Epic’s war with Apple over Fortnite ‘stolen’ loot

Tim Sweeney, the chief executive of US$18 billion Epic Games, tapped out an email to a contact at Microsoft to let them in on a “confidential” project.

“Epic has certain plans for August,” Sweeney, who runs the world’s most popular online game Fortnite, wrote ominously.

Two days later, on August 7 2020, he sent Microsoft another cryptic message. “You’ll enjoy the upcoming fireworks show.”

By August 13, Epic triggered a secret switch that it had hidden inside its Fortnite game on Apple iPhones. Early that morning, it moved Fortnite’s in-game payments to a system that wasn’t controlled by Apple. In response, Apple deleted Fortnite from its App Store, kick-starting a bitter public relations and legal battle.

Today, Fortnite, the battle royale game loved by 350 million players, has become a pawn in a global tussle between developers and Big Tech.

The row centres on Apple’s App Store fees. Apple controls what apps can be installed on iPhones and iPads through its Store, and takes a fee of up to 30 per cent on purchases made within those apps, while Google has similar restrictions for Android phones.

Epic is demanding injunctions that would allow rival app stores on smartphones and let app developers use alternative payment methods.

If Epic prevails in court, Apple could be forced to amend its policy, causing it to lose out on hundreds of billions of dollars of future revenues.

Apple has launched a legal offensive against Epic Games, suing the company for attempting to bypass the Apple payment system. In one court filing, Apple said that when Epic used its own payment system, violating Apple’s App Store rules, the company was stealing.

The outcome of the case could also be used as evidence in competition investigations that Apple is facing over its App Store around the world.

This week, both Apple and Epic filed hundreds of pages of claims to a California court, providing the clearest picture yet of the two-year operation by the Fortnite-maker to challenge the world’s most valuable company.

Code-named Project Liberty, Apple claims the scheme had been in the works since 2019 in an effort by Epic Games to eke more revenues from Fortnite, which had seen falling user engagement. To do this, Epic, which is backed by China’s Tencent, planned to apply pressure on Apple to reduce its App Store fees from 30 per cent, allowing Epic to collect more using its own payment mechanism and games store.

The App Store is part of Apple’s services division, which last year made US$54 billion.

Epic began formulating a plan to go after the app stores of Apple and Google, with Sweeney writing in an internal memo “it’s going to be fun!”.

In April 2020 he ordered the creation of a 200-strong “special project team” to work on Project Liberty.

Sweeney’s plan began to come to fruition by June. In an email to Apple, his team demanded a “special deal”, filings allege, that would see Epic’s fees cut. Apple refused.

Epic responded by accusing Apple of a “self-righteous and self-serving screed”.

On July 27, Sweeney briefed his board on Epic’s “battle plan”. Epic wanted to form a coalition of like-minded developers to protest against Apple’s 30 per cent fees.

It formulated its plan to roll out an update that would allow players to buy discounted “V-Bucks”, a form of in-game currency, via its own payment method.

Apple reacted by barring Epic from its App Store. Epic responded with a PR blitz including a video comparing Tim Cook to George Orwell’s Big Brother.

Apple accuses Epic of a two-year campaign “to portray Apple as the ‘bad guy’ so it can revive flagging interest in Fortnite”. Apple says its store ultimately helps keep users secure. It also argues it is entitled to ask for a fee from developers, since it maintains and owns the App Store.

It adds that Fortnite users can also buy in-game currency on a PC or a console, then use it on their iPhones. It claims Epic made US$700 million in Fortnite revenue from Apple devices.

“Epic just wants a free ride on Apple’s innovation,” its lawyers claim.

Epic has a radically different version of events. In its filing it portrays Apple as an ineffectual gatekeeper over apps and claims its 30 per cent cut of payments is unfair.

In its own filing, Apple says it has a “robust” review process for suspicious apps and rejects up to 40 per cent of apps submitted to its app store.

Success for Epic could have broader implications. Through its grand plan, Epic has escalated its own grievance with Apple into a globe-spanning battle over the future of Big Tech’s app stores.

Even if Apple wins, some legal experts believe that there would still be a case to answer in Europe due to differences in competition law. The trial in California, which kicks off on May 3, may just be the first round in this battle royale.

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