Apple’s spat with app developers over its cut of their revenues exploded into a high-stakes clash on Thursday when Apple kicked the wildly popular game Fortnite off iPhones and Fortnite’s maker hit back with a lawsuit.
The fight began on Thursday morning with a clear provocation. Epic Games, the maker of Fortnite, started encouraging users of the Fortnite iPhone app to pay it directly, rather than through Apple. The iPhone maker requires that it handle all such app payments, so it can collect a 30 percent commission, a policy has been at the center of antitrust complaints against the company.
Hours later, Apple responded, removing the Fortnite app from its App Store.
“Epic enabled a feature in its app which was not reviewed or approved by Apple, and they did so with the express intent of violating the App Store guidelines,” Apple said in a statement. “We will make every effort to work with Epic to resolve these violations so they can return Fortnite to the App Store.”
Epic followed with its own response: It said it was suing Apple.
“Apple’s removal of Fortnite is yet another example of Apple flexing its enormous power in order to impose unreasonable restraints and unlawfully maintain its 100% monopoly over the” market for in-app payments on iPhones, Epic said in a 62-page lawsuit unveiled just moments after Apple removed the Fortnite app.
Apple, on the verge of a $2 trillion valuation as its stock has soared in recent weeks, now faces a legal fight with one of its most lucrative partners over a crucial issue for antitrust regulators investigating the power of Big Tech.
How Apple polices the App Store has drawn intense scrutiny over the past year, as app developers complain that Apple is taking an unfair cut of their business while, in many cases, also competing with their apps with its own offerings. Justice Department officials and state attorneys general are investigating Apple’s control over the App Store, and House lawmakers interrogated Apple’s chief executive, Tim Cook, on the issue in a hearing last month.
In practical terms, kicking Fortnite out of the App Store means that new users will not be able to download it, but it will continue to work on iPhones that already have the app installed.
If the dispute drags out, it will become a much larger problem for Epic Games — and for Apple. Without access to the App Store, Epic Games effectively cannot update its app, meaning it will eventually become obsolete as Apple updates its iPhone software.
Filing a suit serves two purposes for Epic: winning in court and winning in the court of public opinion, said Rebecca Haw Allensworth, a professor of antitrust at Vanderbilt Law School. Epic is more likely to succeed in the latter, she said. “There is growing business pressure against Apple,” she said, noting an antitrust case would be more complicated and difficult to win.
Fortnite has become an enormous enterprise, and announced in May that it had more than 350 million registered players. The game generated $1.8 billion in revenue last year, according to analysis firm SuperData.
Since March 2018, Fortnite’s app has been downloaded more than 133 million times on iPhones and iPads and brought in roughly $1.2 billion, according to Sensor Tower, an app analytics firm. Apple has taken $360 million of that revenue as part of its commission, Sensor Tower said.
“Epic could likely have worked out a privileged deal with Apple — as other big tech companies have,” said Matthew Ball, the managing partner at Epyllion Industries, which operates a venture capital fund. “Instead, it is fighting for the marketplace.”
Epic’s clash with Apple is the latest in a series of recent spats between app makers and the company. Last week, Microsoft said it had ended a pilot of its mobile gaming app, xCloud, on Apple’s App Store.
“Apple stands alone as the only general-purpose platform to deny consumers from cloud gaming and game subscription services like Xbox Game Pass,” a Microsoft spokesman said at the time. “And it consistently treats gaming apps differently, applying more lenient rules to nongaming apps even when they include interactive content.”
And Facebook, after months of rejections from Apple, said last week it had watered down its Gaming app to comply with Apple’s demands. App Store guidelines do not allow apps whose “main purpose” is to provide a store-like interface with other apps or games.
Apple has said that all app developers are subject to the same rules, and that its 30 percent commission on the sale of digital goods and services is fair. Apple has argued that it spends billions of dollars on the App Store and iPhone technology, creating business opportunities for companies like Epic.
“Epic has had apps on the App Store for a decade, and have benefited from the App Store ecosystem,” Apple said in a statement on Thursday. “The fact that their business interests now lead them to push for a special arrangement does not change the fact that these guidelines create a level playing field for all developers and make the store safe for all users.”
Tim Sweeney, the chief executive and founder of Epic, has criticized Apple for price gouging with its 30-percent fees in its App Store. Epic, based in Cary, N.C., has a lot to lose in taking on Apple, he said in an interview last month. But he said he felt obligated to “make this industry a better and fairer place.”
“It’s critical to the future of humanity,” he said. “Otherwise you have these corporations who control all commerce and all speech.”
In 2018, Epic released its own app store, which charges developers 12 percent. Mr. Sweeney said the Epic Games Store has processed more than $1 billion in transactions. Even with the lower fee, Epic’s store makes a profit of 5 percent to 7 percent, he said.