Fortnite has been much-talked-about globally for its compelling storylines, exciting gameplay, and amazing interface. Recently, Fortnite was in the news again, but for an entirely different reason.
Epic Games, the creators of Fortnite, have initiated lawsuits against two of the biggest tech companies in the world – Apple & Google. The lawsuits have created a massive ripple in the app world and have affected the value of stocks and shares CFDs of the companies involved.
What are the lawsuits about?
Both Apple and Google have dedicated app stores where developers can publish content and reach a larger audience. Developers who get to publish on the AppStore and Play Store get access to the companies’ app development tools, security features, and payment gateways. In exchange for these services/facilities, the tech giants charge developers a commission of 30% for every in-app purchase made by customers. Any developer refusing to comply with these rules will be banned from publishing on AppStore and Play Store.
This is the crux of the lawsuits.
According to Epic Games, Fortnite has always been a game by common people, for common people. Customers can download the game for free and can pay to upgrade their players’ clothing, weaponry, vehicles, and more. The idea of making the game free with minor fees is not just to make the game affordable, but to ensure that developers receive their rightful share of the sales proceeds.
With Apple and Google charging a whopping 30% of in-game purchases as commission, Epic Games believes that developers are being cheated of their due. Additionally, with Apple and Google having a near-monopoly on the app market, they leave developers no choice but to agree with the 30% commission or risk losing access to millions of paying customers.
Epic takes justice into its own hands
A few days prior to filing the lawsuit, a disgruntled Epic Games took matters into its own hands and set-up a payment gateway for Fortnite that bypassed Apple and Google’s payment systems. Customers could directly pay a discounted price on Epic’s website and avoid the high processing fees.
This move received the tech giants’ backlash, and both Apple and Google removed Fortnite from their stores within hours. Apple retaliated further by threatening to ban the Unreal Engine code on their platform, a move that would wreak havoc on Epic’s entire business line.
In retaliation, Epic Games filed a lawsuit against Apple and Google, stating that the tech giants had unlawful and monopolistic practices that created a toxic environment for developers and customers alike. Epic hasn’t sought any monetary compensation, but only wants the companies to do away with their harsh commission charges. Their recommendation – charge what other payment gateways like Braintree, PayPal, and Square charge for in-app purchases – a mere 3%-5% as processing fees.
At the moment, Google’s lawsuit is yet to begin. But Apple’s litigation is in full swing at the North District California Court.
The second lawsuit filed by Epic was against Apple for its threat against the Unreal Engine. Epic won this lawsuit, and Apple was forced to restrain from further action.
Other companies and regulatory agencies in support of Epic Games
Epic Games’ audacious move has received much commendation and support from other tech giants like Spotify and Match Group, who have also been victims to Apple and Google’s high commissions.
International regulators aren’t far behind, and the European Union has already started its inquiry into Apple’s monopolistic practices. Last year, the EU fined Google $5 billion for monopolizing Android devices with their apps.
US regulatory agencies too have followed the EU’s example, and Congress has been actively investigating Facebook, Alphabet, Amazon, Microsoft & Apple for compliance.
Apple’s lawsuits might topple revenues and share prices
Apple’s Epic Games lawsuit is just the tip of the compliance scrutiny iceberg. Having been slapped with multiple antitrust allegations and lawsuits, the company is facing serious financial trouble. We don’t mean just in terms of fines, but also loss in revenues and devaluation in stocks and shares CFDs.
Currently, Apple’s largest revenue share comes from its Services division, which includes the AppStore, Apple Music, Apple TV, iCloud, and other associated services. If Epic Games wins the lawsuit against Apple and Google, both companies would be forced to reduce the commissions they charged, reducing their total revenues and profits.
Given that Apple’s profits from its services division are twice as large as what Google generates, the loss would be greater for Apple. In 2019, AppStore alone made over $15 billion in revenue. A change in the commission’s policy could result in losses amounting in the billions. Also, it’s important to note that Epic’s games can still be downloaded on Android phones without Play Store, but the same isn’t possible on iPhones. The loss wouldn’t be as heavy to bear for Google, as it would be for its California neighbor.
Additionally, there is the possibility that the lawsuit victory could propel others to pressurize companies like Apple, Google, and Amazon to do away with their monopolistic policies and exorbitant fees – which are one of the main reasons behind the companies’ high stock market valuations.
Then, there is the increased scrutiny that the lawsuit has exposed Apple to and which has created a negative image of the company. Although share valuations of Apple, Alphabet, Microsoft, and Amazon saw a YOY growth at 57%, 14%, 32%, and 71% respectively in 2020, experts believe this may be a temporary thing. There is growing concern that a tech bubble may be forming, and the slightest change in the companies’ legal stance, operations, or profits could cause the bubble to burst.