Epic vs. Apple – A right Battle Royale pt. II

Apple is somewhat on the backfoot.

• Apple and Epic have both upped the ante in their fight over app store fees, but there are signs that Apple is somewhat on the back foot meaning that there are limits to the aggressiveness with which it can take the fight to its much smaller protagonist.
• In its reply to Epic’s suit, Apple claims that Epic sought a special deal (not unlike the one Apple has with Amazon) before taking matters into its own hands (see here) resulting in the suit that it filed last week.
• It has been my view that this is how the suit will most likely resolve itself and Apple’s allegation adds weight to the notion that a settlement with Epic is possible.
• At the same time, Apple was forced to back-off from a similar dispute with WordPress where it had given WordPress 30 days to add in-app purchasing or face removal from the app store.
• Apple claimed that WordPress submitted an update that allowed purchases from the WordPress website but WordPress claimed that this was merely a notice informing users that they could pay on the website and that the notice had been there for 10 years.
• The issue has been resolved in WordPress’s favour but I suspect that if the Epic dispute had not been ongoing, Apple would have taken a more aggressive stance.
• The immediate problem for Epic is Apple’s intention to cut it off from access to iOS and Mac developer tools on August 28^th which will make life very difficult for thousands of developers who use Epic’s Unreal Engine for game development.
• Epic has filed a suit to force Apple to restore Fortnite to its app store as well as stop it from cutting it off from developer tools for the period of the dispute.
• Epic has also managed to win the support of Microsoft for the suit who stated that cutting Unreal Engine off from developer tools will place the game creators that use it at a substantial disadvantage.
• In patent disputes where injunctions have been granted but are under appeal, it is not unusual for the injunction to be stayed pending the final outcome and I suspect that this will be the case here.
• Hence, I think it likely that Epic will win its petition to prevent Apple from cutting Unreal Engine off from its tools but I am much less certain that it will be able to restore Fortnite to the app store before the situation is resolved one way or another.
• This is largely because Fornite’s removal from the app store only really affects Epic Games and because Epic triggered its removal deliberately.
• The main problem for Apple is the perception that it is conducting itself as a monopoly and that its 30% revenue share is an unfair use of its market power.
• The other problem is that its contention that all developers are treated equally appears to be false as it emerged during congressional hearings that Amazon has a special deal for Amazon Prime.
• Hence, I think that Epic has a pretty reasonable argument and by allowing other forms of payment within its apps, the app store would be opened to competition and the price would fall very quickly.
• While Epic claims to be fighting for fairness for all developers, Apple’s allegation does suggest that Epic would be willing to take an Amazon-like deal in a settlement in its favour.
• Epic is a private company and so a forensic analysis of any settlement with Apple will not be possible as it has no requirement to disclose its financial performance.
• I still think that this is the most likely outcome because the app store revenue is very high margin for Apple and it will not want to see it eroded which is what will happen should Epic achieve a high profile victory and everyone demands a discount.
• This is shaping up to be another great spectacle which I think it likely to end up in an erosion of the fees shared with app stores as this business model has been made obsolete by its colossal success.