Witnessing a moment of clarity... Unity edition

I hadn't spent much time commenting on Unity's attempted self-immolation of last month, mainly because I didn't really have much to add to the conversation.

Unity, for those that still somehow don't know, is the single most-used engine for game development, with something like seventy percent of Steam games being based on Unity, and an overwhelming presence on Android and iOS. Unreal, the second-most-popular game engine, has less than half Unity's presence on Steam, and no presence at all on iOS anymore, thanks to their "Project Liberty" stunt, and the Epic v Apple lawsuit which followed.

EPIC'S ROLL OF THE DICE COMES UP SNAKE EYES: Judge Gonzalez Rogers rules against the Fortnite publisher on almost every part of their lawsuit with Apple

The verdict is in: The iOS App Store is not a monopoly under the Sherman Act, Epic owes rent for having kept Fortnite on the App Store for months without paying for access to Apple's customers, and the amount owed is 30% of all revenues collected outside Apple's In-App payment system. Also, Apple don't have to put Fortnite back on the App Store, and can go ahead with cancelling Epic's developer accounts, which could push Unreal Engine games out of the App Store, permanently.

On the plus side, developers other than Epic can use other payment collection services now, and can tell customers about those other options in their apps (and link to them from the apps), but Apple has not been ordered to give away access to the App Store for free. Apple is still owed; not only can they continue to charge for access, they can charge whatever fee they wish for that access, specifically including the 30% that Epic was calling excessive and unfair. Epic, of course, are not going to benefit from this point of the ruling because Fortnite is not on the App Store, and the ruling did not enjoin Apple to restore Fortnite to the App Store.

That's the substance of the ruling which just came down from Judge Yvonne Gonzalez Rogers. Apple cannot put themselves between developers and their customers; the 30% App Store fee, however, is still legal, and very much in force, as evidenced by the fact that Epic are being ordered to pay 30% of all monies earned by their iOS app during the months when the app was still available in spite of Epic being in breach of the App Store's Terms of Service.

Be very clear on this point: If Apple is hosting your app on their App Store, thus giving you access to the ecosystem which they built, and which they constantly maintain and improve at considerable cost, then Apple can legally charge you a 30% fee for that access. They just can't intercept all of your revenue in order to deduct that fee, something which they'd largely already stipulated in the other lawsuit which was settled a couple of weeks ago.

So yes, Apple is correct in claiming that this ruling definitively exonerates the app store/walled garden ecosystem business model. The iOS App Store is not, in fact, a monopoly under the Sherman Act, and not a target for antitrust action under that Act.

Apple could appeal the injunction which orders to them to allow developers to use other payment methods, but I don't expect them to; they had already agreed to do basically all of this already, in that other case which was settled in front of this same judge. Apple are not losing anything here which they hadn't already decided to let go.

The same is not true of Epic. Apple do not have to do business with Epic, in any capacity; not only that, but they owe Apple money, since they're in breach of their contract and spent months refusing to "pay their rent." Tim Sweeney has clearly bet the farm on this dice roll, and clearly does not have a viable business with a loss this complete on the book, so I am not at all surprised to see that he is losing his shit over how badly this ruling went against him.

Epic will definitely appeal this ruling; they've already said as much in statements. I don't expect that appeal to go any better than the initial lawsuit did, though, since Apple is not in violation of the Sherman Act, and can't be forced to do business with a company that apparently is not above signing agreements in order to breach them, so that they can use that breach as a pretext to sue.

IGN has a reasonable take on the ruling:

A judge has finally ruled in the Epic vs. Apple lawsuit, most notably issuing an injunction in Epic's favor that forces Apple to permit developers on its platform to link to outside payment options within their apps.

[...]

However, this was the only point on which Epic won its case. The court's final order [...] declared it "cannot ultimately conclude that Apple is a monopolist under either federal or state antitrust laws."

[...]

Apple did counter-sue Epic for breach of contract, and the judge ruled in favor of Apple on this point. The court has ordered Epic to pay out 30% of the $12,167,719 in revenue Epic collected from users in the Fortnite app on iOS through Direct Payment between August and October 2020, plus further damages. In total, Epic will pay Apple at least $3.6 million.

Hoeg Law has another, better take on the ruling, from the point of someone who actually practices law, for anyone who's willing to stare at the text of this ruling for two-and-a-half hours while Phil Hoeg reads and explains it.

Prognostication time

I guess it's time to grade my earlier prognostication on this one, in which I predicted that Epic would lose, and badly; that Epic would end up paying damages to Apple afterwards; that Apple would not be forced to give developers free use of their App Store; and that Apple would not be arbitrarily forced to reduce the App Store's 30% fee. I don't know that Epic will end up paying Apple's legal fees, though; otherwise, I was correct across the board.

I'm calling that an A.

And yes, I'm still expecting Epic to also lose Epic Games v Google, in a similarly resounding fashion. I'm not expecting any court, anywhere, to force Google, or Valve, or any of the Epic Game Store other competitors to basically cease being viable businesses simply because Epic haven't yet figured out how to make a viable digital distribution channel of their own.

Update:

I finally made it all the way through Hoeg Law's two-and-a-half hour video, and can confirm (a) that I'm very glad to have not pursued law as a career, because OMFG, do I ever not want to read 185 pages of mostly padding in legalese, and (b) that Epic will not be paying Apple's legal bills. I've therefore knocked a point off my prognostication grade, from A+ to A. Better you than me, Phil Hoeg; I can only imagine how much work it was to read through all 185 pages of this fucking rock to find the nuggets of gold, and I do appreciate it.

Another point of clarification: while Judge Gonzalez Rogers' ruling didn't specifically disallow the 30% fee that Apple charges for access to the App Store, while specifically ordering Epic to pay for the revenues collected from the iOS Fortnite customers at that same 30% rate, she wasn't particularly convinced by the Apple's attempts to justify the 30% rate. Hoeg Law's video notes several places where Gonzales Rogers calls out Apple for not really having any clear justification for the 30% number; she just declined to mandate a change to some other rate, since she didn't have enough information to decide what that rate should be.

Another thing which becomes clear on hearing two-and-a-half hours of the decision's text is the extent to which Gonzalez Rogers really didn't like Apple or their business practices, and really wanted to rule against them... and might have, had the plaintiff been anyone other than Epic Games, who were bringing the suit only after having deliberately, and needlessly, breached their contract with Apple. There is a lot of the text of this decision which is basically giving other potential litigants, e.g. NVidia, or Microsoft, hints about the lawsuits that they could bring, and the sorts of arguments that might have been made which she'd have ruled in favour of, if Epic had thought to make them.

There was a lot of shade thrown at Epic's "expert witness," too; if that guy's career as a paid expert witness isn't ended by this ruling, then I can only conclude that all of his clients are stupid, and deserve to loose any lawsuits that he's contributing to.

Phil did disagree with me on one point. He assumes that both Epic and Apple will appeal the parts of this ruling that went against them, with Apple appealing the injunction that Gonzalez Rogers based on California law, but declared must apply nation-wide, and Epic appealing basically everything else. Epic have already announced that they will, indeed, appeal the nine points of ten that went against them, declaring that they will fight on, and also hilariously that they will be bringing Fortnite back to the App Store, at least in South Korea, as if Apple don't have a say in that, for some reason.

Apple, for their part, have not decided yet whether they will appeal or not. I still don't think it would be worth their while to appeal an injunction that gives them the rest of the year to do, nation-wide, things that they've already agreed to do elsewhere, or been mandated to do in other jurisdictions (like the aforementioned South Korea). I think Apple might just let this point go; Phil Hoeg, who is a corporate lawyer, thinks otherwise. I stand by my prediction, though, so we can add this to the prognostication list for when Apple do decide what they want to do here.

Epic's other other problem

When Epic announced that their digital storefront would be opening itself up to games from other publishers in a bid to eclipse Valve's Steam service, the general reaction from developer-friendly games media outlets was positive. People who spent a lot of time talking to developers, and none at all talking to average consumers, were convinced that Steam was desperately in need of a new competitor, one that would somehow succeed where GoG, Origin, Uplay, and even Microsoft's built-in Windows 10 storefront had not.

The assumption, one which even Epic seemed to share, was that Fortnite had given Epic a large enough base of customers that could be leveraged to take market share away from Steam, while their richer-for-developers revenue cut would necessarily pull disgruntled indie devs away from the more established platform. I have doubts about both points, of course, but it turns out that we're didn't need to wait all that long for the loyalty of Epic's customer base to be tested. The test has come in the form of a competing game: Apex Legends, which combines Battle Royale and Hero Shooter gameplay into a package that's become the top game on Twitch, dethroning Epic's Fortnite less than a week after its launch.

This is the customer base on whose loyalty the success of Epic's storefront depends, already abandoning Epic in favour of a newer, shinier game that is every bit as finished and polished as Fortnite, but with the more conventional look and gameplay of the Titanfall series. These are the customers that are supposed to abandon Steam, which they've been happily using for years, and buy into yet another ecosystem, even though that ecosystem offers nothing by way of features that are absent or inadequate on the platform they already use.