Is Fortnite a video game? Is it an app? Is there a vast virtual universe? All of the above?
Is an iPhone just another gaming device, or is it part of a tightly controlled ecosystem? Is it as safe as it’s made out to be?
These are just a few of the many questions that have been raised and debated thus far in what could be one of the most important trials in the modern-day tech industry.
Apple, the creator of the iPhone, and Epic Games, the creator of Fortnite, wrapped up the first week of testimony on Friday, with the iPhone creator attempting to defend itself against accusations from the video game developer that its App Store is a monopoly and has engaged in anti-competitive behaviour.
The trial’s heart is Apple’s payment system, which must be used for any in-app purchases and gives Apple a 30% cut of any such transactions. Epic attempted to circumvent the system in August of last year, resulting in Fortnite’s removal from the App Store, a lawsuit, and now the ongoing trial.
On the stand, Epic CEO Tim Sweeney repeatedly tried to define Fortnite as more than just a game, using the term “metaverse” to refer to a virtual world in which people attend concerts, watch movies, and go to parties using their online avatars. Other game-based virtual worlds, such as Minecraft and Roblox, are still available on Apple’s App Store.
Epic is attempting to bolster its argument that people do a lot more than just play games in Fortnite, and that Apple’s 30% cut on transactions within Fortnite’s iOS app is anti-competitive because alternative systems aren’t permitted.
According to Ari Lightman, a professor of digital media at Carnegie Mellon University, presenting Fortnite as more than a game is an attempt to broaden the scope of the case and demonstrate how onerous Apple’s restrictions are.
“If you download the app from the [App Store] and then you do in-app purchases, a certain percentage comes back to Apple, part of its agreement,” he said. “But if you want other additional things, if you want digital experiences, virtual experiences that don’t relate to the gaming but relate to the brand, does Apple still get a part of that? Should they get a part of that? And Epic’s arguing: no.”
While Epic is attempting to broaden its scope, Apple, which controls more than a billion devices worldwide, is attempting to narrow its own. According to the company, the iPhone and iPad are just two of many devices on which Fortnite can be played, including the Sony Playstation, Microsoft Xbox, Nintendo Switch, and even smartphones running Apple’s main competitor, Google’s Android system.
Apple claims that many of those platforms are far more restrictive than its own — Sony, for example, rarely allows play against other devices’ gamers and does not allow outside payment systems. Commissions on game consoles are also 30%.
Epic countered that argument by claiming that consoles are fundamentally different from iPhones because they are used for a specific purpose — gaming only — and brought Microsoft Xbox executive Lori Wright to the stand to help make that point.
“We certainly don’t view the iPhone as a competing device” in the same way that a Playstation, Wright responded to Epic’s lawyer’s questions.
The battle to define games and gaming devices is merely a proxy for a much larger conflict.
Epic’s case is predicated on defining Apple as a market in and of itself. It is attempting to demonstrate that the company has complete control over its ecosystem, where app developers must follow its rules in order to gain access to hundreds of millions of Apple users and devices.
And, of course, Apple must persuade U.S. District Judge Yvonne Gonzalez Rogers that there are numerous competitors from which users can choose if they don’t like how it operates.
“While courts are reluctant to define single-brand markets, it seems appropriate to do so here,” said Mark Lemley, director of Stanford University’s program in law, science and technology. “If you own an iPhone, you can only buy apps through the Apple App Store… People aren’t going to switch phone ecosystems based on the availability of a single app.”
Epic must also demonstrate that Apple’s payment requirements are anti-competitive. Apple has countered that the commissions are required to help pay for the company’s frequently lauded privacy and security features.
Epic attempted to debunk that argument in the second half of the week by questioning two Apple executives — App Store VP Matt Fischer and app review director Trystan Kosmynka — extensively about the company’s process for adding apps to its devices. Epic’s lawyers presented several pages of internal Apple emails revealing fraudulent, malicious, and clone apps that passed the review process.
While both executives admitted that the app approval process isn’t perfect, they both defended Apple’s current system and practices.
Fischer stated that the company felt “justified” in earning a commission on digital transactions.
“I believe the number of errors is a small fraction of the overall effectiveness of the review process,” Kosmynka added.
So far, Sweeney and several other Epic Games executives have testified, as have two Apple executives and one representative each for Microsoft and computer systems maker Nvidia, as well as the creator of a yoga app called Down Dog, who testified about Apple’s App Store policies and restrictions.
The court proceedings will resume on Monday, with Epic continuing to build its case before Apple takes over later this week. Several senior Apple executives, including CEO Tim Cook and senior vice president of software engineering Craig Federighi, are expected to testify.
The trial is scheduled to last until May 24, so it could be weeks before a verdict is reached — and appeals are almost certain to follow.
Whatever the outcome, the case is certain to cause a significant shift on a number of fronts, including the broader app ecosystem, which is worth tens of billions of dollars, and tech regulation in general.
“I think Apple has more to lose here because it has a very lucrative business model at stake,” said Stanford’s Lemley, though he notes that Epic, which is valued at nearly $29 billion, also has a lot of money on the table. The company is currently suing Google over its Android app store and may face a battle with console makers over their restrictions.
“More generally, the public stands to benefit from an Epic win, both because it would mean that Apple would find it much harder to exclude apps it competes with and because it will reduce the cost of entry for new apps,” Lemley added.
Lightman of Carnegie Mellon University agreed that Apple has more in the works.
“Apple is going to be … in a place where their brand has been tarnished a bit,” he said. “Win or lose, Apple is going to be perceived as a company that’s sort of extorting exorbitant rents out of the folks that they work with.”
