UPDATED: May 4, 2021 17:26 IST
Apple and Epic Games are finally in the court to end a long battle that might decide the future of Apple’s App Store and how it operates. The Cupertino-based tech giant was challenged by Tim Sweeney, a billionaire game developer, who believes that his company’s popular game Fortnite was wrongly kicked out of Apple’s App Store last summer for flouting its rules on digital payments by establishing its own system.
The trial is expected to last over three weeks and if Epic Games actually go on to win, has the potential to disrupt the economics of the $100 billion app market and provide a way for millions of developers for skipping 30 per cent of their app sales to Apple.
How it all started?
Apple (AAPL) gets a 30 per cent cut of any in-app purchases on iOS devices and does not allow alternative payment systems. Even Google’s Play Store has similar commissions which had led to an uproar here in India last year, inspiring Paytm to come up with its own mini-app store.
The tension started when last year, Fortnite announced that players on iPhones will get a discount on items in the game if they completed the purchases outside Apple’s payment systems. This violated Apple’s rule and stopped it from collecting a commission on one of the world’s most popular games. Hours later, Apple kicked Fortnite off the App Store.
Epic Games sued Apple in a federal court. It also made a parody of Apple’s 1984 ad, depicting CEO Tim Cook as an evil corporate overlord with an apple for ahead. No other company or developer had challenged Apple so openly in the past. The fight is now in the federal court and its result is likely to have serious implications on the entire industry.
‘Fortnite is a social experience’
The hearing started with both companies trying to explain their business motives. Sweeney claimed that Apple’s strict control of its iOS ecosystem is like a “walled garden” which constitutes a monopoly. He said that Apple should allow alternative app stores, and potentially apps, on its devices outside of its own and what it approves.
He went on to describe Fortnite as a “metaverse” and a “social experience”. He said that it is a virtual world with movies, TV shows and concerts beyond just gameplay. It even argued that Apple locks the game developers in a closed ecosystem and charges them hefty fees for additional transactions.
Apple defended itself by saying that allowing apps on its devices that are not subject to its restrictions would compromise the security and privacy of its ecosystem. It said that it is competing in a massive video game market, does not have any monopoly and cannot abuse its position.
What happens if Epic Games wins?
If the trial is won by Epic Games, the app market may change forever. It will allow companies and app developers to avoid paying app stores both Apple and Google. It will also put Epic in a strong position for its upcoming trial against Google over the same issue on the Android App store. That trial is also expected this year and would be decided by the same federal judge.
A win may also initiate an antitrust fight against Apple. The tech giant is being watched closely for its control over the App Store and was recently charged in the European Union for violating antitrust laws over its app rules and fees. Apple also faces two more lawsuits about its App Store fees, both of which might be influenced by the outcome of the Epic hearing.
What happens if Apple wins?
It will further strengthen its position in the tech industry. Apple is already one of the biggest tech companies and a win will only help it grow. It will help Apple tighten its grip over mobile apps and silence the other voices of resistance. What may work in Apple’s favour is the fact that defining a market is key to an antitrust case. The businesses are allowed to have a monopoly in the US but, they can’t preserve it at the expense of competition. Apple’s biggest defence is that it is only of the few big companies in the gaming industry. Also, iOS competes with several other platforms and which makes it not guilty.