Fortnite’s Epic sues for temporary restraint, Apple plays the long game

A cooperative third-person shooter survival game just got very real.

From Ars Technica: “Apple threatens to boot Epic—including Unreal Engine—off Mac and iOS

Epic wrote in a court filing (PDF) that Apple said its membership in the Developer Program will be terminated as of August 28. According to Epic, Apple’s move threatens not only Fortnite but also every game that uses Unreal Engine: “By August 28, Apple will cut off Epic’s access to all development tools necessary to create software for Apple’s platforms—including for the Unreal Engine Epic offers to third-party developers, which Apple has never claimed violated any Apple policy,” Epic said.

“If your membership is terminated, you may no longer submit apps to the ‌App Store‌, and your apps still available for distribution will be removed,” the letter said.

According to the filing, Apple informed Epic that upon termination from the program, a lengthy list of tools and features would no longer be available to it, including software development kits (SDKs), application programming interfaces (APIs), and a host of other tools. Epic would also no longer be able to conduct “Engineering efforts to improve hardware and software performance of Unreal Engine on Mac and iOS hardware; optimize Unreal Engine on the Mac for creative workflows, virtual sets and their CI/Build Systems; and adoption and support of ARKit features and future VR features into Unreal Engine by their XR team.”

This would be an existential threat to the Unreal Engine,” Epic said. “The damage to Epic’s ongoing business and to its reputation and trust with its customers will be unquantifiable and irreparable.”

My take: When you’ve got them by the APIs and SDKs their hearts and minds will follow. Meanwhile, I’m with friend-of-the-blog Bart Yee, who’s been a step ahead on this story:

There are huge ripples that would affect hundreds or thousands of games and game developers who use Unreal for iOS as their game engine.

It remains to be seen just who the other iOS developers and game publishers will lobby or pushback on: Epic for bringing them into this mess, or Apple for being heavy handed.

I know one thing: Apple has plenty of experience in playing the long game in various litigation brought against  them and by them. They know the law very well and have seasoned staff to do the job.

21 Comments

  1. Kirk DeBernardi said:
    Please. Someone enlighten me here if I am wrong or misguided.

    Why is the App Store now being considered some kind of different from what it was from the outset?

    Was it not a form of “curated and monopolized garden wall” platform from the very beginning which all participants certainly realized AND excitedly wanted in on to milk for profit. A veritable Gold Rush from its beginning. Yay! Apple’s “profits for everyone” sandbox. Why is this matrix now a pain point?

    So what’s different about it now in this twisted evolution that has now becoming everyone’s proposed bailiwick?

    Could it be…

    • We demand it be considered a “utility“

    • We demand it be available for all submissions

    • We demand it be cheaper — or — outright free to participate

    • We demand unfettered access to our own payment system

    • We demand unfettered links to anything we imbed

    • We demand no Apple apps that can directly compete

    Am I about correct here?

    It’s a store operated by a company. Not a podium for rights.

    4
    August 18, 2020
    • “Why is the App Store now being considered some kind of different from what it was from the outset?”

      It grew too big.

      To quote Ben Thompson: “[T]he question as to what is anticompetitive and what is simply good business changes as a business scales. A small business can generally be as anticompetitive as it wants to be, while a much larger business is much more constrained in how anticompetitively it can act.”

      1
      August 18, 2020
    • Fred Stein said:
      Epic wants to set up their own set of developer tools (Unreal Engine) and market place (Epic Games) inside of Apple’s developer tools and iOS market place.

      To set up their store, they have to legally nullify Apple’s App Store policies.

      This has far reaching implications. Mobile Games is the growth path for “computer” games.

      Wall Street has discounted this.

      2
      August 18, 2020
  2. Romeo A Esparrago Jr said:
    Fortnite “… can run wild for six months … after that, I have no expectation of success”

    I know not a good compare but I still couldn’t help but think of Admiral Isoroku Yamamoto’s quote (including that other quote from the film “Tora Tora Tora “).

    4
    August 18, 2020
  3. David Emery said:
    It would be good if the judge views this as a “self-inflicted wound”. (I am reminded of a certain scene from “Blazing Saddles”….)

    4
    August 18, 2020
  4. Joe Murphy said:
    No, I disagree Phillip.
    I think it’s the very human issue of devaluing what one already has.

    Kirk, I think there are 3 primary points in answering your question:

    (1) Wanting and having are completely different. Once we get that which we want, we imagine how it could be better. It’s the negative side of the coin that drives our progress.

    BenThompson, Gruber and many others claim Apple pretends the internet didn’t exist. Tim C. and Apple did not deny there was internet distribution. As Thompson acknowledged the internet was new, had many challenges and wasn’t a familiar or trusted resource. Cook simply didn’t name it as a primary distribution channel and for that Gruber called him a liar.

    (2) Developers have forgotten, or it was before their time, what it was like when Job’s introduced the App Store. The limitations and costs of the current distribution channels, be it the big stores, the cell carriers and etc.

    (3) The American society itself has changed. Many have been seduced by the alleged lures of socialism and greed. They want their cake and to eat it too.

    4
    August 18, 2020
    • “Many have been seduced by the alleged lures of socialism and greed.”

      I won’t ask how we got from the Sherman Antitrust Act to socialism.

      But let’s stick to Apple and stay as far away from politics as we can.

      3
      August 18, 2020
    • Kirk DeBernardi said:
      @ PED and @ Joe Murphy —

      I appreciate your insightful and clarifying comments both, but to my mind mere “size” (PED) and “human nature” – “group forgetfulness” – “societal attitudes” (Joe M.) while understandable and true are but flailing attitude arguments trying to land somewhere solid in this matter.

      I STILL ask, where is the wrong?

      Why should things be considered some kind of “different” now that Apple has a sandbox that pleases millions (billions?) and pays plenty utilizing rules and curation that have been there from the onset? It’s the same operation since it’s dawning. Just bigger in scope and content.

      Everyone who participates KNOWS what they’ve gotten themselves into — complete with their own aspirations to profit from this very thing.

      I follow both Gruber and Thompson regularly and, while they (Thompson especially) illustrate how we’ve gotten to the state that we’re now in, this still leaves this lonely argument of size that’s now become a twisted assumption of valid antitrust.

      All the while, iOS still has the minority of marketshare if we’re talking the true scope of THIS marketshare.

      I do understand that the accusations of uneven treatment may have legs and Apple has already been called to task about it but this can easily be addressed without regulatory intervention.

      Remember the old ad tag line, “Where’s the beef?”

      I ask, “Where’s the offense beyond mere size and success?”

      3
      August 18, 2020
      • “I do understand that the accusations of uneven treatment may have legs”

        We are in agreement! Esp. when Apple has a competing app that comes pre-installed and doesn’t suffer a 15%-30% tax.

        0
        August 18, 2020
        • Bart Yee said:
          @PED I would argue that ALL of Apple’s existing Apps, software and hardware and even services, looked at separately or combined, already are “taxed” and have a cost – namely the costs of sales and selling, General and administrative (SGA) operating expenses. In Q3 2020 that was $32.7B for products (70% of product sales) and $4.3B for services (32.7% of services sales), and SGA was $4.8B and we are not even counting R&D expenses of another $4.7B.

          Whether Apple says they are expenses or wants to show them as a “tax on itself” paid by the cost of the device and placing some value on the iOS software, and received by software services segment is accounting (maybe even sleight of hand in some people’s minds).

          But Apple, IMO, has to remind everyone that there is a CONSIDERABLE cost of creating, selling, and maintaining the hardware and software platforms physically, and the integrity, security, and privacy of the software which runs on it. These are real costs and Apple incurs then for the benefit of users, developers and itself.

          0
          August 18, 2020
      • Bart Yee said:
        Kirk, I will suggest the App Store is akin to the Irish Tax case. Apple used existing & codified tax & business laws offered by Ireland to craft its financial arrangements. Ireland and the EU agreed & encouraged it. Many other US companies did the same. 21 years later the EU decided it 1) needed revenues, 2) had to punish large American companies for “taking advantage” of EU laws & policies, 3) protect its own interests by essentially levying “tax tariffs”, & 4) political pressure from EU companies / countries who fell behind or bankrupted.

        Similarly, the App Store used 2008 American capitalistic cost models for running a store (physical or virtual) & charging return on investment for operating under guidelines clearly spelled out in its contracts. Companies, stores, competitors used the same model for >50 years, let alone the last 12 years the iPhone/App Store have existed. Now some developers want to RENEGE on their contractual agreements to bypass the agreed upon cost of doing business. Why? Same as the EU did, 1) they want more revenue for themselves, 2) “punish” the big American company which has gotten too big, even though THEY aspire to become ever bigger themselves, 3) overturn the “laws, business practices, & models” that had been & will be accepted practices in the US & elsewhere. 4) protect its own interests, see my next post.

        In the Tax Case, Apple has prevailed so far, and I believe the same will happen against Epic.

        2
        August 18, 2020
        • David Drinkwater said:
          “ Ireland and the EU agreed & encouraged it.”

          Not entirely correct. Ireland cut Apple a sweetheart deal that was NOT totally in compliance with EU expectations, all the while applying to the EU as a supplicant PIIGS nation for more money into Ireland than Ireland returned to the EU. That is why the EU tried to force Ireland to claim more in taxes from Apple: so that Ireland could repay the EU!

          0
          August 18, 2020
          • Bart Yee said:
            @David, maybe so, but 13 others of the top 20 companies using Ireland also for tax purposes are US based companies including Medtronic, Dell, Oracle, Microsoft, Google, Facebook, Allergan, Pfizer, Merck among others. There must be something to those Irish tax programs to attract that much foreign investment. Source, Wikipedia, Ireland as a tax haven.

            0
            August 19, 2020
        • Kirk DeBernardi said:
          @ Bart Yee —

          Thanks for your reply comparing the App Store brouhaha to Irish taxation.

          Which is it? Is it that Apple has done something wrong, or is it moreover that attitudes have changed.

          CRY: Apple makes TOO much money.

          DEMAND: I want MORE money

          CRY: Apple avoids TOO much in taxes.

          DEMAND: I want MORE taxation.

          The “2008 American capitalistic cost models” and the “existing & codified tax & business laws offered by Ireland“ you cite in your reply were/are probably just fine as is, thank you. Just don’t let the amounts applied get too big. Apparently size is the hinge-point justification for these crying demands of change.

          Who gets to decide that point of “too much”?

          All things being equal, apparently size DOES matter.

          0
          August 19, 2020
  5. Thomas Larkin said:
    Ironic that Epic is complaining about the percentage Apple charges (but not other platforms), only because it is presumably making a lot of money off of Apple’s platform (and saving overhead). Easy exposure to iOS users obviously has great value-and it’s because iOS users value curation by Apple for privacy and security. I’m very curious to see Apple’s and the court’s response to Epic’s request for an injunction; the first “inkle” as to where this might go, and first assessment of Epic’s supposedly brilliant “no prisoners – battle cry” strategy.

    0
    August 18, 2020
  6. Jerry Doyle said:
    My take: Tim Sweeney pursues a selfish, self-centered approach predicated on self-assured hubris from his company’s success, much of it derived from being on the Apple mobile platform. Hubris often causes one to lose sight of not planning properly for the aftermath of his actions taken for a desired outcome. Somewhere in this process Sweeney decided that he was smarter and more influential than all the rest. Sweeney has caused a self-inflicted mess that will have devastating results for him and his company. He believed erroneously, that he could rouse others to come together causing the dynamics to shift against Apple. It will not happen. The most likely outcome is an Apple victory since we now know that the Supreme Court historically has been pretty consistent in holding that companies do not have a “duty to deal.” Consequently, Tim Sweeney’s desire to sell essentially a frontal attack of choice against a company whose reputation is impeccable and whose ability to stand steadfast, formidable, will trump (no pun intended) what should have been prudent planning but instead has become what will be a Tim Sweeney self admission of error and miscalculation.

    2
    August 18, 2020
  7. Aaron Belich said:
    Fortnite is 3rd Person point of view (TPP) game, just correcting the typo of article. I don’t believe they support first person view (FPV), though typically such games are simply referred to as FPS- first person shooter games.

    0
    August 18, 2020
  8. Bart Yee said:
    From a recent CNBC article of Aug. 6,
    “Epic Games, the video game giant behind the hit title Fortnite, said Thursday that it was valued at $17.3 billion after a $1.78 billion funding deal…Epic said the investment included a $250 million strategic investment from Sony, which it announced last month.

    Epic announced that a number of new investors have bought into the company, including Baillie Gifford, funds and accounts managed by BlackRock, Fidelity, Lightspeed Venture Partners, the Ontario Teachers’ Pension Plan Board, funds and accounts advised by T. Rowe Price and hedge fund manager David Tepper. Existing backers KKR and Smash Ventures also increased their holdings, Epic said.

    Chinese tech giant Tencent holds a considerable minority stake in the firm” (40%)

    “Epic will continue to only have a single class of common stock outstanding and remains controlled by Sweeney, the firm said.”

    Now, could it be these investors have demanded higher rates of revenue return from Sweeney? Could they be activists playing both Epic and Apple against each other? And now we understand why no mention of same costs (30%) to be in the Sony PlayStation store (and other gaming console platform stores)?

    Always, ALWAYS, follow the money!

    1
    August 18, 2020
  9. Bart Yee said:
    Con’t from BI:
    “Since the launch of “Fortnite” in 2017, Sweeney has turned his attention to two major new ventures: Launching a digital gaming store in the Epic Games Store, and a battle with Apple and Google over “Fortnite” royalties.”

    From a different BI article on Epic Games Store versus Valve – Steam Game Storefront:

    “In the last eight months, Epic Games has taken its storefront from burgeoning underdog to serious competition. The way Epic has gone about that ascent has ruffled some feathers in the gaming community, and it’s resulting in unfortunate consequences for developers — the latest of which happened just this past weekend.

    For game makers, Steam is the largest PC gaming marketplace in the world — it offers massive exposure and a cohesive platform. And for Valve, Steam is a tremendously profitable venture — for every dollar spent on Steam, Valve gets a cut. Traditionally, that cut has been about 30%.

    Steam is the entrenched leader, and the Epic Games Store is the new upstart. It has far fewer features than Steam, far fewer games in its library, and — crucially — a much higher profit margin for anyone selling games.

    The most foundational way that Epic Games is taking on Steam is by taking a far smaller, 12% cut from anyone selling games on its storefront. And that is extremely attractive to game makers — so attractive, in fact, that Steam altered its revenue split shortly after the Epic Games Store launched in 2018.”

    0
    August 18, 2020
  10. Bart Yee said:
    “Previously Epic Games Store charged 30% but in 2018 reduced it to 12% and applied retroactively to 2014. Valve said that it would lower its usual 30 percent take to 25 percent for any game’s earnings beyond $10 million (including “game packages, DLC, in-game sales, and Community Marketplace game fees”). The platform fee reduces further to 20 percent for earnings that surpass $50 million.” Ars Technica

    The rest of the BI article discusses how Epic Game Store has tied up many “exclusive” old and new game titles by paying the developers up front for exclusive distribution on Epic, to the point of stealing some previously announced and pre-sold distribution on Steam. Now there is backlash on Epic’s exclusivity deals to the point of review bombing, bad press to those who tie into Epic, and positive press to those who decline Epic and list on Steam.

    “More meaningfully, if you’re an indie developer interested in bringing your game to the Epic Games Store and to Steam, Epic won’t allow that. The concept, known as “simship” or “simulatenous shipping,” isn’t allowed by Epic for smaller games. The game either goes to Steam, or it goes to Epic Game Store, but Epic won’t allow for both.”

    And there’s the matter of Chinese Tencent’s 40% ownership of Epic in this current climate.

    0
    August 18, 2020
  11. Bart Yee said:
    IMO, Sweeney is trying to build the same revenue model as the Apple App store but doesn’t have ANY costs of managing an operating system or supporting hardware or a physical sales and support structure, that’s why Epic can pay upfront and charge a lower rate. He simply has an electronic storefront, allows games to download, and takes 12% of the transactions.

    Frankly, I think Apple should just keep Fortnite and Epic off of the App Store and future Unreal developing for iOS. Epic (or its investors) can decide for themselves if they can deal with the direct loss of both those revenue streams. Apple should also stick to its policies and rate structure: Apple, like Google (Android Play Store), Microsoft (X-Box), Sony (PlayStation), Nintendo (Wii, Switch) are not obligated to change or discount their fees / ROI.

    Epic can decide to just go it alone on other platforms, forget iOS and deal with the consequences. Or they could partner with iOS jailbreak writers, offer Fortnite on a competing iOS App store for download, and deal with Apple voiding the warranties and OS updates of jailbroken iPhones. Let Epic support those gamer’s iPhones.

    Apple could introduce a competing game engine for iOS game development.

    Or Apple could just buyout all other Epic investors other than Sweeney for about $10B (that pesky upfront exclusive payout) making Apple the biggest minority owner and then just sit back waiting for Sweeney to explain it.

    0
    August 18, 2020

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