Even if you’re not a gamer, you’ve probably heard of Fortnite, the online game that pits players around the world in a “battle royale” against one another. While you may have rolled your eyes at preteens glued to their screens and oblivious to the goings on around them, Fortnite is worthy of your attention as its publisher, Epic Games, has launched one of the highest profile attacks on the Apple App Store since its inception.
Fortnite vs. Apple: Fight!
For those unfamiliar with the proceedings, Apple’s App Store, and similarly the Google Play store, both provide a means for loading applications onto devices powered by iOS and Android. In the case of iOS, the App Store is essentially the only way for consumers to load apps onto their devices without resorting to some sophisticated technical antics. Apple claims this is to the benefit of consumers, as it vets each app that is submitted to its store, performing a quality check that covers everything from performance to security. Google provides a similar vetting process, although it’s easier to load apps to Android devices outside the Play Store, and some vendors like Amazon even provide their own app stores that run on Android.
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All of this may seem relatively banal, save for one key detail: In order to submit apps to the Apple App Store, a developer needs to follow a set of rules, one of which includes providing Apple with a 30% cut of every digital transaction performed by your app. This was fairly straightforward in the old days of paying a buck or two for an app, but with many digital products being sold on a subscription basis, or being available outside the App Store as well, the waters have become muddied.
For example, if you load the Amazon app on your iPhone, you’ll find you’re unable to purchase electronic books. Apple deems these in-app digital purchases and therefore requires a 30% cut that Amazon is unwilling to provide. Purchase a new Spotify subscription on the web and Spotify gets all your cash. Buy the exact same subscription in the App Store, and Apple takes a 30% cut.
Previously this created little more than some grumbling from developers and larger companies, who begrudgingly complied with paying Apple their 30%, which Apple justified as supporting the App Store infrastructure and funding its vetting process. In a recent release of Fortnite, one of the most popular games in recent history, Epic Games directly challenged Apple and Google by allowing purchases of “V-Bucks” in the game without using the Apple or Google payment system, thus denying the companies their cut while flagrantly violating their store policies. Apple and Google’s predictable response was to ban Fortnite from their respective stores.
SEE: Apple vows to kick Epic Games out of developer program over Fortnite fracas (TechRepublic)
Should anyone confuse this with an innocent mistake, Epic Games immediately filed a lawsuit alleging that the app stores violated antitrust laws. Fortnite also launched a video that parodied Apple’s famous “1984” ad that lampooned IBM as a Big Brother-esque oppressor of innovation. In a role reversal, Apple is now portrayed as the villain.
Why the Fortnite-Apple fight matters
In a time of global pandemic and all manner of other concerns, squabbling tech companies fighting over how people buy fake money in a video game might seem like an incredibly trivial concern. However, Epic Games has forced a decision in the future of technology marketplace platforms that will be felt far beyond game aficionados. At the crux of Fortnite’s argument is that it’s in the public interest for technology companies (such as Apple) to cede control of the platforms they create, and a judgment in Epic Games’ favor could result in anything from Apple and Google allowing alternate payment methods in apps to Apple allowing alternate app stores on iOS devices.
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The entire economic model of platform businesses assumes that the owner of the platform controls both the supply and demand sides of the platform, and it collects transactional fees on both sides. In the case of the major app stores, these are huge businesses, with Apple’s estimated gross sales from the App Store in 2019 exceeding $50 billion. Assuming Apple’s 30% cut, that’s a $15B business, a number that exceeds a significant portion of the companies on the Fortune 500.
The lucrative nature of platform businesses has prompted thousands of companies to launch their own platforms, and perhaps your company has a platform business or is in some stage of development. Perhaps you have a significant revenue stream from participating on someone else’s platform, ranging from the App Store to a B2B platform like the Salesforce AppExchange. If that’s the case, consider what would happen if government-mandated changes to these platform businesses arose. For platform participants, this could create entirely new market opportunities. On the other hand, it could spell the death of lucrative revenue streams when software or hardware makers are able to control the keys to the kingdom on access to their devices.
While the courtroom drama will likely be far less compelling than the latest Fortnite map, expect nothing short of a Battle Royale for the future of technology platforms.