An Epic battle with Apple (and Google)
Gaming has become an incredibly lucrative industry. I’m not talking about slot machines; this is the world of mobile, PC and console games.
Fortnite has more than 350 million registered players. To put that in context, there are around 330 million people in the United States.
Epic Games is the publisher of Fortnite and is worth $17.3bn after its latest round of funding, which added nearly $1.8bn to the corporate coffers. They will need the money, because they’ve decided to take the fight to the most valuable company in the world (Apple) and fellow tech giant Google.
Chinese company Tencent owns 40% of Epic Games and is having its own battles with the Americans over the banning of WeChat. However, this decision to take on Apple and Google appears to have been led by Tim Sweeney, the controlling shareholder of Epic.
He’s as American as a chilli hotdog and is worth over $5bn in his own right.
Removed from the app stores
If you are an Apple user, you cannot currently download Fortnite. If you are on Android, you can only download it somewhere other than the Play Store. This is because Epic Games poked the bears by deliberately encouraging players to pay it directly (and enjoy a 20% discount) instead of buying gaming extras through the app stores (which take a 30% commission on sales).
This is in direct contravention of app store policies.
Epic Games would obviously be better off as the discount is less than the commission. Players also win, spending 20% less on their favourite game. The losers, of course, would be Apple and Google.
App store ecosystems are already being scrutinised
The app store policies that prohibit payment circumvention are at the centre of major competition authority investigations.
Spotify is brawling with the tech giant in Europe, resulting in the European competition authorities investigating Apple’s policies. It’s interesting to hear the views of Spotify’s Chief Legal Officer, Horacio Gutierrez:
“At the heart of our case is the fact that Apple acts as the stadium owner, referee and player, and tilts the playing field in favour of its own services.”
The American antitrust (competition) authorities are all over these tech companies, addressing concerns that it has become near-impossible for any company to compete with the leading tech firms. The argument is that they have almost become too powerful for the public good.
It’s war – the non-virtual type
Fortnite is a battle game, but the action pales in comparison to this corporate clash. Fortnite is David and Apple is Goliath. The fight with Google is interesting too, but far less juicy than with Apple.
Epic, in a stroke of genius, is hitting Apple where it hurts: the court of public opinion.
This was a coordinated move. Within an hour of Apple removing Fortnite from the app store, a 62-page lawsuit was filed in Federal court by Epic Games. Even the world’s best lawyers can’t work that quickly.
The lawsuit doesn’t mince its words, either: “Apple has become what it once railed against: the behemoth seeking to control markets, block competition, and stifle innovation.”
On top of this, Epic Games fired up the PR machine and unleashed an onslaught on Twitter. #FreeFortnite became a top trend, thanks to a brilliant video that mimics Apple’s iconic 1984 advert about oppression from IBM.
From a public relations perspective, this is intensely powerful stuff.
Where to from here?
The problem is that Apple can’t just give in to Epic and neither can Google. These companies generate significant revenues from their app stores and it represents a powerful annuity underpin to the rest of the business (devices in the case of Apple and ad revenue in the case of Google).
If things don’t get sorted out, new phone buyers will have to decide whether having an iPhone or Fortnite is more important. That might sound silly to you, but Fortnite is huge among the younger generation.
Epic is certainly taking a risk here and I can’t help but wonder whether investors in the latest funding round knew about this plan. It feels like Epic raised cash knowing fully that this fight was coming.
Tim Sweeney, the founder of Epic Games, is 50 years old. He is fabulously wealthy. He clearly wants to make his mark on the tech world one more time by reducing the power in the hands of the app store owners.
Tim is a visionary. He’s willing to put it all on the line. The last time Apple dealt with someone like that, his name was Steve Jobs and he was on Apple’s side.
I have much higher financial exposure to Apple and Alphabet (Google) than I do to Tencent (indirectly via Prosus). Financially, I want Apple and Google to win and protect their businesses. They created the app infrastructure by investing many billions of Dollars and that can’t just be ignored here.
But, there’s always something romantic about the underdog. This will be a fascinating story to follow.
Eliminating opponents? Sometimes, life imitates art, rather than the other way around. It’s the most modern example we have of a Battle Royale.