Epic Games, the studio behind the highly popular “Fortnite,” has quickly become a thorn in Apple’s side, with the removal of the game triggering a lawsuit and countless discussions about Apple’s App Store policies. Here’s what you need to know.
Within the space of a few weeks, a disagreement between the ambitions of Epic Games and the intention to main the App Store status quo by Apple has courted considerable controversy. The affair commenced with little warning to consumers, but quickly led to international interest, as the battle sought to change one of the fundamental elements of the App Store: how much Apple earns.
The dominance of Apple has already led to an antitrust probe by the U.S. Justice Department into the App Store’s fees and policies, but the disagreement between Apple and Epic is being made in a more public way, and is more directly affecting younger customers.
While the fight is mostly between Epic Games and Apple, it has already seen other parties wading in with their own observations and opinions on the matter, including developers of other apps included in the App Store. At the same time as Apple receiving close scrutiny over its policies, Epic itself has also come under fire for how it handled the situation, including forcing it to happen and orchestrating a premeditated response.
Here’s how it all came about.
Epic updates Fortnite, Apple pulls it down
The main triggering event occurred on August 13, when Epic updated the Fortnite app with a new feature, one that allowed consumers to pay Epic directly for in-app currency at a discount, rather than paying traditionally via Apple’s App Store payment mechanism. Offering the option enabled Epic to skirt App Store rules that demanded payments go through the App Store payment system, paying a 30% fee in the process.
The fee is a non-negotiable element for the vast majority of apps, but there are some exceptions. For a start, the rule pertains to digital goods, with exceptions made for physical goods, such as those from online retailers and restaurants, while subscriptions can pay a smaller cut of the transaction fee in many situations.
The change was not limited to just the iOS version of the game, as it was similarly applied to the Android version, again going against the Google Play Store’s similar policy and fees.
As was to be expected, Apple pulled the game from the App Store for violating the App Store guidelines within hours of the update’s appearance. Similarly, Google also pulled the game from the Google Play Store, though on Android the game is still available via third-party stores and from Epic directly.
Lawsuit and Marketing
The same day as the removal, Epic filed a lawsuit against Apple in the U.S. District Court for the Northern District of California, in retaliation for pulling the game. Another lawsuit was also laid against Google for its own removal.
The complaint from Epic took an accusatory stance, declaring Apple had become a “behemoth seeking to control markets, block competition, and stifle innovation. The suit also went as far as to alleged Apple’s size and reach “far exceeds that of any technology monopolist in history.”
An important part of the suit is that it isn’t attempting to argue whether or not Epic was abiding by App Store guidelines at all, but instead fought against the guidelines themselves. Its objections to the guidelines primarily includes Apple’s “exorbitant” 30% commission for in-app purchases.
It also argues that the same policies are anticompetitive by forcing developers to use the App Store. If the rules weren’t there, Epic states it would have released its own competing app store.
Epic’s argument disregards the fact that Apple’s App Store and ecosystem is relatively similar to those of Sony’s Playstation and Microsoft’s Xbox platforms, with each forcing the use of a single digital storefront, the usage of specific payment systems, and the taking of a 30% cut of transactions.
At this time, Epic has yet to file lawsuits against either Sony or Microsoft demanding transaction fee cuts or the ability to operate its own digital marketplace.
The filing seeks an injunction to prohibit “Apple’s anti-competitive conduct” and any “equitable relief necessary.”
At the same time as the lawsuit was filed, Epic Games attempted to raise support in the court of public opinion, by releasing a video parody of Apple’s famous “1984” Super Bowl commercial. In this version, a Fortnite character smashes a screen displaying a cartoon talking apple complete with a worm.
While the original framed Apple as the breaker of the aging oppressive IBM’s grasp on computing, the parody seemingly puts Apple in IBM’s place, with Epic instead being the breaker of Apple’s App Store control.
As of August 22, the video has been viewed 5.6 million times. Epic is also attempting to get the social media hashtag #FreeFortnite trending.
The timing of the lengthy lawsuit and the sudden marketing blitz within a few hours of Apple’s takedown of the game strongly suggested at the time Epic had prepared them beforehand, anticipating the app’s removal.
Developer account threat
On August 17, Apple made an offensive move against Epic, which was revealed to the public by Epic over Twitter. Epic alleged that Apple had informed Epic it would be terminating all developer accounts and cutting Epic off from iOS and Mac development tools on August 28.
Naturally, Epic filed a request for a temporary restraining order to prevent Apple from taking “any adverse action against it.” This also included a request for the court to prevent Apple from “removing, de-listing, refusing to list or otherwise making unavailable the app Fortnite, including any update thereof, from the App Store on the basis that Fortnite offers in-app payment processing through means other than Apple’s IAP or on any pretextual basis.”
The court filing published by Epic includes the letter sent by Apple to the company, which noted “several violations of the Apple Developer Program License Agreement” by Epic, and that access would be terminated unless the violations were dealt with within 14 days.
To Epic, the removal of developer tools extends far beyond Fortnite, as the company provide the Unreal Engine to thousands of developers for use in their own games. By not being able to use developer tools to maintain the macOS and iOS elements of the game engine, it effectively cannot provide support to third-party developers who licensed the technology.
The lawsuit declared “Apple is attacking Epic’s entire business in unrelated areas.”
Sweeney before and after the takedown
Epic Games CEO Tim Sweeney has been a public critic of the App Store and its fees structure. In an interview in July, Sweeney outlined his insistence that Apple and Google stunt innovation with their respective app store policies.
In the case of Apple, Sweeney called the App Store an “absolute monopoly,” and that Apple “has locked down and crippled the ecosystem by inventing an absolute monopoly on the distribution of software, on the monetization of software.” At the time, Sweeney added that if developers were able to take their own payments instead of paying the “30% tax,” the savings could be passed on “to all our consumers and players would get a better deal on items, and you’d have economic competition.”
Sweeney has railed against the transaction fee for quite some time, with comments from 2017 declaring the models “pretty unfair” and that companies like Apple are “pocketing a huge amount of profit from your order – and they aren’t really doing much to help [developers] anymore.”
Epic also operates its own app store on PC, as a competitor to Steam and others. While it is beneficial to developers in taking a smaller 12% cut from transactions, the company has also performed its own activities some may deem as anti-competitive, including paying developers for exclusive game launches that are available only through its storefront and not rivals.
On August 15, after the takedown and launching of legal action, Sweeney then made the case for the lawsuit in a series of tweets. Characterizing it as one for consumer and developer choice rather than a fight for more lucrative financial deals, Sweeney suggested it was a fight 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.”
Sweeney also acknowledges the argument that some may see the fight as “just a billion-dollar company fighting a trillion-dollar company about money,” before admitting “there’s nothing wrong with fighting about money.”
He qualifies it by declaring “You work hard to earn this stuff. When you spent [sic] 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.”
“The fight in’t over Epic wanting a special deal, it’s about the basic freedoms of all consumers and developers,” Sweeney proposed.
It is worth remembering that Sweeney’s position may not necessarily be entirely altruistic. Fortnite is an extremely high earner for Epic, including through in-app purchases on iOS, and has been ever since it first appeared on the App Store in 2018.
As for Epic itself, Chinese tech giant Tencent has a 40% stake in the company. Tencent has been in disagreements with Apple in the past regarding payment processing, with a 2018 spat involving WeChat money transfers between individuals outside of Apple’s payment systems resolved with a “mutual understanding.”
To try and strengthen its position, Epic reportedly sought to find other companies with a similar opinion of the App Store. Epic allegedly got in contact with other companies over a matter weeks to try and create a so-called “coalition” of Apple critics.
The list of companies supposedly included Spotify, who did come out in support of Epic’s legal action shortly after it was filed. Spotify is already engaging Apple via an antitrust complaint since 2019.
While it is neither clear if a coalition exists nor what its specific purpose would serve, Epic has seemingly received what it wants, in the form of multiple hot-takes criticizing Apple from various corners of the tech industry.
On August 20, a group of major newspaper publishers contacted Tim Cook to urge a change to subscription fees, spurred on by the Epic fight. Current policy has the App Store commission fee set at 30% for the first year’s subscription to a publication via an app, but for subsequent years it reduces down to 15%.
The group of publications, including the Wall Street Journal, the New York Times, and the Washington Post, instead want the 30% charge removed in favor of a reduction down to 15%.
As part of the letter written by trade body Digital Content Next, the group refers to a deal Apple made with Amazon in 2016 that would take a 15% cut of transactions for customers signing up for a Prime Video subscription as an in-app purchase. The letter asked that Apple “clearly define the conditions that Amazon satisfied for its arrangements so that DCN’s member companies meeting those conditions can be offered the same agreement.”
Korean investigation demands
Meanwhile in Korea, a group of companies have petitioned the Korean Communications Commission, claiming Apple and Google’s in-app purchase rules are illegal. The group, the Korea Startup Forum, objected to how much Apple and Google charge, and the lack of alternative payment options.
“While the 30 percent commission rate is too high in itself, it is more problematic that they force a specific payment system for the app markets,” said the consortium. Furthermore, this is said to be more unfair to smaller companies who are unable to try and negotiate different commission rates with the app storefronts.
It was also suggested both Apple and Google had the ability to raise their fees without consultation, potentially reducing profits for developers or making apps more expensive to consumers.
Apple’s first statement
Apple’s initial public salvo in the battle on August 18 was a relatively straightforward affair, consisting of a plainly-written statement that accuses Epic of being in the wrong, by not rectifying “the problem Epic has created for itself.”
The statement starts with Apple assuring the reader the App Store is “designed to be a safe and trusted place for users and a great business opportunity for all developers.”
Apple then mentions how Epic is “one of the most successful developers on the App Store, growing into a multibillion dollar business that reaches millions of iOS customers,” and that Apple wants to keep Epic in the Apple Developer Program and offering apps in the App Store.
“The problem Epic has created for itself is one that can easily be remedied if they submit an update of their app that reverts it to comply with the guidelines they agreed to and which apply to all developers,” reminds Apple.
The statement concludes “We won’t make an exception for Epic because we don’t think it’s right to put their business interests ahead of the guidelines that protect our customers.”
More public marketing
In a further bid to capitalize on the anti-Apple sentiment of part of its player base, Epic launched the “FreeFortnite Cup” tournament“FreeFortnite Cup” tournament that starts from August 23. The tournament offers a selection of prizes, including digital items such as the “Tart Tycoon” skin resembling the Apple character from the parody ad.
Physical prizes are also offered by Epic, though again with a decidedly anti-Apple leaning. Approximately 20,000 “Free Fortnite” hats in a design reminiscent of Apple’s “Think Different” merchandise are being given away, while 1,200 other prizes include consoles and computers that are also platforms players can play Fortnite on, without going down the Apple route.
Epic has also made its “Free Fortnite” graphic available to players to print onto their own clothing and other items, in the event they didn’t win. The asset pack does however require users to confirm they will leave the text “Free Fortnite” in place on the graphic when used, and not to edit it out to leave the rainbow-colored llama head.
Email chains and Apple’s filing
Apple’s first legal response to the Epic lawsuit on Friday was lengthy and interesting for a number of reasons. It chiefly urged the U.S. federal court in San Francisco to deny Epic’s claims for an “emergency” restraining order that would put Fortnite back in the App Store.
At its core, Apple called out Epic’s behavior of adding its own proprietary payment system that allowed it to bypass the 30% fee as being similar to that of a shoplifter. “If developers can avoid the digital checkout, it is the same as if a customer leaves an Apple retail store without paying for shoplifted product: Apple does not get paid,” the filing states.
The complaint goes on to state Sweeney contacted Apple’s executives asking for a “side letter” from Apple that it would create a “special deal for only Epic that would fundamentally change the way in which Epic offers apps on Apple’s iOS platform,” said Apple App Store chief Phil Schiller.
Specifically, Epic said it wanted to bypass App Store fees by gaining permission to implement direct payment systems. When denied, Sweeney responded informing Apple that Fortnite “will no longer adhere to Apple’s payment processing restrictions.”
The filing, which included a selection of emails between Apple and Epic, refutes Sweeney’s earlier claim of not wanting a “special deal,” as he is seemingly shown to be asking for one.
The email chain starts with a June 30 message from Sweeney to Tim Cook Phil Schiller, Craig Federighi, and Matt Fischer outlining Epic’s intention to use a competing payment processing option. The email also states a wish to create “a competing Epic Games Store app available through the iOS App Store and through direct installation that has equal access to underlying operating system features for software installation and update as the iOS App Store itself has, including the ability to install and update software as seamlessly as the iOS App Store experience.”
Epic gave Apple two weeks to confirm “in principle” to permit the competing app store and payment processing. “If we do not receive your confirmation, we will understand that Apple is not willing to make the changes necessary to allow us to provide Android [sic] customers with the option of choosing their app store and payment processing system,” Sweeney’s message concludes.
On July 10, Apple Vice President & Associate General Counsel Douglas G. Vetter contacts Epic’s general counsel Canon Pence about the “disappointing” email, with a lengthy message outlining why Epic is wrong on this occasion. Pointing out how Epic has earned great success with the App Store, including earning “hundreds of millions of dollars from sales of in-app content,” Vetter outlines “Epic could not have achieved this success without great apps, but it nonetheless underscores the value Apple brings to developers like Epic.”
Vetter points to the security and trust of consumers with the App Store, in his argument against the creation of an Epic Store app, including Apple’s investment in significant resources to ensure app “privacy, security, content, and quality” standards. Apple doesn’t allow other app stores to be offered as Apple would have “no reliable way” to maintain its commitments to consumers over the four areas, and consumers would “hold Apple to account for any shortfall in performance.”
Despite assurances the Epic Store would offer protections on device security and consumer privacy, Apple “cannot be confident that Epic or any developer would uphold the same rigorous standards of privacy, security, and content as Apple.”
Referring to a tweet from Sweeney on June 16 about how it is “up to the creator of a thing to decide whether and how to sell their creation,” Apple agrees with the sentiment. “It seems, however, that Epic wishes to make an exception for Apple and dictate the way that Apple designs its products, uses its property, and serves its customers.”
One week later, Sweeney acknowledges the clear answer to Epic’s requests, while also taking a swipe at the decision for the response to be handed over to Apple’s legal team to create “such a self-righteous and self-serving screed.”
Almost a month later on August 13, Sweeney again emails Apple’s executive team and Vetter, advising Epic will “no longer adhere to Apple’s payment processing restrictions,” by introducing direct payments in the Fortnite app.
“We choose to follow this path in the firm belief that history and law are on our side,” writes Sweeney. “smartphones are essential computing devices that people use to live their lives and conduct their business. Apple’s position that its manufacture of a device gives it free rein to control, restrict, and tax commerce by consumers and creative expression by developers is repugnant to the principles of a free society.”
Sweeney signs off by claiming Epic will “regrettably, be in conflict with Apple on a multitude of fronts – creative, technical, business, and legal” if Apple takes “punitive action” by blocking the app or future updates.
Apple’s last two emails in the chain are from Apple, with one explaining how the Fortnite app is in violation of the App Store Review Guidelines in multiple ways, while the other is the email advising of a termination of Epic’s access to the Apple Developer Program, again for several violations.
A hearing over the order is set to take place on August 24.