Yesterday used Epic Fortnite to essentially wage an open war against the Apple and Google mobile app marketplaces. First, it added an “Epic Direct Payment” discount option in addition to the standard iOS App Store and Google Play payment options. Fortnitein direct violation of those stores’ policies.
When Fortnite predictably removed from both platforms, Epic filed lawsuits against both companies, arguing “anticompetitive restrictions and monopolistic practices” in the mobile app market. That move was accompanied by a heavy-handed PR blitz, including a video asking players to “join the fight to prevent 2020 from becoming ‘1984’.”
But through this whole public battle for “open mobile platforms,” as Epic puts it, there’s one big set of closed platforms that the company is eager to continue doing business with. We are, of course, talking about video game consoles.
Most if not all of the complaints Epic makes against Apple and Google seem to apply to Microsoft, Sony, and Nintendo in the console space as well. All three console makers are also taking a 30 percent cut in all microtransaction sales on their platforms, for example.
This DLC fee also represents a large portion of those console makers’ revenues. “Add-on content” was a whopping 41 percent of Sony’s gaming and network revenues in the last completed fiscal quarter. Microsoft saw a 39 percent increase in gaming revenue the following quarter Fortnite was also released, with the bump surreptitiously attributed to “third-party title power.” And the Switch saw similar post-Fortnite digital revenue increases after Nintendo announced that half of all Switch owners had downloaded Fortnite†
On mobile platforms, Epic calls the same kind of 30 percent fee “exorbitant” and says it wants to offer a more instant payment solution so it can “pass the savings to players.” On consoles, however, Epic was happy to introduce a permanent 20 percent discount on all microtransaction purchases, despite there being no sign of the console makers changing their fee structure.
A Brief History of Console Controls
The major console makers also all have full control over which games and apps can appear in their own walled gardens. When it comes to iOS, Epic says that “by blocking consumer choice in software installation, Apple has created a problem so they can take advantage of the solution.” When it comes to consoles, Epic is silent about the same state of affairs.
In that sense, consoles are even more restrictive than Android, where games and apps (including Fortnite) can be sideloaded without using the Google Play Store. Still, Google has earned a lawsuit for its role in this turn of events, while the console makers have been left untouched.
Beyond the business implications, console makers’ total control over their marketplaces also has a direct impact on the type of content players can play. For example, any game that receives an Adults Only rating from the ESRB will not be welcome on any of the three major consoles. And if you want to use UWP to code an N64 emulator that works on the Xbox One, Microsoft will remove it as soon as possible.
It wasn’t always like that, of course. Back in the days of the Atari 2600, anyone with the programming skill and cartridge making ability could make games for the console. That turn of events led to a plethora of poorly made Atari software flooding the market, a situation many observers blame for the 1983 video game industry crash.
To prevent history from repeating itself, Nintendo created a lockout chip for the NES that gave it effective control over which cartridges could run on its hardware (and gave it the ability to get a license fee from game developers for the privilege to manufacture cartridges). When companies like Tengen tried to get around this restriction, Nintendo sued them and won, reinforcing its right to Apple-like control over its own software market.
Decades later, this kind of absolute control over compatible software is being treated as the de facto standard in the console room. But in the cell phone world, companies like Epic are increasingly and publicly ridiculing similar restrictions as anticompetitive monopolistic practices. What is the difference?
Split the difference
Some argue that software restrictions on consoles have less of an impact because the hardware is designed only for playing games. As Epic puts it in its own FAQ, “mobile devices are essential computing devices on which we conduct our social and professional lives and engage in commerce and entertainment.” That FAQ only compares the mobile market to “other common computing platforms, including the web, Windows, and Mac.” Consoles don’t fit that same “general purpose” framework, it seems.
But that’s an increasingly outdated view of what consoles can do. The Xbox One, to name just one example, includes a wide selection of non-game apps for features such as video on demand, music streaming, VoIP, email, and more. That may not place it on the same level of software selection as a smartphone, but it does bring it closer and closer to the “general purpose computer”.
Some might point to the very different nature of the revenue model for the different ecosystems. While Apple makes a significant profit on every iPhone sale, console makers routinely sell their hardware at a loss or next to no profit in order to increase the user base for future software licenses and sales.
That could help explain why console makers feel the need to guard their 30 percent off software sales and microtransactions. But it doesn’t really explain why a company like Epic would be okay with paying that fee to Sony, but not Apple.
[Update: Epic’s Tim Sweeney did indeed gesture a bit toward this explanation in 2018, telling GamesIndustry.biz that “there’s a rationale for [the 30-percent fee] on console where there is massive investment in hardware, often sold below cost, and in marketing campaigns in broad collaboration with publishers. But on open platforms, 30 percent is disproportionate to the cost of the services these stores provide, such as payment processing, download bandwidth, and customer service.” Thanks to Christopher Dring for point this out†
Maybe Epic is just more concerned about the potential for lost revenue on consoles versus mobile platforms. A mid-2019 Newzoo study of three major battle royale games, including: Fortnite, found that 71 percent of players played primarily on consoles, compared to just 17 percent on PC and 12 percent on mobile. Being cut off from those console players in a heated public battle would be a much bigger blow to the game’s revenue stream.
“Epic Hearts Microsoft”
Or maybe Epic just has a better relationship with console makers than it does with cell phone manufacturers. Epic has long made console the main focus of its Unreal Engine development, in a way that was less true for mobile phones.
Sony recently invested $250 million in Epic and also featured Epic’s Unreal Engine 5 prominently in a recent major promotional demo for PlayStation 5. Even Nintendo, which has traditionally used its own technology for game development, has started using Unreal Engine for its own titles in recent years. In a way, Epic can’t attack these platform holders without attacking itself as well.
And while Epic and Microsoft were famous for the universal Windows platform on PCs, the two companies publicly buried the hatchet during the rollout of the HoloLens 2 platform last year. “Epic loves Microsoft,” Tim Sweeney said at the time. “Epic Hearts Microsoft.”
However, Apple and Epic are no strangers to the business world. epics Infinity Blade and Unreal Engine, for example, were featured in an iPhone keynote presentation in 2010, and the company unveiled a “Zen Garden” demo for iOS 8 at WWDC 2014. But while Unreal Engine is an important part of the console landscape today, the high- End 3D graphics that allow it are still more of a niche on mobile platforms, which often aren’t powerful enough for those kinds of games.
Perhaps the answer is that Apple, in particular, is a more mature target these days. Everyone from Microsoft and Google to email app makers to European regulators has been targeting the anti-competitive nature of the iOS marketplace in recent months. Perhaps Epic doesn’t want to be the only company to similarly take over the console triumvirate.
With Epic not responding to our requests for comment, we’re left guessing why consoles have been spared the company’s legal and PR wrath. But in the end it could just be a matter of timing. Perhaps Epic will focus on mobile marketplaces first, hoping to set a precedent that could also break the monopoly control console makers who own their own hardware.
Today, it’s hard to imagine a world where console makers can’t approve the software running on their systems. But if Epic is successful in its cell phone attacks, that could be where we’re headed.