2 minutes explanation : The Royal Battle between Epic Games, Apple and Google

25/09/20
2 minutes explanation : The Royal Battle between Epic Games, Apple and Google

THE LEGAL BATTLE BETWEEN THE PUBLISHER OF THE GAME WITH 350 MILLION PLAYERS AND THE TWO SILICON VALLEY GROUPS EXPLODED AT THE BEGINNING OF AUGUST. LET’S TAKE TWO MINUTES TO GO BACK AND REVIEW THE CONTEXT, THE STAKES AND THE CONSEQUENCES OF THIS IMPORTANT CASE FOR THE VIDEOGAME SECTOR.

 

Background

Fortnite is a video game published by Epic Games. Freely accessible and playable at no cost, this so-called free-to-play game generates significant revenue through integrated purchases. Players can thus perform microtransactions directly within the application in order to more quickly acquire cosmetic improvements for their characters (new appearances or new dances in particular). The game is available on many platforms, including the iOS and Android mobile environments, developed by Apple and Google respectively. Apple and Google charge various commissions on sales generated from their mobile application platforms. When Fortnite is installed from one of the platforms, 30% of the price of each transaction in the game goes to Apple or Google – at least that has been the case until now.

 

Issue

On August 13, 2020, Epic Games activated a feature integrated to Fortnite that allows for direct collection of all amounts paid by players in the game in exchange for a 20% discount. In this context, players are free to alternatively use the payment systems offered by Apple or Google, or they may benefit from the discount by choosing to pay Epic Games directly without going through an intermediary.

 

 

In reaction, Apple and Google immediately withdrew the game from their mobile application platforms, considering that Epic Games did not comply with their terms of use. The users concerned can no longer download the game or its updates from these platforms.

 

Epic Games’ response has been immediate and consisted in implementing a media strategy backed up by its judicial counterpart. On the same day, Epic Games launched a major communication campaign against the alleged monopoly of Apple’s application platform. At the same time, it brought Apple and Google before the competent Californian court with the aim of putting an end to the distribution terms allegedly anti-competitive.

 

 

The following day, Apple informed Epic Games that if it failed to comply with the contractual terms and conditions applicable to all application publishers distributed on the App Store before August 28, 2020, it would no longer benefit from the partnership allowing it to make its creations available on this platform.

 

Beyond the purely contractual implications, the apple-shaped company emphasized on the guarantees that the system put in place offers in terms of reliability and security of the applications distributed. In addition, Apple highlights the heavy investments devoted to the functioning of its platform, which offers significant visibility to its partners.

 

In addition to the impossibility for Epic Games to distribute its games on Apple devices, the end of this partnership would also mean that the numerous third-party applications created using Epic Games’ Unreal Engine, widely used in the industry, could no longer be offered on Apple’s services.

 

Epic Games has therefore referred the matter to the competent judge as a matter of urgency in order to obtain a swift settlement. This ruling does not require Apple to allow Fortnite to be downloaded on its platform again but prevents Apple from suspending the distribution of third-party applications developed using Unreal Engine technology.

 

On 28 August, Apple therefore suspended Epic Games’ account. Since then, none of the games published by Epic Games can be downloaded from Apple’s service.

 

Consequences

The outcome of this case could potentially redesign the value distribution scheme in a mobile development sector. The timing of Epic Games’ decision to initiate this litigation is not insignificant: earlier this year, the European Commission announced that it would launch investigations to determine whether Apple’s practices with regard to the distribution of applications published by third parties comply with European competition rules.

 

The amount of the contested sales fees is nowadays usual in the mobile application distribution sector. However, these standards have been established by historical players in digital distribution, including Apple and Google. These companies insist in particular on the fact that these fees are lower than those previously practiced on the market for the physical distribution of video games.

 

Major digital players whose services are also distributed on mobile operating systems, such as the companies that publish Spotify, Tinder or Facebook, have since indicated their support to the Epic Games initiative.

 

IF THE LEGAL BATTLE HAS JUST BEGUN, THE GAME ALREADY APPEARS TO BE EPIC!

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