Epic v. Apple: Round Two. Fight!

Much as Activision Blizzard have deservedly dominated video gaming news for the past few weeks (and look like they'll continue to do so), it bears remembering that ABK aren't the only video game company behaving badly. Tim Sweeney's Epic Games, who:

• agreed to list Fortnite on the Google Play Store last year, bringing it in line with Fortnite's already-existing presence on the iOS App Store...
• only to deliberately violate both of those agreements, resulting in being dropped from both stores... 
• at which point they launched two law suits, and the PR campaign which they had prepped and ready to go, apparently hoping that a wave of bad PR could bully both Google and Apple into caving rather than going to trial... 
• only to have Apple go the mattresses over the bad faith of the whole business, at which point Epic "salted the earth with subpoenas," apparently hoping to learn confidential details of the business practices of Valve and Microsoft, among others...
• only to have Apple's return volley of discovery uncover just how terribly the Epic Game Store is actually doing (spoiler alert: it's not making any money for Epic)...

yes, that Epic; they're still in court, and apparently it's now Apple's turn to start firing back, and whoo boy! are the details ever fun to read.

As reported by PC Gamer:

Various documents have been coming out from the ongoing Apple vs Epic legal case in the state of California, and here's a full rundown of the core of Apple's (pretty decent) defense [...] Apple's lawyers executed what one can only call a drive-by on the Epic Games Store, which Epic's lawyers had been claiming was comparable to the App Store.

"Epic Games Store is unprofitable and not comparable to the App Store" the lawyers began, rather bluntly, "and will not be profitable for at least multiple years, if ever." Ouch! 

Ouch, indeed! 

Apple's legal eagles are just getting started, though -- now it's time to break down just how far from profitable the EGS is:

"Epic lost around $181 million on EGS in 2019. Epic projected to lose around $273 million on EGS in 2020. Indeed, Epic committed $444 million in minimum guarantees for 2020 alone, while projecting, even with 'significant' growth, only $401 million in revenue for that year. Epic acknowledges that trend will continue in the immediate future: Epic projects to lose around $139 million in 2021."

[...]

"Epic lost around $181 million on EGS in 2019. Epic projected to lose around $273 million on EGS in 2020. Indeed, Epic committed $444 million in minimum guarantees for 2020 alone, while projecting, even with 'significant' growth, only $401 million in revenue for that year. Epic acknowledges that trend will continue in the immediate future: Epic projects to lose around $139 million in 2021."

[...]

"At best, Epic does not expect EGS to have a cumulative gross profit before 2027."

But wait! There's more!

Part of Epic's case against Apple is that it wants the ability to have the Epic Games Store on iOS, and the other reason it keeps bringing the store up is that Epic's commission rate on the store is 12%. This is rather neatly countered by the observation that, well, iOS and the Epic Games Store are two entirely different things: "While Epic’s commission is lower than Apple’s, it does not offer all the services that Apple provides. EGS is essentially a storefront—it lacks the integrated features that make the App Store a desirable platform for consumers and developers."

The Apple wonks end by pointing out that Epic's basis for claiming exclusionary conduct from Apple is that the iOS store was not designed to host other stores. Which, I mean, of course it was. "Epic’s allegations thus depend on the notion that Apple’s design and implementation of its own intellectual property can constitute exclusionary conduct. That theory fails as a matter of law."

Now, this is the part where I say, for the record, that I am not a lawyer. Even if I were a lawyer, it would Canadian law I'd be practicing, not California contract law. That said... that looks pretty devastating to me, as far as Epic's case goes.

As I said at the top of this post, I have serious problems with the way Epic went about bringing this suit in the first place. The obvious bad faith that preceded their removal from Apple's App Store just rubbed me raw; the fact that a PR campaign, aimed squarely at Fortnite players, for some reason, was all prepped and ready to go before the removal had even happened speaks pretty clearly to what their intentions had been right off the jump. As a matter of principle, I don't think the courts should be rewarding Epic for that behaviour.

The second problem deals with Epic's creative definition of the word "monopoly" in this context, one which even they admit is on shaky legal ground... while also admitting that current anti-trust law in the U.S. probably doesn't cover the App Store in its current form. So bringing an an anti-trust suit against Apple is, essentially, legally frivolous, since Epic knew from the outset that the law wasn't on their side.

That left only the claim that Apple's 30% cut of the proceeds of App Store sales was excessive and unfair... a claim for which Epic also had no evidence, unless one counts their own Game Store... which, yes, only takes a 12% cut, but is losing money hand-over-fist, with no end in sight for at least another six years. I can see why Epic want the California court system to order Apple, and Google, and Valve to chop their own revenues by two-thirds, reducing them from profitable businesses to money-losing enterprises that the EGS might hope to catch up to, but again, I don't think the courts should be rewarding Epic that richly for bringing what looks like an utterly frivolous, money-and-time-wasting legal action.

Ethically, Epic have acted in bad faith and deserve to lose this one. Legally, it looks like Epic have no case, and deserve to lose this one. And, given how weak Epic's case has looked so far, especially compared to the can of whoop-ass that Apple's legal team just opened up on them... I have a feeling that they're going to lose this one.

Prognostication

I'm calling it now: In the matter Epic v. Apple, the latter will prevail, and Epic will end up adding Apple's legal and court costs to their non-stop Game Store losses. The only reason Tim Sweeney isn't sweating the outcome of this doomed legal adventure is that he is Epic's majority shareholder, and thus can't be fired or reigned in by Epic's board of directors in any meaningful way.

Incidentally... Epic's suit against Google? It's probably weaker that their suit against Apple, since Google only allow the installation of apps outside of Google Play (Apple don't); Epic actually went that route, initially bypassing Google entirely, with no restrictions or retribution from Google over the matter. It's tough to argue monopoly when the alleged monopolist have gone out of their way to create and maintain Android as an open platform, on which users can do basically anything they want. I predict that Epic will lose that case, too.

And, yes, that thought does make me just a little bit happy. 

#FuckEpicGames

Updated Aug. 29th, 2021

We're still waiting for the judge to decide Epic v Apple, but in the meantime, and for people who find my layman's take on these matters less than satisfying, here's a much more expert opinion, from an actual lawyer:

An Antitrust Epic (Playlist)

Now, whether or not you agree with Richard Hoeg (I don't always), I did find it interesting that he had all the same problems with the details of Epic's case, and the ethics of Epic's approach to this matter, that I did. The "pot calls kettle black" nature of Epic, whose own Game Store has been profoundly anticompetitive from its inception, arguing that Apple's App Store is anticompetitive for doing much, much less, feels like hyperbole at the very least, if not outright hypocrisy, and I can't recall if ever I called that out, specifically.

VICTORY!!! After waging a very noisy, one-sided war against Google, Valve, and gamers, Epic Games has quietly surrendered

What a difference a year and a half can make.

And, yes, it has been only that long since Epic Games announced the very first EGS-exclusive title: Supergiant's Hades, an early-access game that announced at the Game Awards in December of 2018, and released the same night. That was only a few months after Epic declared that Fortnite: Battle Royale for Android would be side-loadable only from their own digital distribution channel, rather than just making the game available on Google Play like every other developer with an Android app to flog.

Tim Sweeney's Epic Games would go on from there to declare themselves to be so deeply opposed, on principle, to everything about Valve Software's Steam service that they just had to launch a competing service... which offered absolutely nothing to consumers that Steam didn't, and was actually missing a whole bunch of stuff that Steam users were used to. No worries, though, because Tim Sweeney had a plan: to embrace exactly the same platform exclusivity deals that he'd once called evil, back when Microsoft and Sony were profiting from them, and not him.

The message from Epic to gamers was crystal clear: fuck you, pay me. And gamers got the message; they heard Epic loud and clear... and, en masse, gamers refused to pay.