Apple (AAPL) Vs. Epic Games "Fortnite"
Apple Inc and Epic Games’ legal battle royale is nearing an end.
During its third week in Oakland, California federal court, the drama between the tech giant and “Fortnite” publisher is about to get more intense since Apple’s CEO Tim Cook will take the stand on Friday.
In this article we are going to point out what has happened between the two companies, and how important is Tim Cook’s testimony along with what is going to happen when the trial is over and one of them wins.
- It all started when Epic took a turn and gave the users of its mobile games, a way to pay directly without the need of using the App Store and Google Play store.
- Then both companies removed Fortnite, and that’s when Epic sued Apple for anti-competitive behavior.
- On the other side, Apple is blaming Epic for breaching a contract and saying it only took what is called appropriate measures by removing the game.
- If Apple wins the case, it has many ongoing cases against it from developers that are similar to Epic. Even if Epic wins, they have been on the headlines as sticking up for the little guy and that’s a win itself says Lyons.
What happened with Apple and Epic Games?
It all started when Epic took a turn and gave the users of its mobile games, a way to pay directly without the need of using the App Store and Google Play store.
Both Apple and Google take a 30% cut of most purchases made in their online stores. For this reason, Epic games had to charge $9.99 before. However, now that it found a way to take them out of the picture Epic can give its players a discount at $7.99.
But what was Epic thinking? The tech giants removed “Fortnite” from their app stores which caused not only a halt of new players but also made it harder for those who already had the app to update it and keep playing.
The lawsuit story: “Who sued who?”
Epic sued Apple and Google for their app payment systems that requires a cut of Epic’s sales. The argument here is that both companies’ systems are anti-competitive and monopolistic. Lightman said, is that “Apple monopolizes access to its user base by charging exorbitant rates and breached antitrust laws by removing the app from the App Store.”
On the other hand, Apple argues that Epic breached a contract when it decided to take them out of the equation and as a result, the company took what is considered “appropriate measures,” in pulling the Fortnite app, he said.
At stake in the trial is Apple’s business model for iOS devices, said Jennifer Rie, a senior litigation analyst for Bloomberg Intelligence. “It operates the iOS as a walled garden, and Epic is seeking to force Apple to open the system to other app distributors and/or other services of payments made for apps and for in-app purchases,” she said. “It would be a major change in the way Apple controls iOS devices and could result in a big hit to its revenue.”
The trail so far
The trial began on May 3rd with Tim Sweeney, CEO of the Cary, North Carolina-based Epic. Sweeney acknowledged that he personally used an iPhone instead of an Adroid software because he thought Apple will be more secure. Furthermore, he acknowledged that Apple made changes to allow Fortnite players to compete with each other even when one was on an Apple phone and another one o a video game console. The so-called “cross-platform” managed to boost the game expansion to more than 400 million users.
How important is Tim Cook’s testimony?
Cook’s testimony may be less important than that of various industry experts who testified last week, Rie says, “but his testimony will be important for the rationale behind Apple’s business model.”
“This is key testimony for Cook as the App Store and its fee structure represents the golden jewel of Cupertino’s services business,” said Daniel Ives, an analyst with Wedbush Securities, who expects Apple to be the victor in court. “All eyes are on this testimony as the Epic trial hits on the broader App Store fee structure and antitrust swirls which remain a risk around the Apple story in the eyes of the Street.”
What happens next?
Epic and Apple ware required to make their closing arguments on Monday and answer the judge’s questions.
Before testimony began Thursday, MarketWatch reported, Judge Gonzalez Rogers said she had not “decided what I’m going to do” but “one or both of you won’t be happy, so it’s going to go to the court of appeals.”
“Even if they lose the case, they have been playing a court-of-public-opinion game,” Lyons said. “You spend a few million dollars on lawyers and you are a company that winds up being in the headlines for sticking up for the little guy. Maybe that’s a win in itself.”
On the other hand, if Apple wins the company has still many ongoing purported class actions against the company by classes of developers and app buyers making similar accusations against the tech giant just like Epic games. Rie says, “These lawsuits have yet to play out. And the Department of Justice is investigating Apple and and may file a suit, as well, as could State Attorneys General. So if Apple wins, it is not necessarily the end of the story.”
Disclaimer – I/we have no position in any stock mentioned. I wrote this article myself, and it expresses my personal opinions. I am not receiving any compensation for it, other than FDGT Academy. I do not have or had in the past any business relationship with any company that is mentioned in the above article.
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