Both sides win and lose in judge’s Epic Games vs. Apple ruling around App Store payments

“Fortnite,” by Epic Games. (Bigstock Photo)

A federal judge ruled Friday that Apple can no longer prohibit individual developers from offering their own independent payment options in the iOS App Store. However, the same judge also stopped short of declaring Apple a monopoly, which foiled one of the primary points brought in a suit by Epic Games.

That’s the short version of the judgement on Epic Games vs. Apple, which was delivered in a Northern California District Court on Friday morning. Both sides got some of what they wanted, which could lead to a lot of big changes in how modern mobile marketplaces conduct their business.

Under the terms of the injunction, developers of iOS apps store no longer have to go always through Apple’s systems for payment processes. Apple is no longer allowed to delist or otherwise penalize the makers of apps that include options by which a customer could pay those makers directly, such as external links.

The changes have 90 days to go into effect, until Dec. 9, unless stopped by a higher court.

However, Judge Yvonne Gonzalez Rogers did not rule in favor of Epic’s contention that Apple’s control of the App Store is enough to legally qualify as a monopoly. The judge did find in favor of Epic in that Apple engages in “anti-competitive conduct” under California law, but Apple’s processes were not found to be monopolistic.

North Carolina-based Epic Games, which has offices in Bellevue, Wash., originally filed its suit against Apple in August 2020, Testimony during a May trial divulged a lot of information that would ordinarily be kept under wraps, such as Microsoft’s profit margins on individual Xbox sales, which made it a big story in tech circles.

Epic is the primary publisher and developer behind the hit free-to-play game Fortnite, as well as the popular Unreal Engine software. While Fortnite can be downloaded and played for free on all of its available platforms, players have the option to buy extra amounts of Fortnite‘s in-game currency, V-Bucks, for actual money.

V-Bucks can be exchanged in-game for exclusive but cosmetic items like special outfits or character animations. The sale and use of V-Bucks is the primary way in which Fortnite makes money, and reportedly brought in $9 billion for Epic over the course of 2018 and 2019.

“Fortnite” characters in Seattle Sounders FC uniforms. (Epic Games Image)

Under the present terms of both the App Store and Google Play, both storefronts take an automatic 30% cut of all revenue that’s generated by or within apps. Further, as part of the terms of service, any app with in-game purchases, like V-Bucks, was forced to go through the storefont’s payment system.

That 30/70 split, which was the industry standard for years across all digital storefronts, has historically rubbed Epic CEO Tim Sweeney the wrong way. It was a non-trivial part of why the Epic Games Store, launched in 2019, offers an 88/12 split to developers instead.

In Aug. 2020, as part of a larger plan that Epic called “Project Liberty,” it implemented a 20% price reduction on V-Bucks across every version of Fortnite, but only for players who went directly to Epic for the sale. Users who went through Apple or Google wouldn’t get the lower price.

Both Apple and Google, as one might expect, immediately delisted Fortnite from their respective storefronts. Epic then filed separate lawsuits against both companies, alleging antitrust and anticompetitive behavior.

The Google lawsuit has ended up being a story all its own, which has revealed a startling amount of crazy accusations against Google. It has not yet gone to trial.

The Apple suit, conversely, may have begun the process of tearing down the walls around the iOS garden, so to speak. Apple has previously used its control over the store’s rules to create some incredibly specific policies, such as those that it used last year to keep Microsoft from directly launching an Apple version of the Xbox Game Pass.

Now, other big companies could theoretically bring their apps directly to the iOS marketplace without going through Apple’s systems. The ruling caused Apple’s stock to take a 2% plunge on Friday, according to CNBC.

Today’s ruling isn't a win for developers or for consumers. Epic is fighting for fair competition among in-app payment methods and app stores for a billion consumers.

— Tim Sweeney (@TimSweeneyEpic) September 10, 2021

It’s hard to see this as any kind of win for either company. Epic had hoped to force Apple to relax its restrictions entirely, and didn’t get that. The “Project Liberty” sale was also found in the judgement to be a violation of Apple’s terms of service. Epic has to pay Apple a fee equivalent to 30% of the money it made off of selling V-Bucks on iOS between last August and now. It adds up to over $3.5 million.

However, it did open the door for big players to go around Apple entirely for their products on iOS. Any mobile game that offers in-app purchases, such as Valve’s Dota Underlords, can now offer cheaper prices or other perks if players go directly to its developer, which could theoretically cost Apple billions. Epic got something out of this.

An Epic spokesperson reportedly told NPR late on Friday morning that the company plans to appeal the decision.

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