The lawsuit resulting from the dispute between Apple and Epic is turning into a privileged window on the world of the videogame industry. The armies of lawyers hired by the two multinationals have published mails, calls and documents who are laying bare the strategies and agreements not only of the parties involved, but of the entire sector.
The process is about to go live, and it could change the way we use game stores forever. However, the revelations that have emerged have already caused much discussion.
Introduction: where are we?
Even though the story has been in the news in recent months, it's easy to lose track of events. Before analyzing the revelations that emerged from the trial papers, it is better to understand how we got to this point.
In August 2020 Epic publishes a small update for Fortnite mobile. No changes to the gameplay, only the possibility to buy the in-game currency, the V-Bucks, directly from Epic through the Fortnite app.
This update however, violates the terms of the contract that Epic had established with Apple and Google so that the app was sold on the two most used stores in the world. As with all apps, Fortnite had to pay 30% of the profits from in-app purchases to the company that owns the store. The first consequence is the removal of Fortnite from both the App Store and the Play Store.
Epic's response is not long in coming. It publishes a controversial video that mimics Apple's famous 1984 ad, in which the Cupertino company is described as a tyrant to rebel against.
While everyone is wondering aboutethics of exposing the very young Fortnite audience to this advertising / propaganda, Epic is already hard at work suing Apple and Google. A calculated move, which Epic lawyers refer to behind the scenes under the name "Project Liberty".
The goal of Epic is not just to get rid of the deductions applied by the stores. The strategy also aims at break the closed ecosystem that has always characterized Apple devices, opening iPhones to other stores.
Apple's response is not long in coming. All Epic developer accounts operating on the App Store are closed. In practice, anyone using the hugely popular Unreal Engine is excluded from iPhones. Although Epic manages to contain losses by protecting its graphics engine with a court order, accounts remain closed and Fortnite blocked.
Here ends the first phase, the first skirmishes. At the end of September 2020, both parties in dispute refuse the jury trial, convinced that they can win in an actual legal proceeding.
The court is due to meet on May 3 of the following year, chaired by Yvonne Gonzales Rogers. The judge immediately warned that, given that Epic's goal is to attack the Apple ecosystem, this ruling can have enormous repercussions for the entire gaming industry.
Meanwhile, Google has preferred to act under the radar. The lawsuits against Alphabet are proceeding in parallel, with less hype. The request, then rejected, to postpone the process until October 2022 also came from Mountain View.
The first few bars
The trial begins on Monday 3 May 2021, with the opening statements of both sides.
Epic defines iOS as a monopoly, and accuses Apple staff, including the late Steve Jobs, of trapping consumers. The deductions from the App Store are also defined as non-homogeneous, aimed only at certain products.
Apple for its part underlines how the business model of the App store has brought benefits to the consumer. It also attacks the definition that Epic has proposed of the single market, and this very technical side of the process could be decisive in influencing the sentence.
From day one the process was not without incident, also due to the fact that the pandemic has forced the parties to meet via the internet. For example, the court did not change all viewers of the call, and for twenty minutes some young Epic fans shouted "Free Fortnite" preventing the process from starting.
A more serious incident was the one that saw the publication of some documents that should have remained private. The most interesting information comes from some of those documents, which concern not only Epic and Apple, but also Sony and Microsoft.
Day 1: Fortnite is not a game, it's a "metaverse"
The first witness to be called by the court was Tim Sweeney, CEO of Epic. His testimony immediately introduced one of the most important themes of the trial: Epic's vision of the Fortnite phenomenon.
"Fortnite is a phenomenon that transcends the video game. [...] The long-term evolution of Fortnite will make it more like a platform that allows creatives from all over the world to distribute their works to users [...] and make the most of the profits. […] If apple continues to keep 30% of profits, this vision would be unattainable. "
Sweeney supports the vision of the "metaverse" with both theoretical and practical elements. He first uses the definition that Neal Stephenson gives in the novel Snow Crash. Then he points out that the concept was not born during the preparation of the trial, but was born four years ago, at Devcom, when for the first time Epic attacked Apple on the deductions. Last piece of the CEO's testimony was the recent news that Sony would have invested a billion dollars in the Fortnite metaverse.
However, the CEO's testimony wasn't perfect for Epic. Questions from Apple's lawyers have raised the question of what consequences this ruling could have. Sweeney is the promoter of the Coalitiion for App Fairness (CAF), which aims to help all developers get better deals from stores.
Pressed on the issue of consequences, however, the CEO admitted that he did not fully understand them. Apple's lawyers have already addressed CAF in some minor lawsuits in North Dakota and Arizona, already reporting some successes.
Day 1: The bills in your pocket at Epic
Apple's strategy therefore appears to be centered on whether the current system works. However, this does not mean that the Cupertino lawyers have developed a purely defensive strategy. A fundamental part of their line is to show how the alternative to the status quo, therefore the Epic store, is not sustainable.
They therefore emerged from the papers presented the red accounts of Epic Games Store. Millionaire holes created by extremely expensive exclusive agreements and the free games policy. The store has always been at a loss, and is far from sustainable. This despite the enormous success of Fortnite, which in two years generated a turnover of nine billion dollars.
From these papers also emerged the first revelation about parties not involved in the process. Epic would deal with Sony to get Fortnite cross-play on PlayStation 4. The Japanese multinational would have obtained in exchange a withholding on in-game profits, to compensate for the economic losses that the agreement would have involved.
Epic's lawyers have not battled on any of these points. They preferred to cash in on Apple's attack, so the court could focus on more defensible arguments.
Day 2: Nvidia and a strange loophole
The second witness called by the court is, somewhat surprisingly, Nvidia. A leader in the production of graphics cards, the company was called upon to testify on another issue, its video game streaming service GeForce Now.
Apple is extremely hostile to video game streaming services, and does not allow them to be made available through the App Store. However, this did not stop Nvidia from creating a web application for Safari, Apple's browser.
If we add to this news that Nvidia is in talks with Epic to bring Fortnite to GeForce Now, the picture becomes complete. Fortnite could return to iOS, but not on the App Store, since October. And streaming services are the topic that involved another market giant in the process.
Day 3: The accounts in the pocket of… Microsoft?
The main witness on the third day of the trial was Lori Wright, vice president of Microsoft Gaming. The testimony initially seemed to center on the same issue that had involved Nvidia the previous day. Like GeForce Now, xCloud, the Xbox streaming service, also had to use a web app after the App Store rejected the application for security reasons.
Wright attacked Apple on this point. According to the company that owns the App Store, in fact, the reason why video game streaming services are not eligible in its store is that each game must be evaluated independently. But that doesn't apply to other streaming services. In fact, Netflix can operate on the App Store without each episode of its TV series being evaluated as a single entity by Apple.
But soon the manager was forced to answer questions about the Xbox business model, revealing that Microsoft has never made any profit from their consoles. Revenue depended almost entirely on subscriptions and withholdings from the store, equal to 30%, exactly like Apple.
The conversation finally moved on to reduce the deductions from the Microsoft store on PC. The percentage that the store keeps from app sales is in fact recently dropped from 30% to 12%, aligning with Epic. However, Wright said that this change will not happen on Xbox as well.
Microsoft's name did not emerge only during this testimony, however. Some trial cards report some sort of alliance between Epic and Xbox. It seems that it was Epic who pushed for Microsoft to drop the need for a subscription Live Gold to play free to play games online on Xbox.
Another interesting document is the exchange of emails between Sweeney and Phil Spencer, director of Microsoft Gaming. The founder of Epic would have asked the director of Xbox to help him with "certain plans" in August 2020. Spencer refused, and Sweeney would then invite him to "Enjoy the fireworks" that would follow.
Conclusions: All Epic friends
The first week of the trial is revealing how Epic has created a network of relationships that expands throughout the gaming industry. Taking advantage of the success of Fortnite, the company has approached almost all the major players in the market to obtain exclusive contracts for its store.
The strategy appears to have worked with Sony. One of the trial documents discloses an offer of over $ 200 million from Epic to obtain Sony exclusives. A similar offer was proposed to Microsoft without success, for fears related to compatibility with the Game Pass program on PC.
Epic would even have considered to approach Nintendo on this front. However, the plan was immediately set aside due to the excessive difficulties of the negotiation.
However, these relationships are also the basis of the attempt by Apple's lawyers di exclude Microsoft employee testimonies from the trial. According to the lawyers defending the Cupertino company, the alignment of intent between the companies would be too evident. In addition, some documents brought in support of Wright's testimony would not have been provided to Apple's lawyers, a practice that violates the rules of US trials.
The trial will continue in the coming weeks, with more witnesses and likely other revelations. It seems that Facebook will also be involved, and Apple has already attacked its witnesses as unreliable. One thing seems to be certain, whatever the sentence will be, after it is handed down the gaming industry will change forever.