Apple vs. Epic Trial: Who Won?

In the aftermath of the Apple vs. Epic court trial, it became obvious who won this case right?

Epic obviously won. Right?

Hello?

It took me a while to get why so many game industry people are so insistent and dare I say dogmatic, about supporting a narrative claiming the outcome of the trial as an absolute Apple victory. So to try and check myself and get more context on the case I spoke with:

• David Hoppe, Managing Partner at Gamma Law Group, and
• Chris Hewish, President of XSOLLA

Panel Discussion on Apple vs. Epic Trial

Some Key Takeaways:

• “Under the court’s decision, Epic can at a minimum provide Fortnite users and users of their other apps with a purchase link in the apps that would go to the Epic Games Store. Depending on how you interpret the judge’s decision, they may be able to even include a side-by-side payment option for the Epic Games Store right in the app.”
• “In just the last month or so we’ve had multiple developments in the United States and other countries that suddenly make it seem that Apple’s and Google’s anti-steering policies won’t survive for much longer anyway. So the decision in this case requiring Apple to allow links to alternative payment methods in apps doesn’t have the impact that it would have when Epic v. Apple was filed. In that respect, Epic may not get the credit it deserves for taking on this issue over a year ago.”
• By the specific legal language, it’s not clear whether the original infraction that got Fortnite kicked off of the AppStore will now be permissible or not. As David notes even with 185 pages of legal language it was not specifically clear.
• Chris ran an informal LinkedIn survey about whether they believe AppStore would open up fully to all external payments, 65% of respondents believe that this will happen in 2 years

After some thinking, I actually can’t say if Epic won or not… but it’s absolutely not for the reasons that anyone else is talking about. Read to the end to find out why…

Well, Technically…

While most of the industry right now is interpreting the court case as a win for Apple, I think it’s dangerous to think in simplistic binary terms. I also feel there is too much of an academic consideration by folks like Ben Thompson at Stratechery. According to Ben:

The vast majority of Judge Yvonne Gonzalez Rogers decision in Epic v. Apple is both straight-forward and predictable; I wrote that the iPhone company would likely win when the lawsuit was filed, and argued that the law was firmly on Apple’s side in App Store Arguments. That is indeed what happened: Apple won, and it wasn’t particularly close; Epic has already filed an appeal, but I doubt it will succeed.

Just to be clear, I’m a fan of Ben Thompson and Stratechery but in my opinion, there is a big gap between this very academic interpretation of the court case and the perspective of a business person. Do we care about who got more points in the case?

Or, do we care more about what the business outcomes are going to be?

But even an academic interpretation should admit that based on the court outcome, conceivably Fortnite can go back to providing alternative payment options as they originally did. However, the link may have to be completed in an Epic Games web browser rather than in-app.

At least this is the current assumption, read on!

The Initial Fortnite App Store Infraction

• Note above that Epic also offered a 20% discount to Apple’s payment option

Remember, the payment page was also in-app:

I mean, this above payments page may as well have been a web browser page and it’s not like it’d be that difficult to get back to the app even when directed outside of game:

So Who Won?

Before making up your own mind about who “won or lost”, I think you should think for yourself and try to understand the specific details and business implications of this ruling.

Last August, when everybody was suggesting Epic had zero chance of success in their court case, I published a blog post called “An Epic Game of Chicken.”

The key point of that post was to articulate that the possible business outcomes Epic saw in moving forward with the case likely had very high positive expected value. Do we think the expected values readjusted today would be higher or lower?

Knock-on Effects

Also, remember all of the knock-on effects from the trial so far:

• App Store fees to 15% for all developers with less than $1M in annual net sales
• Reader apps allowed external payments link without using Apple payments in the week leading up to the trail
• Open App Markets Act introduced by Congress

There are also massive movements in Asia like South Korea. Further, multiple surveys seem to suggest that the majority of game developers believe we will continue to see additional externalization of the App Store. What would the survey results have been before the trial?

Would any of this have happened without Tim Sweeney bringing attention to Apple through the court case?

Who Do I Think Won?

Ok, I mentioned that after re-thinking, I’m not sure who won. But it’s not for the reasons people are talking about. I also think there’s a reason Tim Sweeney is still in war mode on Twitter… because many important aspects of the ruling were left ambiguous.

Thanks, government!

Getting to the point though, go back up and look at the initial Epic Direct Payments page. Note the 20% discount offered from Epic vs. Apple payments. I think Apple may try to pull a fast one here and try to disallow differentiated pricing or still charge their 30% fee.

• Note that the judge in the case DID NOT STATE that Apple can’t charge a 30% fee on gross. Therefore, even if Epic were able to include a side-by-side payment option with a discount of 20%, Apple could still try to enforce a 30% take from that lower discounted gross pricing.

One additional potential Apple tactic to watch out for:

• Walled garden hard currency

It’s feasible that Apple could further try to complicate Fortnite or actually any cross-platform game by accounting for “Apple vbucks” purchased via iOS and not enabling that currency to transfer to other platforms or accounts. This would likely not impact most game studios except for those with the newer generation of cross-platform games like Epic with Fortnite or Mihoyo with Genshin Impact.

Therefore, for me, it comes down to differentiated pricing. Will Epic be allowed to enable and retain differentiated pricing or not?

If Epic can offer differentiated pricing: Absolute win. ✅

What If Apple Pulls One of the Tactics Mentioned Above?

To be honest, I’m still tempted to say Epic achieved some kind of victory even if they get hosed on external payments by Apple. The current academic consensus is to technically look within the confines of the case itself.

But with momentum and shifting tides of public opinion, saying Epic lost is like saying Captain America couldn’t beat the Red Skull because while his shield bounced off of like 30 objects that then hit a rock that knocked out Red Skull, technically Captain America did not himself defeat the Red Skull.

So even if Apple disallows external payments in the original payment flow “somehow”, while I wouldn’t consider the court case an outright Epic win, I would probably call it a stalemate.

What do you think? Leave a comment and let me know!