Epic Games – Gritted teeth

Clearly, Fortnite has not had a good lockdown.

• Epic Games has caved into Google and is making Fortnite available in Google Play (see here) in a clear sign that growth and engagement at Fortnite is slowing meaning that it now needs Google more than Google needs it.
• Epic has had a long-running battle with the app stores (see here) over what it views as an abuse of power by both Apple and Google in charging a 30% cut of revenues generated through the stores.
• This cut was started by Apple on iTunes and was originally designed to allow the store to break even with the return being earned by the store increasing the stickiness of the ecosystem.
• However, as the ecosystems grew in terms of the number of users and volume of transactions, this has rapidly become a source of high margin as well as a major bone of contention with developers.
• When it became clear that Epic had a major hit on its hands (Fortnite), Epic decided to use the popularity of Fortnite to drive installs of its own app store where it would not have to pay any fees and everyone else much less.
• Once the app store was installed on the devices of millions of Fortnite players, this could then be used by other developers to distribute their apps with a much lower (around 8%) revenue split with Epic Games.
• However, it looks like Fortnite has not has a good pandemic (despite its 350m users) and has missed out on the increase in users resulting from millions across the world sitting bored at home and trying games for the first time (see here).
• The result is that Epic Games has made Fortnite available on Google Play for the first time but has done so through gritted teeth.
• Epic Games has cited the almost endless popups and warnings about software downloaded outside of Google Play which it clearly views as attempts to dissuade users from sideloading apps.
• The situation at Apple is far more draconian with Apple not allowing anything to be installed that has not come from the Apple app store.
• Although Epic is blaming Google for making sideloading as difficult as possible, the reality is that its own app store has not managed to gain the traction with users that it hoped.
• Now that Fortnite is more mature and growth is slowing, not being easily discoverable on Android devices has obviously hurt its growth during the lockdown period.
• Whether Google has behaved in an anticompetitive manner is a matter for the anti-trust authorities, but Epic Games’ execution with its own app store has clearly not been particularly great.
• Either way, this is a major victory for Google and Apple as if the Epic Store had been successful, it would have started to put real downward pressure on the revenue share that they are able to extract from developers.
• Hence Apple and Google’s dominance of the app ecosystem and their ability to tax it looks to be secure for the immediate future.
• This is bad news for developers but if they had rallied behind Epic and helped it to create a viable alternative, then they would be in a position to exert real pressure.
• They have only themselves to blame.