The Epic Trial to Squeeze More Profits from Apple
Over the last few weeks, gamers and journalists alike have been on the edge of their keyboards, listening to the California Courts conference line for the Epic v. Apple trial. The once-underdog Epic Games is now a 28.7 billion dollar company and stakeholder in a court case against the established Apple App Store.
While Epic seems to want to protect gamers and their ability to play Fortnite conveniently without workarounds on all devices, Epic Games is attempting a coup d’lawsuit by destroying Apple’s integrated product approach critical to their business model and their users’ experience.
Epic — through its current lawsuit and a coordinated push of state bills — portrays itself as a scrappy underdog facing a tyrant. But it’s just hypocritical to attack Apple’s App Store while running a successful online store and charging the same commission you’re suing against. In fact, Epic’s fight with Apple seems entirely driven by an appetite for cronyism. Unsatisfied with this colossal profit margin and successful business model, Epic is attempting to sue, lobby, and fight to cut a competitor out of the mix — Apple.
Epic’s overarching frustration is that Apple collects a stagnant 30% service fee on all transactions done through its app infrastructure, including in-app purchases. But their legal argument hinges on a dubious claim that qualifies Apple as a monopolist over its market. Definitionally, Apple’s less than 50 percent share of the smartphone market would not be a monopolist under any court or enforcement agency assessment. Neither would Apple’s share of the gaming market as half of Fortnite’s lifetime revenue comes from Sony’s Playstation and 28% from Microsoft’s Xbox with only a paltry 7% from Apple.
By manipulating the rules of American antitrust, Epic claims Apple is a monopoly by narrowly defining the market that Apple competes in as limited to iPhones only. Epic argues Apple is a monopoly because only Apple can offer an app store on the iPhone iOS system. From there, Epic argues Apple leverages its monopoly power in iPhone iOS to dominate the iPhone app store market.
But the iPhone and the App Store are not separate products or markets — they’re a unified and integrated system designed to provide unparalleled safety and security to Apple users. In fact, this is Apple’s competitive advantage — an integrated operating system that transitions from TV to Mac to iPhone seamlessly. This ensures that the functionality and ease of operation remain consistent. More importantly though, customers know that when they use an Apple product, download apps, and make purchases that Apple protects them from malicious third-party actors. Epic’s goal to upend this system by forcing Apple to open its system and remove their protections could cause irrevocable harm to user trust in Apple products.
Epic’s entire court testimony seems to land on shaky ground. Testimony from Epic officials revealed Epic behaves quite like Apple, using the integrated approach in certain aspects of its own business model. Just like Apple, Epic wants to shield its users from harmful apps, polices its app store, and reprimands bad actors. Epic’s CEO even testified that the source of Epic’s frustration — Apple’s commission rate — applies only to about 10% of developers, is the “prevalent” market rate, and even used on Epic’s own marketplace.
Epic’s courtroom crusade is likely to benefit Fortnite gamers in the short-term, but the ramifications would likely deny Apple from running their unified method for processing payments and take consumer trust out of our app store transactions on any app store.
Epic’s political moves seek to manipulate the government to squeeze more money out of Apple into Epic's pockets. It’s one thing to maximize profits, but Epic’s efforts to have lawmakers and courts pick winners and losers in private transactions could destroy the very delicate consumer safety hard-earned and hard-used by technology businesses everywhere.
Carl Szabo is Vice President at NetChoice, a trade organization.