Republica Press

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REPUBLICA PRESS
Your Business & Political News Source

Apple and Epic Head to Court Over Their Slices of the App Pie

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One Friday last August, Tim Sweeney, a billionaire game developer, sent an email to a contact at Microsoft: “You’ll enjoy the upcoming fireworks show.”

A week later, Mr. Sweeney’s game Fortnite delivered good news to players on iPhones: They would get a discount on items in the game if they completed the purchases outside Apple’s payment systems.

The change violated Apple’s rules and cut the iPhone maker off from collecting a commission on one of the world’s most popular games. Hours later, Apple kicked Fortnite off the App Store.

immediately sued Apple in federal court. It also began a public-relations broadside that was months in the works, complete with a trending #FreeFortnite hashtag and a parody of Apple’s iconic “1984” ad depicting Apple’s chief executive, Tim Cook, as an evil corporate overlord with an apple for a head.

up to 30 percent of their app sales to Apple.

An Epic victory would also invigorate the antitrust fight against Apple. Federal and state regulators are scrutinizing Apple’s control over the App Store, and on Friday, the European Union charged Apple with violating antitrust laws over its app rules and fees. Apple faces two other federal lawsuits about its App Store fees — one from developers and one from iPhone owners — that are seeking class-action status.

Beating Apple would also bode well for Epic’s upcoming trial against Google over the same issues on the app store for Android devices. That case is expected to go to trial this year and would be decided by the same federal judge, Yvonne Gonzalez Rogers of the Northern District of California.

has also said he was OK paying commissions to companies like Microsoft and Nintendo because they sold their gaming consoles at or below cost and depend on the commissions, while Apple earns wide margins on all parts of its business.

created an alliance with other app makers “to ensure we’re not the only voice,” according to an Apple court filing. Epic named the effort Project Liberty.

Last June, Mr. Sweeney emailed Mr. Cook and a few of his deputies, asking to release a competing marketplace for games on the iPhone and to use Epic’s own payment system instead of Apple’s, enabling it to circumvent Apple’s 30 percent cut.

Apple’s lawyers responded, writing that the company wouldn’t turn the App Store “into a public utility.”

its own feud with Apple, had been scheduled to testify but dropped out.

Apple has accused Epic of looking for a free ride. The game maker has not gone after other companies that distribute Fortnite. Microsoft, Samsung, Sony and Nintendo all charge the same commissions on games, according to a study funded by Apple. That study did not note that Apple popularized the 30 percent rate with the App Store in 2008.

In response, Epic has pointed to the commission it charges in its own marketplace for game developers: 12 percent.

halved its commission to 15 percent for developers that make less than $1 million on their apps. That new rate applies to about 98 percent of the developers that paid Apple’s commission, according to estimates from Sensor Tower, an app data firm.

Yet it hardly affected Apple’s bottom line. According to Sensor Tower, more than 95 percent of Apple’s app revenues come from companies paying the full 30 percent rate.

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