How Epic Games breached Apple’s App Store dominance

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Last August, video game developer Epic Games released a new version of the iPhone app for its popular online game Fortnite, with a mysterious but important update. The in-game menu now offered two options for purchasing its in-game currency, V-Bucks: purchase through Apple’s App Store for the regular price of $ 9.99, or through a new “Epic Direct Payment” priced. reduced, for $ 7.99. By making this change, Epic was deliberately in violation of Apple’s App Store regulations. The company requires all so-called in-app purchases to be made through Apple, which typically results in a flat fee of 30%.

But Epic’s provocation worked. Apple, recording the infringement, quickly pulled the Fortnite app from its marketplace, giving the game developer an opportunity to sue for antitrust and anti-competitive behavior. (Epic did the same with Google, which removed Fortnite from its Google Play Marketplace for the same reason.) This act of strategic legal trolling last week paid off when the trial ended and Judge Yvonne Gonzalez Rogers made a surprising and rare decision against Apple. The company would no longer be able to ban developers from using their own payment systems through iPhone apps; other “buying mechanisms” would be allowed, she wrote. In other words, when the decision goes into effect, in three months, Apple will no longer have full control over how users pay for purchases through iPhone apps.

It may sound like an administrative baffle issue, but it has major implications for users and developers. Since Apple launched its App Store in 2008, any money spent on or through apps, whether it’s, for example, a Tinder subscription or extra lives in Candy Crush, has been subject to penalties. thirty percent charge. To avoid giving this cut to Apple, some companies have made subscriptions unavailable through their apps. You can only access the Netflix app, for example, after signing up through a separate web browser. Once the court order goes into effect and developers can use their own payment systems from in-house apps, Apple’s tightly sealed ecosystem will appear a little less impervious. The digital economy will see more vigorous competition, the absence of which is becoming a global concern. (Earlier this year, Apple cut App Store fees to 15% for developers earning less than $ 1 million per year, but those accounts represent the minority of overall App Store revenue. )

This regulation is especially important as many tech companies act more like App Store-style marketplaces as they rush to create “the metaverse,” a kind of cross-platform interactive virtual domain. Any version of the metaverse is also by definition an economy, in which users can purchase various digital products and access them on the digital platforms of their choice. Apple’s App Store may be the closest thing to a metaverse we’ve got so far – you can already use it to buy all kinds of digital experiences, which follow you. from phone to phone. But a centralized payment system like Apple’s, which benefits the platform more than the creator or user, discourages the kind of openness and portability upon which the concept of the metaverse is based. Before Epic’s trial, Tim Sweeney, the founder of the company, had already mobilized against the restrictions of the App Store. By obstructing transactions with third parties, he tweeted last August: “Apple has banned the metaverse.”

App Store fees are akin to a digital import tax. Businesses that oppose it may just want to create their own rates. Epic itself already operates a marketplace called the Epic Games Store, for example, and charges a flat rate of twelve percent for developers who sell there. The Roblox video game platform takes up to 75% of the revenue and pays its developers (many of whom are children) using its in-game currency, Robux. Some of the larger cryptocurrency-focused companies, like the non-fungible tokenized OpenSea website, are also marketplaces. In the predicted era of the Metaverse, each of these companies would look a bit like a virtual version of Amazon, providing not only their own products, but entire ecosystems in which other companies could sell theirs as well. The Epic Games v. Apple provides the beginnings of a legal framework for this future.

The judge’s decision goes in the direction of openness, but not too far. Epic would have preferred not to pay any fees to Apple, but Gonzalez Rogers felt that Apple was justified in charging for the use of its App Store. Otherwise, it would suffer from “unpaid use of its intellectual property,” she writes: Apple has invested in the infrastructure of the store, so it should be paid for it. On the other hand, Apple’s “anti-leadership” policy, which prohibited developers from informing their users of Apple’s fees, let alone avoiding them, has been found to be illegal. Running a marketplace is good, as is kicking out those who don’t follow the rules, but marketplace customers cannot be tricked into using only Apple’s tools instead of their own.

Still, Epic lost as much in the decision as they won. (The video game company is now appealing.) Gonzalez Rogers has determined that Apple’s App Store is not, as Epic has accused, a monopoly, at least not yet. According to the decision, Apple controls fifty-five percent of transactions in mobile games and is “near the precipice of substantial market power.” What keeps it from monopolizing the industry is the significant competition posed by Nintendo and the cloud gaming service Steam. While Apple and Google certainly have a duopoly over telephone hardware in the United States, they are grappling with a growing number of alternative digital markets. Gonzalez Rogers estimated that the mobile games market is worth a hundred billion dollars a year; Apple will now have a little less control over it.

From a user experience perspective, the decision could have immediate benefits. Netflix, for example, will be able to introduce a direct subscribe button in its app and offer a discount to encourage its use, like Epic did with V-Bucks. The changes may not be entirely practical. App interfaces could become more complicated or less secure as developers introduce their own payment methods, sending users to website pop-ups instead of frictionlessly applying payment information saved in the App Store. . Nonetheless, this will make digital business models more sustainable. If Gonzalez Rogers’ decision is any indication, the Metaverse will not be monopolized.


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