The big fight is on: Epic Games sues Google and Apple on Fortnite removal

The recent anti-trust hearings in the US Congress related to the growing market position of US technology turned into another dimension over the past 24 hours with Epic Games suing Apple and Google as two tech giants have removed the game Fortnite from their App Store and Google Play. Epic Games had long wanted to avoid paying the 30% cut for in-app purchases and recently Epic Games launched their own Epic direct payment solution using their own digital token called V-bucks. This circumvents the in-app payment solution on Apple’s and Google’s app infrastructure. This seems to be a violation of the guidelines on the App Store and Google Play according to this Gizmodo article, but Epic Games is challenging this with the CEO Tim Sweeney calling Apple and Google a duopoly that prevent consumers from getting lower prices and choosing their own payment solution. This opens a new flank in the whole anti-trust debate because consumer welfare loss is central in the interpretation of anti-trust laws.

Developers and companies are joining forces against Apple and Google

Epic Games fight with Apple and Google follows a recent public relations storm for Apple when the creators of a new email client Hey.com was rejected on the App Store if they didn’t allow in-app subscription and leaving no ability to update the email app. The negative media story hit just before Apple’s important WWDC20 developer conference and Apple ended up giving concessions to Hey.com.

This decisions by Apple and the recent anti-trust hearings in US Congress likely caused Epic Games to smell an opportunity, and both Spotify and Match Group (the company behind the Tinder app) have been out publicly supporting Epic Games’ decision. Netflix has also had previous fights with Apple over the App Store, so this campaign by Epic Games could snowball into something Apple and Google cannot control. Epic Games is 40% owned by Tencent and as a result the company has almost unlimited resources to fund the attack. With 350 million users Fortnite is one of the most popular games of all time and the main question for Apple and Google is whether consumers care about big companies’ fluffy words about protecting their app store and developing/maintaining costs versus consumers that just want to play games. Epic Games has prepared this for a while and part of the attack is a full-blown social media campaign centered around a video ‘Nineteen Eighty-Fortnite - #FreeFortnite’ spoofing on Apple’s famous advertising clip from 1984 warning computer consumers to fight against IBM which was dominating the industry.

It is Apple’s future that is at stake

Apple made $51.7bn in revenue from its Services segment in the last 12 months and Fortnite alone is estimated to generate $30mn in revenue per month. The Services segment is now 22% of overall revenue but 39% of total gross profit due to better margins and has single-handedly been the key driver in Apple’s market value as the free cash flow generation from this eco-system is better and more profitable for Apple. Besides Aramco which has a very little float, Apple seems to be on the verge of being the second company hitting $2trn in market value which happens if the stock price gains 1.7% more from yesterday’s close.