Apple Mostly, But Not Entirely, Wins Against Epic; No Antitrust Violation, But Must Tweak Practices To Comply With CA Law

from the antitrust-is-hard dept

If there's something that's been made clear over the last year or so in the world of antitrust it's that just because some people don't like big companies and their practices, that doesn't mean it's an antitrust violation. It rarely is. In the well, rather epic lawsuit that Epic brought against Apple, we initially described it as a contract negotiation by lawsuit and predicted that it didn't seem likely to actually meet the bar for an antitrust violation. It seems that District Court Judge Yvonne Gonzalez Rogers agreed with us, rejecting the antitrust claims entirely. As the judge wrote:

Given the trial record, the Court cannot ultimately conclude that Apple is a monopolist under either federal or state antitrust laws. While the Court finds that Apple enjoys considerable market share of over 55% and extraordinarily high profit margins, these factors alone do not show antitrust conduct. Success is not illegal. The final trial record did not include evidence of other critical factors, such as barriers to entry and conduct decreasing output or decreasing innovation in the relevant market. The Court does not find that it is impossible; only that Epic Games failed in its burden to demonstrate Apple is an illegal monopolist.

Key to any antitrust ruling is the market definition and everyone always wants that definition to fall in their own favor. Those bringing antitrust lawsuits like to narrow down the market to basically "exactly what this company provides and no more," while defendants try to define the market as broadly as possible. The judge rejected both Apple's and Epic's market definitions here and found something more reasonable in the middle -- but in the end the definition helped Apple much more than it did Epic.

Ultimately, after evaluating the trial evidence, the Court finds that the relevant market here is digital mobile gaming transactions, not gaming generally and not Apple’s own internal operating systems related to the App Store. The mobile gaming market itself is a $100 billion industry. The size of this market explains Epic Games’ motive in bringing this action. Having penetrated all other video game markets, the mobile gaming market was Epic Games’ next target and it views Apple as an impediment.

Further, the evidence demonstrates that most App Store revenue is generated by mobile gaming apps, not all apps. Thus, defining the market to focus on gaming apps is appropriate. Generally speaking, on a revenue basis, gaming apps account for approximately 70% of all App Store revenues. This 70% of revenue is generated by less than 10% of all App Store consumers. These gaming-app consumers are primarily making in-app purchases which is the focus of Epic Games’ claims. By contrast, over 80% of all consumer accounts generate virtually no revenue, as 80% of all apps on the App Store are free.

The ruling itself is a rather epic 185 pages, but the key point is what's above. The judge knows this is going on appeal, and it seems like the massively thorough ruling is more about covering all the bases for the 9th Circuit judges, than for the parties in the case.

Almost all of the claims are dismissed with one partial exception. The court did find that Apple violates California's unfair competition law. Epic doesn't get a complete win on this claim either. The court notes that it failed to show any unlawful practices under California's law, but some unfair ones. But even then the victory is somewhat limited, and many of Epic's claims of unfairness fail as well. The only bit that succeeded regarded Apple's anti-steering provisions. These are the rules Apple places on app store developers preventing them from telling people about ways to pay outside of the iOS App Store.

As explained before, Apple uses anti-steering provisions prohibiting apps from including “buttons, external links, or other calls to action that direct customers to purchasing mechanisms other than in-app purchase,” and from “encourag[ing] users to use a purchasing method other than in-app purchase” either “within the app or through communications sent to points of contact obtained from account registrations within the app (like email or text).” Thus, developers cannot communicate lower prices on other platforms either within iOS or to users obtained from the iOS platform. Apple’s general policy also prevents developers from informing users of its 30% commission.

The court found that a step too far -- and frankly, that makes sense. It was always a really shitty thing to do in the first place, and extremely anti-consumer. And the court found that even if there weren't actual antitrust violations by Apple, the anti-steering provisions "threaten an incipient violation of an antitrust law" by restricting information from consumers.

Thus the court grants the only remedy to Epic: an injunction against such practices:

While Apple’s conduct does not fall within the confines of traditional antitrust law, the conduct falls within the purview of an incipient antitrust violation with particular anticompetitive practices which have not been justified. Apple contractually enforces silence, in the form of anti-steering provisions, and gains a competitive advantage. Moreover, it hides information for consumer choice which is not easily remedied with money damages. The injury has occurred and continues and can best be remedied by invalidating the offending provisions. In terms of balancing, Apple’s business justifications focus on other parts of the Apple ecosystem and will not be significantly impacted by the increase of information to and choice for consumers. Rather, this limited measure balances the justification for maintaining a cohesive ecosystem with the public interest in uncloaking the veil hiding pricing information on mobile devices and bringing transparency to the marketplace.

[....]

Accordingly, a nationwide injunction shall issue enjoining Apple from prohibiting developers to include in their:

Apps and their metadata buttons, external links, or other calls to action that direct customers to purchasing mechanisms, in addition to IAP.

Nor may Apple prohibit developers from: Communicating with customers through points of contact obtained voluntarily from customers through account registration within the app.

Frankly, this seems like the right outcome overall. Apple's restrictions on companies providing information to their users was always pretty shady. But the rest of the antitrust claims were pretty silly in the first place.

Another interesting tidbit in the opinion suggests that Epic's arguments may have gone a step too far and undermined a stronger antitrust case that it could have made:

While the Court has found that evidence suggests Apple’s 30% rate of commission appears inflated, and is potentially anticompetitive, Epic Games did not challenge the rate. Rather, Epic Games challenged the imposition of any commission whatsoever

Oops.

Either way, this has to be seen as a pretty big victory for Apple, and I'm confused by some reports saying it's a "major win for Epic Games." It's not.

But, of course, this is just the District Court. There is no way that Epic is not going to appeal this ruling.

Filed Under: antitrust, california, competition, fortnite, unfair competition
Companies: apple, epic

The EPIC Effect: Microsoft Changes Revenue Split To Match EPIC Store, Steam Holds Firm

from the competition-is-amazing dept

Way back when Epic released its Epic Store PC game storefront, the release of this new competitor to Steam focused on two major selling points. The first was timed exclusives that it shelled out tons of money for, allowing it to sell games the public couldn't get anywhere else for a certain period of time. This pissed off lots of people, as the public generally doesn't like exclusives. That said, Epic did mention that it would end its exclusivity practices if the rest of the gaming storefront world, especially Steam, mirrored the Epic Store's second key selling point, which was a far more favorable split offered to game developers than the "industry standard" 70/30 split that sees places like Steam getting nearly a third of game revenue just for hosting the game on its platform. Instead, Epic's store has a 88/12 split, meaning the platform is willing to take less than half of the revenue Steam extracts from gamemakers.

In other words, Epic positioned its exclusivity program as merely a method to get the other storefronts to take less money away from game developers, which softened the blow with the public and surely made it a great many fans in the gaming industry.

Well, Steam hasn't caved yet. But Microsoft did just announce that it is moving to match the splits offered by the Epic Store, marking some movement in the industry and perhaps an indication of things to come.

“As part of our commitment to empower every PC game creator to achieve more, starting on August 1 the developer share of Microsoft Store PC games sales net revenue will increase to 88%, from 70%,” Head of Xbox Game Studios Matt Booty wrote on the Xbox blog. “A clear, no-strings-attached revenue share means developers can bring more games to more players and find greater commercial success from doing so.”

The move is the latest in a bit of a sea change for game revenues. In a survey released yesterday by the Game Developers Conference, only 3% of respondents thought the once-standard 30% take by a platform was justified. The Epic Games Store broke onto the scene by notably only taking 12% of the revenue. Over the last year, both Apple and Google have lessened their cuts for games making under $1 million. Steam, meanwhile, has held more or less firm on its 30% take, with the cut lessening the more money a game makes, a system that makes more money for larger, richer publishers, while penalizing smaller indies.

Funny what a little bit of competition can do. While it is certainly notable that Steam is watching all of these changes with its proverbial arms folded, doing no sort of splits-changing of its own, maybe that's okay and maybe there's a place for that. Or maybe the pressure continues to build and the Epic Store does end up being the preferred storefront for smaller titles and indie developers and Steam eventually does have to come down from the 70/30 split.

All I know for sure is that without Epic entering this arena and pushing the envelope, be it for altruistic reasons or otherwise, it seems unlikely that even Apple, Google, and Microsoft would have made any of these changes. That's why, whatever you think of the Epic Store, the added competition certainly is nice.

Filed Under: competition, epic store, steam, video game stores, video games
Companies: epic, microsoft, valve

Platform Wars Update: Epic Store Losing $330 Million Per Year To Acquire Customers

from the oof! dept

It's been a while since we've checked in on how the PC gaming platform war is going. If you'll recall, the Spring of 2019 saw a new entrant into this ongoing battle, with Epic releasing the Epic Store. Epic's plan appeared to be essentially a PR battle at first, drawing in the public by proclaiming that Steam's revenue splits with developers and publishers were bad for the gaming industry and by drawing in publishers and developers with a better version of those splits for them. On top of that, Epic used those splits to gobble up a bunch of exclusive or timed exclusive releases of games, which ended up pissing off many in the gaming public and, of course, Steam. Then came Epic's free game releases, where the platform worked out deals with publishers to offer up AAA game titles for literally no money as a method for getting gamers to adopt the platform.

All of this didn't come with zero fallout from what Epic was doing, of course. The public doesn't like exclusives generally. Crowdfunding got weird due to the exclusivity. And the launch of the Epic Store in the early days was not without its hiccups, either. Now that we're 2 years on, how has this all shaken out?

Well, Epic is getting a decent chunk of market share with its tactics, even as the platform takes on major losses in doing so. The reason for those losses? Well, largely they have to do with all of those free games and timed exclusives. And we have Epic's battle with Apple to thank for the information.

The raw numbers, as reported in a "Proposed Findings of Fact and Conclusions of Law" document Apple filed last week, show massive incurred and projected losses for Epic's game download hub, which launched in late 2018. Documents and testimony from Epic itself show a $181 million loss for the store in 2019 and projected losses of $273 million in 2020 and $139 million in 2021.

You might think Epic is incurring those losses because it only takes a 12 percent cut of third-party game revenues, compared to the industry-standard 30 percent cut on other digital storefronts. On the contrary, though—in its own court filings, Epic says that 12 percent revenue chunk has been "sufficient to cover its costs of distribution and allow for further innovation and investment in EGS."

The main driver of EGS' losses, instead, is Epic's generous program of "minimum guarantees." These encompass the advance payments Epic has used to attract so many timed exclusives to its storefront and seemingly also cover the free games Epic makes available to Epic Games Store users every week.

Now, while this isn't precisely the type of method for using "free" as part of a business model as we've talked about in the past, it's close enough to count. The upshot of all of this is that commentary from Epic's folks makes it clear that they're well aware of these monetary shortfalls... and are largely just fine with them. The whole point of all of this is to make as big a dent in market share in a short time period as possible. And, of the two ways Epic saw to do that, taking on initial losses like this was the better option.

"There are two ways to bring users into something," Epic Games co-founder and CEO Tim Sweeney told Ars in 2019, just after the launch of the Epic Games Store. "You can run Google and Facebook ads and pay massive amounts of money to them. But we actually found it was more economical to pay developers [a lump sum] to distribute their game free for two weeks... We can actually bring in more users at lower cost by doing all these great things for great people rather than paying Google and Facebook."

That effort is starting to work. Last June, Sweeney told PC Gamer that EGS had about 15 percent of the PC gaming market. That's not great, but it's not bad considering the near-monopoly power Steam has in PC gaming downloads (Sweeney estimated Steam's share at 90 percent in 2019, though that could be a bit inflated).

In court documents, Epic went on to note that it expects its storefront to start turning a profit in 2023, so it looks like it has some runway there as well.

So, what does this all mean? Well, at the very least it's an interesting experiment in using free loss-leaders to gain customers and give them reasons to buy elsewhere on the platform. Epic hasn't pulled some magic trick to suddenly unseat Valve's Steam platform as of yet... but it's also apparently playing the long game here.

Filed Under: epic store, platform wars, steam, video games
Companies: apple, epic, valve

Epic Games' Case Against Teenage Fortnite Cheater Finally Settles

from the cheat-sheet dept

As you may recall, back in 2017 Epic Games went on something of a crusade against cheating in its online hit game Fortnite. While much of Epic's attention was focused on websites that sold cheating software for the game, the company also set its sights on individuals who were actively promoting the use of cheating software in online videos. One of those Epic sued was a 14 year old who, if I'm being frank, sounds like a bit of a jackass. While the teen, identified in court documents only as "C.R.", was having his own mother defend him in letters to the judge in the case, he was also then going around uploading still more videos advocating the use of cheating software and taunting Epic Games. Epic's lawyers defeated the teen's mother, which, real feather in their cap for that I suppose. And so the trial continued.

Until recently, when, as Epic has done in other cases against underage targets for its litigation, the company and the defendant managed to come to a settlement.

Epic Games has settled a three-year-long lawsuit against a teenage Fortnite player who was accused of using cheats in the game (thanks Law360). C.R., who was 14-years-old at the time of the 2017 lawsuit, was alleged to have been using and advertising Fortnite hacks on his YouTube channel.

The Notice of Voluntary Dismissal doesn't reveal any details about the settlement, just that Epic, C.R. and his court-appointed guardian have agreed to dismiss all claims and action following the Court's approval of the settlement agreement.  

It is unlikely that any serious money changed hands as part of this. What Epic Games was after was a cessation of advocating of cheating software in order to curb its use. But, still, a three year long case against a large company for a teenager and his family had to come at a massive price tag in legal bills alone. And, frankly, the real question is what the point of this all was? If it was the stomping out of cheating in Fortnite that Epic was after, well, it sure as hell didn't accomplish that mission.

Hell, it was just over the past summer that cheating in Fortnite tournaments appeared to reach its crises apex.

For the last couple of years, Fortnite has been considered one of the few titles that catches and removes cheaters fairly effectively. However, with cases recently skyrocketing, it seems that a lot of foul play may simply go undetected.

Following Sunday’s fourth and final round of FNCS qualification, Twitter was flooded with posts relating to a player named Kona. They openly used cheats to get through opens and semis, and were only banned after going live on Twitch with the client still onscreen.

So the company went legal on a teenager and his mother to combat cheating, an effort that completely failed. That was really worth all the trouble, Epic?

Filed Under: cheater, cheats, fortnite, fortnite hacks
Companies: epic

Judge Rejects Epic's Temporary Restraining Order Request For Fortnite (But Grants It For The Unreal Engine)

from the and-so-it-goes dept

On Monday there was a... shall we say... contentious first hearing in the antitrust fight/contract negotiation between Apple and Epic over what Apple charges (and what it charges for...) in the iOS app store. The issue for the hearing was Epic's request for temporary restraining orders against Apple on two points: first, it wanted a restraining order that would force Apple to return Fortnite to the app store. Second, was a restraining order on Apple's plan to basically pull Epic's developer license for the wider Unreal Engine.

As the judge made pretty clear would happen during the hearing, she rejected the TRO for Fortnite, but allowed it for the Unreal Engine. The shortest explanation: Apple removed Fortnite because of a move by Epic. So Epic was the cause of the removal. The threat to pull access for the Unreal Engine, however, seemed punitive in response to the lawsuit, and not for any legitimate reason.

More specifically, for a TRO to issue, the key issue is irreparable harm (i.e., you can get one if you can show that without one there will be harm that can't be easily repaired through monetary or other sanctions). But here, as the court notes, Epic, not Apple, created the first mess, and so it can fix it by complying with the contract. So there is no irreparable harm, since it can solve the issue. The opposite is true of the Unreal Engine, though:

The Court finds that with respect to Epic Games’ motion as to its games, including Fortnite, Epic Games has not yet demonstrated irreparable harm. The current predicament appears of its own making. See Second City Music, 333 F.3d at 850 (“Only the injury inflicted by one’s adversary counts for this purpose.”). Epic Games remains free to maintain its agreements with Apple in breach status as this litigation continues, but as the Seventh Circuit recognized in Second City Music, “[t]he sensible way to proceed is for [Epic to comply with the agreements and guidelines] and continue to operate while it builds a record.” Id. “Any injury that [Epic Games] incurs by following a different course is of its own choosing.” Id. Epic Games admits that the technology exists to “fix” the problem easily by deactivating the “hotfix.” That Epic Games would prefer not to litigate in that context does not mean that “irreparable harm” exists.

By contrast, Epic Games has made a preliminary showing of irreparable harm as to Apple’s actions related to the revocation of the developer tools (SDKs). The relevant agreement, the Apple Xcode and Apple SDKs Agreement, is a fully integrated document that explicitly walls off the developer program license agreement. (See Dkt. No. 41-21 at 16.) Apple’s reliance on its “historical practice” of removing all “affiliated” developer accounts in similar situations or on broad language in the operative contract at issue here can be better evaluated with full briefing. For now, Epic International appears to have separate developer program license agreements with Apple and those agreements have not been breached. Moreover, Apple is hard-pressed to dispute that even if Epic Games succeeded on the merits, it could be too late to save all the projects by third-party developers relying on the engine that were shelved while support was unavailable. Indeed, such a scenario would likely lead to nebulous, hard-to-quantify questions, such as, how successful these other projects might have been, and how much in royalties would have been generated, much less the collateral damage to the third-party developers themselves.

This same analysis effectively shows up on the other issues, such as the "balance of equities" question:

... the Court observes that Epic Games strategically chose to breach its agreements with Apple which changed the status quo. No equities have been identified suggesting that the Court should impose a new status quo in favor of Epic Games. By contrast, with respect to the Unreal Engine and the developer tools, the Court finds the opposite result. In this regard, the contracts related to those applications were not breached. Apple does not persuade that it will be harmed based on any restraint on removing the developer tools.

None of this is all that surprising, but it certainly suggests that the judge is not being distracted by Epic turning this whole thing into an anti-Apple marketing campaign.

Filed Under: antitrust, fortnite, temporary restraining order, tro
Companies: apple, epic

Epic Games Sued By Company That Manages 'Coral Castle' In Florida Over New Fortnite Map

from the the-lawyers-in-the-coral-castle dept

Of all the trademark insanity we cover here, there are still little nuggets of niche gold when it comes to the truly insane trademark disputes. There are plenty of these categories, but one of my personal favorites is when real life brands get their knickers twisted over totally unrelated items in fiction. If you cannot conceptualize what I'm talking about, see the lawsuit brought by a software company that creates something called Clean Slate against Warner Bros. because...The Dark Knight Rises had a piece of software in it that was referred to as "clean slate."

Which brings us, as most stories about insanity do, to Florida. Epic Games released a new map for its hit game Fortnite recently, entitled Coral Castle. The map includes motifs of water and structures made from coral. CCI, based out of Florida, holds trademarks for a real life landmark called Coral Castle. There too, you can catch real life motifs of water mixed with structures made to look like coral. It is not, however, a video game setting. It is real life. And, yet, CCI has decided to sue Epic Games over the name of its map.

CCI, a Florida corporation, owns two trademarks related to Coral Castle, which is “a limestone structure created by an eccentric Latvian-American named Edward Leedskalnin.” According to the filing, Coral Castle, “often referred to as ‘Florida’s Stonehenge’ … comprises numerous megalithic stones, mostly limestone formed from coral, each weighing several tons.” The two trademarks cover “[o]n-line retail services” like Coral Castle replicas, collectible spoons, thimbles, t-shirts, and CCI’s logo, according to the complaint.

So, merch for the landmark, got it. What that has to do with a video game map is quite literally anyone's guess, but CCI seems to think that between the name of the map and what the filing itself refers to as thematic elements, this is somehow both trademark infringement and going to cause confusion in some kind of manner.

The virtual Coral Castle, CCI contended, “shares common themes with the real Coral Castle,” like castle structures and partial walls, stone objects, and nautical motifs. The complaint avers that both the real and virtual Coral Castle “evoke the feeling of a centuries old mysterious place.”

CCI argued that Epic has caused it harm by “utilizing the vast goodwill associated with the [t]rademarks” to promote Fortnite and the sale of in-game purchases without CCI’s consent. Too, Epic has purportedly “used reproductions, counterfeits, copies and/or colorable imitations of the Trademarks in commerce or in connection with the sale, offering for sale, distribution and/or advertising of Defendant’s goods and services, and such use is likely to cause confusion, to cause mistake, and/or to deceive.”

All of which is monumentally silly. Whatever fame Coral Castle might have regionally, it feels quite unlikely that the general populace is going to even know that the landmark exists, never mind somehow connect it to Fortnite's new map. In the absolute worst case scenario, perhaps some gamers might think, true or not, that the map is in some way inspired by the Florida spot. But some sort of confusion in commerce? Where? How?

Add to all of this that the map isn't a likeness of the real life landmark what are we even debating this for? Epic made its map different. As in distinct. As in not really trying to fool the public into thinking there was any association here.

What CCI could have done, however, would have been to have some fun with this and use it to draw attention to its real life landmark. It went legal instead, foregoing all of the potential good publicity it could have generated.

Filed Under: coral castle, fortnite, games, maps, trademark
Companies: cci, epic

The Fortnite App Store Battle: A Real Antitrust Conundrum, Or Just A Carefully Planned Out Contract Negotiation?

from the a-little-from-column-a... dept

Last week there was quite a lot of news paid to Apple kicking Fortnite out of the iOS app store for violating the rules by avoiding Apple's in-app payment setup (out of which Apple takes 30%). Epic, who had been hinting at this for a while, introduced a direct payment offering that effectively avoided the 30% charge that Apple (and Google) require from developers.

There have been arguments over the last decade or so since Apple implemented its policy requiring subscription revenue to go through Apple's system -- but this is probably the biggest fight yet. Epic was clearly expecting Apple to do this because almost immediately after Fortnite was removed from the app store, Epic first released a Nineteen Eighty-Fortnite parody ad, mocking Apple's infamous 1984 Superbowl ad.

Almost immediately, Epic also sued Apple over the removal in a legal complaint that was clearly prepared well in advance. Represented by some of the top antitrust lawyers in the country, and weighing in at 65 pages, Epic had spent some time preparing for this fight. To drive this point home, the lawsuit itself references 1984 in the opening paragraph, tying into Epic's marketing campaign:

In 1984, the fledgling Apple computer company released the Macintosh—the first mass-market, consumer-friendly home computer. The product launch was announced with a breathtaking advertisement evoking George Orwell’s 1984 that cast Apple as a beneficial, revolutionary force breaking IBM’s monopoly over the computing technology market. Apple’s founder Steve Jobs introduced the first showing of the 1984 advertisement by explaining, “it appears IBM wants it all. Apple is perceived to be the only hope to offer IBM a run for its money . . . . Will Big Blue dominate the entire computer industry? The entire information age? Was George Orwell right about 1984?”

Fast forward to 2020, and Apple has become what it once railed against: the behemoth seeking to control markets, block competition, and stifle innovation. Apple is bigger, more powerful, more entrenched, and more pernicious than the monopolists of yesteryear. At a market cap of nearly $2 trillion, Apple’s size and reach far exceeds that of any technology monopolist in history.

The coordination between product, marketing, and legal shows that Epic was well aware of what it was doing.

And, almost immediately after all of that, Google also kicked Fortnite out of its app store, and Epic sued Google too. Rather than opening with the 1984 line (which wouldn't apply to Google), in this case, Epic's lawyers leaned on the "Don't Be Evil" line:

In 1998, Google was founded as an exciting young company with a unique motto: “Don’t Be Evil”. Google’s Code of Conduct explained that this admonishment was about “how we serve our users” and “much more than that . . . it’s also about doing the right thing more generally”. Twenty-two years later, Google has relegated its motto to nearly an afterthought, and is using its size to do evil upon competitors, innovators, customers, and users in a slew of markets it has grown to monopolize. This case is about doing the right thing in one important area, the Android mobile ecosystem, where Google unlawfully maintains monopolies in multiple related markets, denying consumers the freedom to enjoy their mobile devices—freedom that Google always promised Android users would have.

Google acquired the Android mobile operating system more than a decade ago, promising repeatedly over time that Android would be the basis for an “open” ecosystem in which industry participants could freely innovate and compete without unnecessary restrictions.2 Google’s CEO, Sundar Pichai, represented in 2014 that Android “is one of the most open systems that I’ve ever seen”.3 And Andy Rubin, an Android founder who is described by some as the “Father of Android”, said when he departed Google in 2013 that “at its core, Android has always been about openness”.4 Since then, Google has deliberately and systematically closed the Android ecosystem to competition, breaking the promises it made. Google’s anti-competitive conduct has now been condemned by regulators the world over.

Both lawsuits argue that this is an antitrust violation. Also, in both cases, Epic makes it clear (again, strategic marketing at work) that it's not seeking monetary damages, but is demanding that both companies change their practices regarding what cut they take from in-app payments via the app stores. Of course, if it gets rid of having to hand over 30% to Apple and Google, Epic stands to make a lot more money (even if it then discounts in-app purchases that are done directly, as it did with this update).

Of course, when various mutli-billion dollar giants battle in court, you know there's a lot happening behind the scenes. From a pure narrative perspective, you can see Epic's point. Fortnite's success on mobile is not about the benefits provided by the app stores on either of the major mobile operating systems. And, to be clear, Epic had explored this area in the past. Two years ago it tried to avoid the Google Play Store to protest the 30% cut (which is possible, though clunky, on Android), but eventually gave in and went back into the Play Store.

From Apple's standpoint, Epic's move put it in a no-win position. If it let Epic do this with Fortnite, tons of other developers would claim that Epic was getting preferential treatment, and thus letting Epic's move slide would create massive problems in its own way. But pulling Fortnite down from app store created a new set of problems as well (including this antitrust suit). Then Google was similarly put in an impossible situation. Right after seeing what happened with Apple, Google basically had to make a similar call, knowing that it had to decide if it was going to stand firm like Apple (and face a certain lawsuit) or cave and create a whole host of other problems.

From Epic's vantage point, this was a shot that the company had to take. The company's CEO, Tim Sweeney, has a history of not liking rent-seeking by middlemen. And while the antitrust fight can be costly, a win (either by settlement or by the results of litigation) would be a huge win, and a loss would effectively leave Epic in the same position it's in now (though with some quite hefty legal bills that the company can easily afford).

As for the legal arguments... I think it's an uphill climb. The public narrative may sound good, but the actual antitrust laws are going to make this quite difficult to win.

To some extent, this comes down to one of the key differences between the mobile universe -- which is much more closed, limited, and controlled by gatekeepers -- and the wider, more open internet ecosystem. And, to their credit, both Apple and Google have done a lot to build the entire smartphone/tablet ecosystem with iOS and Android, though it is disappointing that over time Google has progressively moved away from its more "open" promises regarding Android. That said, being more closed and proprietary has allowed both companies (and especially Apple) to argue that their devices are a lot more secure than computers and an internet where anything goes.

Also, much of this fight ignores that in the console world, 30% is also the standard fee. It certainly looks like, pretty much across the board, devices used for gaming have decided that the entrance fee to get on a device is about 30% of any in-app purchases. As John Gruber notes, Sweeney seems to handwave around the dedicated gaming consoles argument -- suggesting that somehow the 30% makes sense there, because of the nature of those consoles. But that does seem to undermine his overall argument (and may also doom his legal argument).

I don't know what the right answer is here, and I don't find myself particularly rooting for any one of these giant companies in this fight. I wish mobile platforms were more open, but I understand why they're not. I also don't think that the activity Google and Apple engage in will trip the wire under current antitrust law. And thus, if Apple and Google do stand firm, I think Epic loses in the long run. But it can be a very long run, and it might just be worth it for Epic to try to force its view of the mobile app market onto that world.

But, of course, to some extent, everything is a negotiation. And there's a part of me that wonders if Epic isn't just hoping to use this as an "initial offer" to get Apple and Google to agree to a favorable deal to allow Fortnite back into the app stores. That, of course, would raise a bunch of other questions -- including other developers demanding similar treatment. But I could see some sort of tiered system worked out, whereby Apple and Google agree that at certain levels of revenue, the cuts they take drop. Just to get this lawsuit out of the way.

No matter how you feel though, this is going to be a big fight to watch over the coming months and years. It's almost as fascinating as Fortnite itself.

Filed Under: 30%, antitrust, app store, fortnite, marketplaces, play store, tim sweeney
Companies: apple, epic, google

Hey, Epic, If you're Going To Boldly Give Away A Historically Popular Game For Free, Make Sure You Can Handle The Demand

from the free-as-in-advice dept

The Epic Store is still around, still rocking its exclusivity deals with game publishers, and is still trying really hard to unseat Valve's Steam as the dominant PC gaming platform of choice. Truthfully, the news about the ongoing battle between Steam and Epic has sort of quieted down. That ultimately is probably not a good sign for Epic. If there is unseating to be done, it's going to have to be done loudly, publicly, and with much coverage in the press.

Which is perhaps why Epic recently decided to strike a deal with Rockstar to give away Grand Theft Auto 5 for free. Yes, free as in you pay no money and yet own the game forever. Rockstar's reasoning behind this is quite easy to understand: the company already made a hilarious sum of money selling the game for nearly a decade and the game's ecosystem and players have since moved into the online MMO realm where the game now makes hilarious sums of money via microtransactions. More players means more revenue for Rockstar.

And for the Epic Store, this is sort of free game is a great way to entice gamers to your store, gin up a chunk of new user adoption, and really show the public how great your PC games store performs--, oh son of a bitch.

The Epic Games Store went offline on Thursday morning as users anticipating the launch of Rockstar Games’ Grand Theft Auto 5 for free on the platform overloaded its servers. News of the game’s free release leaked early on Wednesday on the Epic Games Store Twitter account.

The website and launcher both went down just before 11 a.m. EDT, when the Premium Edition of the game for Windows PC was scheduled to go live. “We are currently experiencing high traffic on the Epic Games Store,” Epic Games said on Twitter.

On the one hand: yay, the strategy worked and tons of people flocked to the Epic Store to get the free game. On the other hand: crap, the strategy also backfired, because now a whole bunch of people's first impression of the store is that it's unstable and cannot support the public demand. Whoops.

This seems to be something of a trend for Epic. Great on the marketing and PR messaging, much less great on the execution. And quite frankly, it's not as though Epic shouldn't have known it was going to have a stampede on its hands.

Despite being six and a half years old, GTA 5 is clearly still popular. It goes beyond just the game being available for free, too: 2019 was one of Rockstar Games’ best sales years for GTA 5. GTA 5 was initially released in September 2013 on PlayStation 3 and Xbox 360, and again in 2014 on Xbox One and PlayStation 4. In 2015, it came to Windows PC. With the PC launch, the game found a new audience with the modding scene and in Grand Theft Auto Online. The game’s popularity on Twitch ballooned in the past year with role-playing servers in GTA Online.

Now, as of the time of this writing, 2pm CST, the problems seem to have been fixed. I know this because I went and got the game for free myself, even though I already own it on my console. And, while this was my first time on the Epic Store myself, you'll have to go elsewhere for my take on how good or bad the store itself is.

But as for this marketing strategy by Epic? I give it a meh.

Filed Under: epic store, gta 5, overwhelmed, video game stores, video games
Companies: epic, rockstar

EPIC Offers Its Support Of The EARN IT Act; Thinks It Can Separate Undermining Section 230 From Undermining Encryption

from the it-really-shouldn't-be-supporting-either dept

As the EARN IT Act moves forward -- with all of its Section 230 and encryption-threatening appendages still intact -- we're getting some very interesting responses from tech companies that have benefitted from Section 230 and/or rely on strong encryption.

The goal may be noble -- the protection of children from sexual abuse -- but those noble goals are just a crowd-pleasing dodge. It's an assault on both Section 230 and strong encryption that's being pushed with an anti-child porn narrative, one that makes it very difficult for legislators to oppose. To vote against EARN IT, supporters will misleadingly claim, is to vote for the spread of child porn, so it's going to be tough to find lawmakers willing to push back.

Attorney General Bill Barr wants encryption broken. If it means American citizens are less protected, so be it… just as long as the FBI can get into a few more locked devices or accounts. Plenty of people in the administration seem to feel Section 230 has to go, if only to make it easier to sue platforms for perceived slights.

Entities that used to be allied against Section 230 reform and encryption-breaking are now for it. The Electronic Privacy Information Center wants to do both somehow. It has sent a letter [PDF] in support of the EARN IT Act that is pure cognitive dissonance. EPIC claims it wants to see Section 230 reformed but somehow keep this "reform" from threatening the encryption of end-to-end communications. How it imagines this law will achieve both aims is nearly impossible to discern.

The letter says Section 230 must be reformed, but for something much lower on the "for the children" list.

EPIC also supports efforts to reform Section 230. In the case Herrick v, Grindr, EPIC provided an amicus brief for the Second circuit in which we explained that the “Internet has changed since Congress passed the [Communication Decency Act] in 1996. Advanced social media platform did not exist when Congress enacted the law.” We objected to a lower court interpretation of section 230, which found that “online platforms bear no responsibility for the harassment and abuse their systems enable. If they chose not to respond to the exposure of personal information or intimate images, to threats of violence, to verbal and psychological abuse, there is nothing a victim can do to intervene.” As we explained, “Congress never intended § 230 to create such a system.”

We all can agree platforms need to handle things like harassment better. But there's no clear way to make it better, not when you're moderating millions (Twitter) or billions (Facebook) of users. Attacking the law that allows them to engage in moderation without fear of reprisal isn't going to make things better. It's either going to result in platforms refusing to moderate at all or -- in the case of smaller competitors -- just deciding it's not profitable to do business in the United States.

EPIC knows the EARN IT Act also threatens the use of end-to-end encryption. If the "best practices" handed down by law to address the spread of child porn include forcing platforms to break encryption to view message content, encryption gets weaker and opponents of encryption like Bill Barr and FBI Director Chris Wray get what they want: encryption that doesn't protect anyone.

EPIC thinks it can back the EARN IT Act and keep encryption intact.

[F]or companies that actually provide end-to-end encryption we would caution against recommendations that diminish user privacy and security. Strong encryption is critical for network security. The Act correctly identifies “data security and privacy” as relevant considerations in developing best practices. The Act also requires that the Commission include two experts who have “current experience in matters related to constitutional law, consumer protection, or privacy” as well as two experts in “computer science or software engineering related to matters of cryptography, data security, or artificial intelligence in a non-governmental capacity.” The Act should make end-to-end encryption a “Relevant Consideration” under Section 4(a)(4).

Providing end-to-end encryption protects users, promotes commerce, and ensures cybersecurity. EPIC recommends that the EARN IT Act make clear that liability should not be imposed for a secure end-to-end encrypted communications system that safeguards the security and privacy of users.

That's all well and good, but we're not going to get a law that undermines Section 230 while protecting encryption. It will undermine both. That's the goal of the legislation. Doing everything you can to prevent the distribution of child porn means cracking open encrypted messages to view their contents. Platforms are doing all they can to prevent this, but forcing them to undermine encryption makes millions of people not distributing child porn less secure. It's pretty screwed up to run an organization interested in protecting the privacy of internet users when you're throwing your support behind a bill that threatens to make everyone's conversations less private.

Filed Under: earn it, encryption, section 230
Companies: epic

Copyright In The Modern Era: Fortnite Lets Players Mute Emote To Avoid Auto-Copyright Claims Against YouTubers

from the no-mote dept

If you had told me a few years ago that we would have multiple stories at Techdirt over copyright issues surrounding video game emotes, I would have said you were a crazy person. Unfortunately, it seems that it's the world that is crazy instead.  Fortnite in particular has been a focus of many of these stories, as a popular feature in the game is the ability to perform emotes, some of which are or are accused of being based on pop culture occurrences from other media. It is all, I can assure you, very stupid.

But people claiming likeness to Fortnite emotes isn't the only copyright issue that surrounds their use in the game. Even when Epic has tried to do right by creators of copyrighted content, it still has managed to find itself in trouble. For example, it seems that Epic, which properly licensed Rick Astley's meme-famous Never Gonna Give You Up audio for an emote inspired by his song, has been forced to patch the game so that players can mute the musical content of that emote. Apparently, YouTubers are finding themselves receiving copyright strikes over the song.

Fortnite introduced its Rick Astley-inspired emote just one week ago, and the company has already rolled out an update to let PC players mute the music in response to complaints: creators said they were getting copyright claims over the licensed track that plays when the emote is used.

While it’s clear that Epic licensed Astley’s song, which defined early memes for an entire generation of people, the company didn’t think of how this would affect its creator base. Giving players the ability to mute might take away from the fun of the emote, but it’s a good middle ground for now. It also allows Epic to pursue other popular tracks for its game while ensuring the creator community isn’t hurt.

This shows yet another flaw in copyright law in terms of it functioning well within the modern era of technology. Epic licensed the song properly, except that nobody planned for the obvious eventuality of that licensed emote being used by YouTubers, where the label then issued copyright strikes against those video uploads. What's the argument by the label? Every YouTuber doing let's plays has to license the song as well, even though they're only playing the game? Is Epic supposed to work out a separate license for YouTube videos? Is it a public performance?

Or is this all terribly dumb and a barrier to the original purpose of copyright law? That, probably. After all, it's not as though a snippet of a song that was otherwise licensed appearing on YouTube is somehow a replacement for that song. It's also not as if rick-rolling weren't an incredibly common trollish trope, for which Astley is principially famous among the present youth. Epic having to patch the audio of the emote out of its game for this reason is silly.

But that's modern era copyright for you.

Filed Under: copyright, emote, fortnite, muting, never gonna give you up, public performance, rick astley, rickroll, videos
Companies: epic, youtube