it erase or erode some of the support they got from the Apple suit filed only hours before, it might also have exposed their motives as being less altruistic and more… like I said — the casino that wants to stop paying taxes to the city so it can become it’s own city.

That absolutely doesn’t mean Apple and Google are in the right or even in the clear. Just that Epic may not be the Batman we want or need either. Because, push comes to shove, there’s just no way of knowing whether non billionaire, even non-millionaire developers will benefit a lot, little, or not at all by whatever result Epic ends up getting here.

Like I said, I have very strong feelings about how I think app stores need to evolve and change for this next decade of devices. Sure, to stave off what I can only imagine will be the bluntest, most technologically illiterate remedies imaginable from the U.S. and E.U., but also to do the one thing I think is being largely forgotten here:

Better serving us, the customer.