Level 65: Epic Games vs Apple (2020)

The brewing Apple App Store battle, Facebook's growing influence over Oculus, and the team behind Roblox's most popular server

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📜 This Week’s Notable News

Epic Games v Apple (2020)

Strap in, this one’s a doozy. 

Epic Games, creators of mega-hit Fortnite, have long been outspoken about Apple’s “monopolistic” App Store practices. Epic’s CEO, Tim Sweeney, has been especially vocal about his negative opinions on Apple’s decision to take a 30% cut of every purchase transacted via the Apple Store. Realistically, a company of Apple’s size and influence isn’t going to bend on this. The U.S. government is notoriously bad at managing tech-related antitrust practices, and the cost of taking Apple to court would easily be hundreds of millions of dollars. Lucky for us, who closed a $1B+ funding round a few weeks ago and is adamantly anti-monopoly? Epic Games. 

Which brings us to the events of last Thursday, August 13th. Follow timeline to get up to speed:  

(If you’re already familiar with the events, skip below to continue reading. If you aren’t, it's worth taking the time to click the links and get up to speed)

Thursday August 13th: 

3:07AM PST - The official Fortnite Twitter account announces the “Mega Drop” , a permanent 20% discount that allows consumers to circumvent App Store-led purchasing. It’s worth noting that the 20% cut comes directly from Epic’s profit margin, so Epic isn’t going to be raking in more money by doing this.

11:56AM PST - Apple responds by removing Fortnite from the App Store 

1PM PST - Two events happen concurrently:

  1. Epic Games releases a parody of Apple’s famous 1984 commercial, this time painting Apple as “Big Brother”. The resemblance in the new ad is uncanny and continues to run on loop via Twitch, YouTube and Twitter for the next 16+ hours. 

  2. Epic Games announces it will sue Apple for anti-competitive practices. The kicker? They don't even want any money, they just want “fair competition in markets that effects tens of thousands of app developers” 

4:56PM PST- Apple emails App Store users to remind them of all of the wonderful Not-Fortnite games they can buy on the platform. 

7:33PM PST - It’s announced that Epic Games is suing Google for the same anti-competitive practices. Google responds by also pulling Fortnite from it’s app store. 

There are two sides to every argument, and both are compelling in this case.  Let’s examine why Epic might do this and how Apple ended up in this position

Epic Games: IP Funnels & The Apple Tollbooth Theory

Epic Games has investments across the entire gaming industry, including a game engine, game studio, game publisher, and game store. Simply put, they have the resources to own the process Apple provides them from end to end on their own. One line of thinking, popularized by industry analyst Matthew Ball, is that Epic’s wide-reaching investment strategy is all about increasing the total size of the gaming industry. After all, with influence in every corner of the industry, a bigger industry means more money for Epic.

The other point of note is that Epic Games is different from traditional mobile companies in that the App Store isn’t the primary entry point for its content. In fact, Fortnite was already a worldwide phenomenon by the time it launched on mobile. In this regard, the 30% fee that Apple charges Epic and other media companies (like Netflix) who already have other entry points to their content feels a lot more like what Eric Stromberg refers to as a “tollbooth” than a proper service worth paying for. 

Apple: “It’s My App Store I Can Do What I Want To” 

As Stratechery’s Ben Thompson put it, “Apple’s business model is designed to be anti-competitive”. The company has always been about making users do things Apple’s way if they want access to Apple products. It makes sense that this logic applies to the App Store too, particularly considering Apple is handling all of the payment processing, account management, and customer support. Benedict Evans, another popular newsletter author, has been adamant about the core benefit this provides to users: a single centralized point for the action. If Apple goes through the effort to manage the entire App process end to end, from development tools to payment, don’t they deserve some type of kickback on the process? 

This story is very much continuing to develop, with Apple announcing earlier this week that they will pull Epic Game’s access to all of their development tools if they don't withdraw their legal claims (which could have far reaching implications to all of the developers who rely on Epic’s game engine). It’s becoming more clear that Epic is prepared to make as much noise as possible with this lawsuit until they get their way, and clearly the plan is working so far.  

Further Reading and Analysis From Industry Experts:

  • Business Essayist Ben Thompson on Apple’s Competitive Stack Link

  • Venture Capitalist Benedict Evans on Being Pro-Apple Link

  • Epic Games CEO Tim Sweeney on Why He’s Doing This Link

  • Industry Analyst Matthew Ball’s six-party Epic Games Primer Link

💡 Industry Content

Virtual Reality, Now Sponsored by Facebook: Earlier this week, Oculus announced that all consumer products will require Facebook logins by 2023. The move upset fans, many of whom have deep mistrust for the social media giant that purchased Oculus for a reported $2B back in 2014. In what seems to be an already slow-growing field, it seems strange to add additional gatekeeping layers that might drive consumers to alternative platforms. Link

How to Launch and Grow a Mobile Game: This deconstruction of mobile strategy-title Battle Legion looks at how the game effectively developed its core gameplay loops, engagement, and monetization structure. Dethroning historical mobile giants like Clash of Clans require excellence on all three fronts, and it's particularly interesting to see how mobile gaming strategy has developed over time. Link

🎮 Fun & Games

Building in Public: Every good game starts as an idea. A simple mechanic, character, or design element that can go on to spark creative endeavors that change popular culture for years to come. But very rarely do we see the journey from idea to game laid out in front of us. In this journal-esque Twitter thread, follow indie game developer Dave as he develops an idea he had in early 2019 into a full-fledged game called Mixolumia (that you can buy!) over an 18 month period. Link

Flying Around the World: IGN’s review of the newest edition of Microsoft Flight Simulator. It’s a monster of a game at a 94 metacritic rating (tied with TLOU2!) and 150 gb file size. Link

Being a Women In Professional Gaming: In this feature, Vice explores what it means to be a professional female gamer. Comments like “women can’t be good enough” or women are “stealing a spot from someone more qualified” run rampant across video games. It’s important to hear these perspectives in order to understand how we can be better allies. Link

😎 Other Cool Reads

Roblox: Lots and lots of attention going to Roblox these days, and specifically about the developers powering the games. One such game, Adopt Me, a sim about adopting pets, has logged billions of sessions and is Roblox’s most visited server, outperforming the number of  concurrent users (peak was ~1.6M) seen on most AAA titles. This is a look into Adopt Me’s 30 person (and growing) development team, their relationship with Roblox, and the popularity around the hit title. Link

The Wild West of Music: A few weeks ago, we touched on the growing influence that copyright claims are having on gaming live streamers. Content creators are having their livelihood erased for including 30 second clips of broadcasts nearly two years due to copyright issues. This piece looks directly at the creators impacted by the new legal enforcement and gets their perspective on where music in streaming can go. Why now and why this? Link

Dev + Data Series: This video is the most recent in a series that brings a consumer-friendly approach to how games are built. Written and animated by Riot Games developer Blaustoise, this video explores how online matchmaking works. Link

📊 By The Numbers

$420,069.69: The current highest bid for indie smash-hit Fall Guys’ charity fundraiser. The highest bidder will earn the right to release their own in-game skin, with bids already coming from Ninja, G2 Esports, AimLabs, Mr. Beast, and others. Link 

$1,000,000,000: The amount of gross revenue generated by Free Fire, a mobile battle royale that is popular in the Latin American and Southeast Asian markets. Link

😍 Our Current Favorites 

Fawzi (@fawzitani

SOS. I hope I’m not the only out here trying to balance the intense four-game-a-day NBA playoff schedule with the League of Legends LCS playoff schedule. I literally have two screens going at all times, bleeding #rednation for the Rockets and green for Flyquest.

Max (@MaxLowenthal)

When we joined Substack, gaming had a tiny presence on the platform. One of the other major publications that immediately caught my attention was Game Discoverability Now! — a look into how to get your game noticed, written by long-time games industry expert Simon Carless. Over the last year or so, Simon’s newsletter has been filled with lots of interesting tidbits, including his recent breakdown of how much money developers actually make when selling a game on Steam. The newsletter is an interesting, well-rounded view on how games are brought to market, check it out. Link

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