Earlier today, Apple announced it will reduce the App Store commissions for smaller businesses so that developers earning less than $1 million per year pay a 15% commission on in-app purchases, rather than the standard 30% commission.
Tim Sweeney, founder of Epic Games, says the move — an apparent reaction to current investigations into Apple by Congress, the European Union, the Justice Department and the Federal Trade Commission on antitrust grounds — doesn’t go nearly far enough. He told the Wall Street Journal that Apple is merely “hoping to remove enough critics that they can get away with their blockade on competition and 30% tax on most in-app purchases. But consumers will still pay inflated prices marked up by the Apple tax.”
Sweeney — whose company has been embroiled in a battle since launched a direct-payment system in its popular “Fortnite” game to bypass Apple’s 30% fee — went even further today in conversation with Dealbook during a two-day event.
Asked about Epic’s fight with the tech giant — which began in August with its payment system, which led to Apple kicking Fornite off the App Store, which led to Epic filing a civil lawsuit against Apple in the U.S. and, today, to begin legal proceedings against Apple in Australia using the same argument that Apple is acting monopolistically — Sweeney didn’t mince words. He even likened the Epic’s ongoing campaign to the fight for civil rights in the U.S.
Said Sweeney: It’s everybody’s duty to fight. It’s not just an option that somebody’s lawyers might decide, but it’s actually our duty to fight that. If we had adhered to all of Apple’s terms and, you know, taken their 30% payment processing fees and passed the cost along to our customers, then that would be Epic colluding with Apple to restrain competition on iOS and to inflate prices for consumers. So going along with Apple’s agreement is what is wrong. And that’s why Epic mounted a challenge to this, and you know you can hear of any, and [inaudible] to civil rights fights, where there were actual laws on the books, and the laws were wrong. And people disobeyed them, and it was not wrong to disobey them because to go along with them would be collusion to make them status quo.”
While the analogy undoubtedly prompted some eye rolls by attendees, Apple’s announcement today shows that Epic, which has itself evolving into a powerful and lucrative platform — one valued at $17.3 billion during in August following a $1.78 billion funding deal — is moving the needle.
The question is where it all ends. Interviewer Andrew Ross Sorkin noted that Epic has a price in its own app store, asking if there is any “fair price” in Sweeney’s mind that Apple could charge.
Sweeney noted that Epic itself pays 2% to 3% in transaction costs in developing countries, another 1% for payments support and “maybe 1%” of revenue to cover its bandwidth costs and suggested that an 8% Apple tax, as it has come to be called, might be acceptable in exchange for the service it provides to developers.
In fairness to Apple, Sorkin also observed that similar to Apple, Sweeney talks about “Fortnite” as a platform, one that is “right now not open; there’s not a competitive marketplace where others can effectively develop on top of [the] platform [to] create their own in app purchases right now.” He asked if that might be changing.
Sweeney said the company is “moving in that direction.” Pointing to Fortnite Creative, a mode in Fortnite allows users to freely create content, he said that “tens of millions of creators are sharing their content with their friends and with the general public, and there’s a little bit of a business model there. But it’s in the very early stages of development.”