Thursday, August 20, 2020

Fortnite's absence from Apple's App Store will be short-lived--here's why and on what basis Epic Games will put it back soon

Epic Games provoked Fortnite's removal from the iOS App Store and the Android Play Store by running a promotion that circumvented the in-app payment rules of those platforms--and already had that Nineteen-Eighty-Fortnite video as well as two partly-overlapping antitrust complaints, each more than 60 pages long, prepared at the time.

This legal dispute may very well take years to be resolved and go all the way up to the Supreme Court. Epic Games isn't seriously going to forgo its revenue opportunity on iOS (and Android) for the better part of the 2020s.

Epic would have us all believe that they're idealistic freedom fighters, the Braveheart of the mobile app universe. Realistically, they're more principled than a self-serving Spotify (trying to capitalize on the fact that the EU presently has the least principled competition commissioner in the bloc's history), but neither are they prepared to die for this cause nor are they just drama queens (well, maybe to some degree if that YouTube video is any indication). At the end of the day, they're businesspeople running a company recently valued at $17.3 billion and trying to change some parameters in their favor. Also, I do find it credible that it's not only about money but also about their view of what would be fair.

I've been following high-stakes commercial disputes like this for a long time. There's only one circumstance that sets this one apart from cases like Apple v. Samsung or Oracle v. Google: Epic Games is privately-held, with a majority belonging to its founder Tim Sweeney, roughly 40% of the shares to China's Tencent (which also owns well over 90% of Supercell, for example), 1.5% to Sony (which I understand wants a 30% cut from developers just like Apple), and the rest to some financial investors and maybe some key employees. Officers of a publicly-traded company have a fiduciary duty toward other shareholders, which makes their key decisions more predictable. Here it's a major unknown how much leeway Mr. Sweeney enjoys--it depends on his non-public agreements with all those minority shareholders, some of whom have a purely financial interests and only one of whom (Tencent) may actually like the idea of Epic Games acting as a proxy warrior.

But even if Mr. Sweeney truly considered this a holy war and Epic's minority shareholders supported or simply couldn't do anything about it, Fortnite would realistically return to the App Store in a matter of weeks--or maybe months should it take surprisingly long.

There are litigants like Apple who mostly just let their lawyers speak and largely refrain from commenting on pending cases in public, and there are the likes of Qualcomm (who published an infographic when asserting patents against Apple) and Nokia (who are incessantly vocal about their ongoing dispute with Daimler and its suppliers of mobile communications components). The way Epic Games started this leaves no doubt they're at least as PR-focused as Qualcomm and Nokia combined. I don't want to take a position on accusations of Epic seeking to "weaponize" Fortnite gamers for its purposes, but it is fair to say that a mobilization effort of that nature and stature is unprecedented in smartphone-related litigation.

At least on Twitter I don't get the impression that Epic is off to a good start. They thought they came out swinging, but so far it appears Apple actually has broader support in the court of public opinion than Epic, which is a potential sign of some miscalculation on Mr. Sweeney's part. He may have made the mistake to assume that end users care as much about that 30% App Store cut as he and other developers do. I am an app maker--as I've repeatedly stated and will soon be more specific about when I announce my new game--, so Epic's campaign could theoretically benefit me, but I also have a reputation at stake here as a smartphone litigation commentator.

Someone as successful as Mr. Sweeney is ultimately rational, so what's the end game here with respect to Fortnite's availability on the App Store?

Epic would love to obtain a temporary restraining order (TRO) in order to deal Apple a first blow. That would be "la puerta grande" for Fortnite to return to the App Store. The motion hearing will take place on Monday, and I predict that Judge Gonzalez Rogers is going to be more than reluctant to enjoin Apple at this stage. From the perspective of a judge, it doesn't make sense that someone would purposely breach an agreement and then ask a court to enter an order within a matter of days only to prevent the other party (that met its own obligations) from triggering the contractually defined consequences of such conduct. As Apple told The Verge, they're happy to make Fortnite available again, provided that Epic honors the related agreements, which it had been doing for years and very profitably so.

Should Epic totally surprisingly get its TRO, then Fortnite will be back up on the App Store within about a week. Assuming the far more likely outcome, which is that Epic's TRO motion will be denied, it will happen, too--just a little bit later.

From a rational perspective, Epic has nothing to gain from a protracted unavailability of Fortnite for iOS after failing to win a TRO:

  • By bringing the TRO motion, regardless of how much of a long shot it was in the first place, Epic has already shown to the court of law and the court of public opinion that it strongly believes in its views.

  • Apple won't have to worry about damages Epic might be seeking later on. In that scenario, it would still be clear that Epic had access to the App Store and to Apple's developer tools, and all it had to do was to stop running a promotion that didn't comply with Apple's in-app payment rules. That wouldn't give rise to a huge damages award even in a best-case scenario for Epic.

  • Maybe Epic is trying to work something out with Google (interestingly, I still haven't seen a TRO motion against the Android maker), but even if that happened, very few iOS users would switch to a different mobile operating system just because of Fortnite.

  • There comes a point at which Epic's own iOS user base is going to be annoyed.

All things considered, I believe the most likely development is that the court will deny Epic's motion for temporary relief and Epic will then say it's disappointed but at least it tried, and now it must live with the decision, and in the interest of their customers, they will comply with Apple's rules again (for the time being, while pursuing their litigation) in order to make Fortnite available for iOS again and to ensure continued access to Apple's developer tools with a view to the Unreal Engine as well.

Whether a federal judge will be comfortable with the notion of her court being used as a PR tool by a multi-billion-dollar games company is another question. That may or may not be Epic's second miscalculation in the early stages of this dispute.

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