For information about what happened in this case, go to Epic Games v. Apple: What Happened?

The case continues to thicken today. Since last time, there have been allegations, appeals, lies, backstabs, and changes for all.

When Judge Yuvvon ruled on the case, journalists all over the world tried to figure out the meaning of the ruling. It was a ten round fight where Apple won 9 counts and Epic Games won 1. Epic Games had won on the count that Apple was breaking anti-competitive laws in California. This required Apple to allow app developers to send users outside their app to the apps’ websites to make purchases. Due to their losses in the other counts, Epic Games had to pay Apple $6 million in royalties. 

“This has the ability to change everything from Apple’s perspective.” That’s what Mr. Cool, a Computer Science teacher here at ACL, has to say about this case. Apple could lose a lot of revenue due to this outcome. “The level of control they currently have over the app store allows them to make an incredible amount of money,” he says.

A majority of the app store revenue, approximately 70%, comes from in-game purchases. If many companies of those games on the app store were to provide an alternative payment method, Apple’s hold on the mobile video game market w ill be threatened.

It’s important to understand who won the case and who really won the case. Mr. Chapin, the Computer Science Pathway Leader at ACL, says that Epic Games reaped the most benefits, even though Apple aimed to convince people they won. “[… In reality, Apple’s] stock price dropped 3% and they lost $82 billion [in value],” he explains.

Mr. Cool, however, has a different take. He believes that Apple won this case, because Epic Games lost a lot. “T]hey got very, very little of what they wanted, almost none of what they actually wanted out of this, [and] the biggest thing is [that] the judge said Apple is not a monopoly. […] The judge s[tated that] Apple could continue doing what they were doing.” Epic Games is in a worse situation now than where they were before, as Apple is not required to add Fortnite back to the app store. 

Both teachers bring up interesting points. Apple lost with the decrease in their stocks and value, whereas Epic Games lost the court case and the ability to host Fortnite on Apple operating systems (iOS).The communities that will have the biggest impact from this case are game developers and Apple. Game developers are now able to offer alternative payment options (in-app purchases and website-based purchases) and can lower their prices and still make more money. From a consumer’s point of view, the impact is minimal. Prices will drop and consumers will have more payment options.

The change to permit website-based purchases allows bigger companies like Epic Games and Microsoft, who made Minecraft, to chip away at the hold Apple has on the app store, as they previously had to give approximately 30% of all in-app purchase revenue to Apple. At the same time, Netflix and Spotify tried to avoid this tax completely by not allowing in-app subscription purchases. These companies can all sue with a higher chance of winning than before. The case with Epic Games and Apple serves as a precedent that would be their stepping stone. For example, in the future, other companies could see the mistakes Epic Games made and try to correct them.

From Apple’s perspective, this can be interpreted as a warning sign, as they should pay heed to the ruling. As the judge stated, Apple’s practices are deemed monopolistic. In other words, as Sam Weinstein, a law professor at Cardozo School of Law at Yeshiva University and a former antitrust lawyer, says in the Wall Street Journal, “On another day with more facts, a couple of years down the line, maybe Apple [will] lose[].”

Last but not least, from Epic Game’s point of view, this can be interpreted as a victory, just not the one they were hoping for. Epic Games was looking for a means of getting their own alternate payment into Apple. To add on to that thought, Mr. Cool hypothesizes that their real end goal was to get their Epic Games store onto the Apple app store. 

As of today, Epic Games’ Fortnite is still not on the Apple app store. Apple had told Epic Games that after the case was over, Fortnite would be able to return to the app store, yet due to the ongoing litigation, it will likely be a while until we see Fortnite back on the App Store. 

Not only is Epic Games appealing the court case, but Apple is as well. Apple seems to realize the risk associated with some payments happening via third party payment options. 

Let’s talk about the practicality of developers actually switching to an alternate payment system. 

How easy would it be for app developers to create a website-based payment system? Mr. Chapin says that it would be easy for developers to incorporate a payment system into their website, but a minimal amount of apps will use that as their only payment method. In addition, there is an ease, convenience, and trust in making payments through Apple that a website lacks.

If the Court of Appeals were to rule 100% in favor of Epic Games, would it be easy for apps to make their own payment system? “If we saw a complete turnaround and completely in favor of Epic, that would cause a lot of chaos in the market initially,” Mr. Cool states, “I know for sure if it got to the point where it was legal and it was allowed, under the Apple terms of service, to have third-party payment processors[.] I know […] Square* and Stripe** [, companies that sell payment processing software,] would pounce on that. […] I am sure if it got opened up it wouldn’t just be Epic [Games—] there would be a lot of other companies that would jump into the markets or advertise developers.” 

In other words, it would be very easy. The competition would make several different models, each appealing to different developers.

The next question to answer would be if these apps would support Apple payments only, website payments only, or both. Both teachers have very similar responses. They say that although website-only payments will give app developers more money, using both will lead to more sales. This would be because after every step of the payment, the consumer will rethink if they really need to make said purchase. For example, if you only need to take one step to make a $100 purchase, you will only have to think about it once before making the purchase. On the other hand, if it takes 10 steps to make a $10 purchase, at each step the consumer would ask, “Do I really need this?” Mr. Chapin tells me he learned this when he was running an internet company, trying to find the best payment method to make the most revenue. 

This is the fight of two tech giants, but also the fight of David and Goliath. The result has the ability to affect all of us, or it might not change anything at all. Only the future will reveal the case’s true impact on us.

written by Edward Christopher

edited by Saanvi Gutta and Tryphena Pili

 

References:

Bloomberg. (n.d.). Apple Loses $85 Billion in Value After App Store Ruling. Bloomberg.com. Retrieved October 11, 2021, from https://www.bloomberg.com/news/articles/2021-09-10/apple-erases-nearly-85-billion-in-value-after-app-store-ruling.

Board, T. E. (2021, September 12). Opinion | an antitrust victory for Apple. The Wall Street Journal. Retrieved October 11, 2021, from https://www.wsj.com/articles/antitrust-victory-apple-fortnite-epic-11631476049?mod=searchresults_pos9&page=1.

Gallagher, D. (2021, September 10). Apple’s Walled Garden Springs a leak. The Wall Street Journal. Retrieved October 11, 2021, from https://www.wsj.com/articles/apples-walled-garden-springs-a-leak-11631301916?mod=searchresults_pos3&page=1.

Higgins, T. (2021, October 2). Apple doesn’t make videogames. but it’s the hottest player in gaming. The Wall Street Journal. Retrieved October 11, 2021, from https://www.wsj.com/articles/apple-doesnt-make-videogames-but-its-the-hottest-player-in-gaming-11633147211?mod=hp_lead_pos10.

Higgins, T. (2021, September 10). Judge orders Apple to Loosen App Store restrictions in mixed verdict. The Wall Street Journal. Retrieved October 11, 2021, from https://www.wsj.com/articles/apple-trial-ends-in-mixed-verdict-after-fortnite-makers-monopoly-allegations-11631289792?mod=searchresults_pos11&page=1.

Higgins, T. (2021, September 12). Apple judge’s warning suggests App Store fight is far from over. The Wall Street Journal. Retrieved October 11, 2021, from https://www.wsj.com/articles/apple-judges-warning-suggests-app-store-fight-is-far-from-over-11631363400?mod=searchresults_pos10&page=1.

Jbursz. (2021, September 10). Apple vs. epic ruling reveals 70% of App Store revenue comes from a small fraction of customers playing games. CNBC. Retrieved October 11, 2021, from https://www.cnbc.com/2021/09/10/apple-vs-epic-70percent-of-app-store-revenue-from-customers-playing-games.html.

Needleman, S. E., & Higgins, T. (2021, September 22). Apple denies request by epic to bring ‘fortnite’ developer account back. The Wall Street Journal. Retrieved October 11, 2021, from https://www.wsj.com/articles/epic-games-says-apple-won-t-reinstate-developer-account-11632331517?mod=searchresults_pos7&page=1.

The Wall Street Journal. (n.d.). WSJ’s the future of Everything – WSJ Podcasts. The Wall Street Journal. Retrieved October 11, 2021, from https://www.wsj.com/podcasts/wsj-the-future-of-everything.