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May 20, 2021

Epic Games will probably lose to Apple, but it would be a shame for the industry

By MarketLine

The Epic Games versus Apple fight is now underway in court, US competition law is generally tough on the plaintiff so Apple will likely win, but great industry progress could be made if not.

The saga between these two tech giants occurred because of Fortnite owner, Epic Games, losing patience with Apple’s royalty demands on digital tech store content producers. Apple takes between 15-30% of all spending via its app store, apart from physical purchases.

Epic Games is estimated to have generated $1.2bn in revenue through Apple’s app store which effectively generated $354m for Apple according to Sensor Tower.

After a period of planning, Epic released its own payment method for the Apple store to bypass the cut, Apple predictably blocked it and then Epic took the firm to court. At present the fight is happening in the US courts but there are cases pending in Australia and the EU further down the line.

If Apple loses, the consequences could be quite transformative in the industry. Wiping out that 30% which companies arbitrarily give to Apple, could allow new digital industries to develop and the profits from digital sales to be better distributed to content makers.

Epic Games argues that Apple is functioning as an effective monopoly

Apple takes 15-30% of all economic activity, other than physical goods or orders via this system and iOS gives Apple an estimated $100bn dollars a year via the App Store.

Epic argues that producers and consumers of mobile content are forced into this system because of an effective monopoly. Google also runs a similar model and so whether via Android or IOS some one gets paid either way. Epic has levelled the same complaints at Google but has chosen to fight one battle at a time.

Epic has been running a publicity campaign through multiple outlets, including its own massive userbase to make Apple the villain. As a result of the lawsuit Apple has had to admit some embarrassing truths, that systems like iMessage are not available on android because it makes it harder for users to switch to android.

Apple argues it is not a monopoly and the benefits it offers to protect users and developers is worth the fee that is required. It states that these fees are its right to enforce, given that its brand draws in the massive number of mobile users that firms such as Epic want to target.

The argument boils down to the philosophy of what a mobile phone actually is

Is the mobile phone essentially a handheld computer that we can do what we like with because it’s our property, or is it a device that can only be used as the manufacturer allows us to based on what’s best for their profit margins. This question is fundamental to the court case and at present the latter is the case, but if the former can be established, it will allow significantly more technology freedoms.

If Epic loses, the outcome won’t be too severe for the company, it’s a fight it can afford to lose because a smaller number of its players are on mobile devices and the firm has significant financial stability.