How You Capitalize From the Apple vs. Epic Court Ruling

How You Capitalize From the Apple vs. Epic Court Ruling

December 3, 2021
Topics
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Deconstructor of Fun is an excellent podcast created by games professionals, for games professionals. They explore the business side of the games industry with the goal of bringing content that is relevant, insightful, and entertaining. It’s well worth subscribing to, and you’ll enjoy the guests that join host Michail Katkoff for a weekly download of gaming’s biggest topics.

Xsolla president Chris Hewish appeared on the show to discuss the ramifications of the game-changing decision in the Apple vs. Epic Games lawsuit. While that is set to go into effect on December 9, 2021, Epic has already appealed and it could be appealed by Apple as well. Regardless, it has already sent waves across the industry and is poised to initiate a sea change in how mobile games handle payments.

Below are transcribed excerpts from the episode with a focus on how Xsolla can help developers take advantage of these changes.

The legal case between Epic Games and Apple is arguably one of gaming’s biggest storylines from the last few years. Something we’ve covered on this podcast methodically. 

It began back in August of 2020 when Apple removed Fortnite from the App Store following a violation of Apple’s In-App Payment Policy. The case has progressed quickly, focusing on Epic’s argument that Apple’s iOS business practices are anticompetitive — filled with inconsistencies and touting a monopolistic approach to mobile’s most dominant ecosystem.

As of September 10, 2021, only 13 months later, Judge Rogers issued a permanent injunction, resulting in two key takeaways for the tech giants:

  • For Apple: The company must allow iOS apps to offer payment options besides the ones subject to Apple’s 30% fees within the next 90 days. Essentially, these payment methods link outside of the core app experience.
  • For Epic: According to the verdict, Apple’s business practices are not monopolistic. Epic must pay Apple 30% of the revenue gained from their non-App Store approved payment methods (which totals around $3.5 million). Fortnite will continue to be banned indefinitely due to a breach of contract.

Michail Katkoff: Chris, Xsolla must be pretty happy with this decision?

Chris Hewish: Yes, we are very happy with this decision. It’s something we’ve been discussing and planning for internally for quite some time. You may not know this, but Xsolla handled payments for Epic when they had a standalone APK for Fortnite on Android. So we’ve been in this from the beginning and are now helping some equally big companies leverage this decision to their advantage.

Michail: Are a lot of companies moving in that direction? Is there more inbound traffic? I would assume this is very good for business.

Chris: It is very good for business and interestingly, a number of companies we've been working with for since well before this, whether it's to put up cross-play games or top-up page, so there's been some activity around this already, and we've seen extremely good results from it.

This just opens it up even further. I think what we're seeing right now is a lot of companies that were on the sidelines, who were big enough, and had the resources and the desire to monetize off the App Store, but they were scared of violating Apple's rules and guidelines and impacting their main business.

We're seeing a lot of those companies now take their own internal legal reviews to get the green light, and they're now coming to us and looking for a solution to take advantage of this.

Michail: You mentioned services like cross-play and top-up. What do you mean by those?

Chris: Sure, cross-play is when you take your game from the App Store, and you put a web version up, whether it's on a web page or it's a PC version of the game, and you have cross-play where players can play across the platforms.

What that allows you to do is sell items and currency on the web or on the PC version that actually go into the account on mobile as well. That's tried and true, and that's been done for a long time. That's always been within the guidelines and okay to do. 

Then you have top-up where you skip putting a game up on the web or having a PC version, and you just put a page up where you can offer currency bundles, items, or whatever transactions you want. Players can buy stuff on that page, and it actually goes into their mobile account. 

Up until now, you haven't been able to steer players from your app to those web pages. You've had to reach out to them in different ways, and companies have been doing that, but now it's a legitimate and easy way to actually let your players know about it and drive a substantial amount of business that you don't have to pay that 30% fee on.

Michail: In terms of examples of games that do that, if you go to the Supercell store and check it out, you'll find that you can buy passes and bundles for Clash of Clans. Is that essentially what you mean by top-up pages?

Chris: That's exactly right.

Michail: How long does it take to make a top-up page?

Chris:  I can only speak for ourselves, and I don’t want to sound like the salesy guy on the show here, but for us, we can get it up and running in no time at all. We have a system that basically points at your app page, scrapes the metadata, and will automatically create a page for you with pricing, links, and the whole thing.

I’m curious to see how developers and publishers are going to lean into this and start building out a community hub and where they can really start to engage with their players. I think on the mobile side, you haven’t seen those communities the way you do on PC, and to me that’s an exciting opportunity.

Michail: How did Spotify, Netflix, and other subscription services monetize outside of iOS before, and why wasn’t this done by gaming companies?

Chris: I think when you look at Spotify and Netflix, companies like those already have a strong presence beyond just mobile. They're not viewed as just a mobile product, and they have a great web presence, and they are good examples of cross-platform products. Their content is consumed all over the place and not just on one piece of hardware. 

That really allows them to engage with their users off-platform easily, and when you're looking at the game side of it, there's a parallel there. If you look at cross-platform games, game companies are already doing this and taking advantage of it.

You don't have a lot of people going online trying to find Flappy Bird communities to talk about events and what's coming up. But you do in other games, like Roblox, for instance, and Nexters is doing it with Hero Wars. These are all examples of companies that have a big enough game and community. That community is engaging with content everywhere, so it makes it a lot easier to communicate with them on the web since they’re already there.

Honestly, it's been surprising that more developers haven't done this. I think it's an opportunity with a lot of upsides, with little downside and little upfront cost, and now we're going to see more of it.

Michail: Chris, who do you think this ruling benefits the most - small to mid-size developers or large size publishers? 

Chris: It benefits developers and publishers of various sizes to different degrees. But from our perspective, the common benefit relates to devs finally being able to create a bridge between their apps and their presence on the web, where they can do all the commerce, community, and marketing things that PC devs have been doing for years. 

It's a great opportunity for mobile developers to earn significantly more money while building deeper relationships with their players. You can link out to web shops where you can monetize without paying 30%, collect all the data you want, build direct relationships with your players, and leverage all the marketing power the web has to offer to acquire new users. 

But this requires resources and bandwidth, which means the obvious winners are the larger developers and publishers who have the resources and bandwidth to take advantage of everything this has to offer. We’ve actually been helping some pretty big developers do exactly this for the past year. 

When done right, we’re seeing revenue bumps upwards of 40% by driving spend outside of the app store; this is being done under the current restrictive, and now illegal, anti-steering app store practices.

These large, or as we call them, “enterprise," companies can afford to build their own ecosystem outside of the app store and drive traffic back and forth. We've seen companies doing this for a while, with web/mobile games linked via cross-play or top-up pages where players can spend outside of the app. Nexters, Roblox, and Supercell are three different examples of companies already benefiting from monetizing outside the app stores. They’re all doing it really well and stand to benefit greatly once they can openly connect players directly from their apps to their web shops. 

You also asked about mid-sized and smaller devs. They can benefit as well, although the upside isn’t as obvious since they don’t have large player bases to migrate or extra people internally to run secondary ecosystems outside the app. This is an area I’m really keen to see evolve. We’ve seen mid-sized and indie devs find great success on PC by operating outside platforms like Steam; Battlestate Games is one great example. They make the wildly successful Escape from Tarkov yet run it all from their own website. They’re having triple-A success without being on Steam, the Epic Games Store, GoG, or any other platform. I think there’s a parallel where mid-sized and indie devs can find ways to monetize and socialize with users outside of the app store, creating a new form of acquisition and virality that hasn’t been possible before. 

Michail: What is the effect on the app ecosystem as a whole?

Chris: The biggest effect has been moving scrutiny of the ecosystem from industry wonks to the mainstream and the resultant attention from legislative bodies around the world. For years we've all known that big platforms, like the App Store, are unresponsive and predatory; and have zero incentive to tend their gardens. The incentives have simply been misaligned, and there haven’t been any real alternatives. Sure we’ve all benefited, but at what cost? Well, we’ll now have the opportunity to find out. I personally believe that one of the biggest effects will be the opportunity for mobile devs to finally build closer relationships with their players, without fear of getting the ban hammer by driving users to other parts of their own ecosystem; whether it’s for better prices, community building, or anything else. It’s finally the chance to have that connection that the walled gardens have blocked everyone from for so long. 

Michail: Do you think Google will follow suit?

Chris: Yes, I do. Interestingly, Google has already been working on some things to make it easier for third-party app stores to operate on par with Google Play. Last year Google said, “… some developers have given us feedback on how we can make the user experience for installing another app store on their device even better. In response to that feedback, we will be making changes in Android 12 (next year’s Android release) to make it even easier for people to use other app stores on their devices while being careful not to compromise the safety measures Android has in place. We are designing all this now and look forward to sharing more in the future!”

A few months ago, the website XDA found documentation indicating that third-party app stores will be able to update apps on Android 12 without constant user interaction. This effectively allows third-party stores, like the Epic Games Store, for example, to function much like Google Play does today. Instead of the user getting pop-ups during install or having to manually update apps from a third-party store, these processes will be automatic. There are details and nuances to this, but it’s a big deal nonetheless and shows that Google is arguably being more forward-looking and inclusive than Apple on this topic. 

Michail: Epic’s intent behind the suit was to prove Apple was in violation of antitrust laws. They didn’t achieve that. Do you think that Epic will continue this pursuit? After all, Apple sees this as a win,and Epic sees this as a loss. 

Chris: We’ve just finished the first round of this fight, with many more to come. Epic is definitely playing a bigger and longer game here, with the end goal, we think, being to hang the monopoly tag on Apple. This would have a far-reaching impact on how Apple can treat devs and publishers. I don’t think Epic will consider it a win until they can get their Epic Games Store onto one of the largest platforms on the planet. 

Another way to look at this, and we’re going to get a bit futurist here, is that this becomes even existentially critical when you look past the iPhone and start to question what new technologies are coming that Epic sees are crucial to an open and interconnected ecosystem, such as… the metaverse. Technologies that Apple will likely be the leader in and which will require content delivery via the App Store. In this context, I can start to see why Epic considers this a loss. Just think about it. Tim Sweeney is all about an open, connected, and free-flowing metaverse. Anything that stands in the way of this vision is a loss for Epic. 

Meanwhile, we all get to sit back and benefit from more effectively monetizing games and connecting more deeply with players.

--

Are you ready to take advantage of the changes coming on December 9? Step up and learn all about Web Shop for Mobile Games, and how it lets you do everything the App Store does and more, for only 5%. Check out our one-pager for more information and an integration guide, and download our free ebook with in-depth details, best practices, and everything you need to get started. We're here to help, and we can't wait to see you succeed.

Deconstructor of Fun is an excellent podcast created by games professionals, for games professionals. They explore the business side of the games industry with the goal of bringing content that is relevant, insightful, and entertaining. It’s well worth subscribing to, and you’ll enjoy the guests that join host Michail Katkoff for a weekly download of gaming’s biggest topics.

Xsolla president Chris Hewish appeared on the show to discuss the ramifications of the game-changing decision in the Apple vs. Epic Games lawsuit. While that is set to go into effect on December 9, 2021, Epic has already appealed and it could be appealed by Apple as well. Regardless, it has already sent waves across the industry and is poised to initiate a sea change in how mobile games handle payments.

Below are transcribed excerpts from the episode with a focus on how Xsolla can help developers take advantage of these changes.

The legal case between Epic Games and Apple is arguably one of gaming’s biggest storylines from the last few years. Something we’ve covered on this podcast methodically. 

It began back in August of 2020 when Apple removed Fortnite from the App Store following a violation of Apple’s In-App Payment Policy. The case has progressed quickly, focusing on Epic’s argument that Apple’s iOS business practices are anticompetitive — filled with inconsistencies and touting a monopolistic approach to mobile’s most dominant ecosystem.

As of September 10, 2021, only 13 months later, Judge Rogers issued a permanent injunction, resulting in two key takeaways for the tech giants:

  • For Apple: The company must allow iOS apps to offer payment options besides the ones subject to Apple’s 30% fees within the next 90 days. Essentially, these payment methods link outside of the core app experience.
  • For Epic: According to the verdict, Apple’s business practices are not monopolistic. Epic must pay Apple 30% of the revenue gained from their non-App Store approved payment methods (which totals around $3.5 million). Fortnite will continue to be banned indefinitely due to a breach of contract.

Michail Katkoff: Chris, Xsolla must be pretty happy with this decision?

Chris Hewish: Yes, we are very happy with this decision. It’s something we’ve been discussing and planning for internally for quite some time. You may not know this, but Xsolla handled payments for Epic when they had a standalone APK for Fortnite on Android. So we’ve been in this from the beginning and are now helping some equally big companies leverage this decision to their advantage.

Michail: Are a lot of companies moving in that direction? Is there more inbound traffic? I would assume this is very good for business.

Chris: It is very good for business and interestingly, a number of companies we've been working with for since well before this, whether it's to put up cross-play games or top-up page, so there's been some activity around this already, and we've seen extremely good results from it.

This just opens it up even further. I think what we're seeing right now is a lot of companies that were on the sidelines, who were big enough, and had the resources and the desire to monetize off the App Store, but they were scared of violating Apple's rules and guidelines and impacting their main business.

We're seeing a lot of those companies now take their own internal legal reviews to get the green light, and they're now coming to us and looking for a solution to take advantage of this.

Michail: You mentioned services like cross-play and top-up. What do you mean by those?

Chris: Sure, cross-play is when you take your game from the App Store, and you put a web version up, whether it's on a web page or it's a PC version of the game, and you have cross-play where players can play across the platforms.

What that allows you to do is sell items and currency on the web or on the PC version that actually go into the account on mobile as well. That's tried and true, and that's been done for a long time. That's always been within the guidelines and okay to do. 

Then you have top-up where you skip putting a game up on the web or having a PC version, and you just put a page up where you can offer currency bundles, items, or whatever transactions you want. Players can buy stuff on that page, and it actually goes into their mobile account. 

Up until now, you haven't been able to steer players from your app to those web pages. You've had to reach out to them in different ways, and companies have been doing that, but now it's a legitimate and easy way to actually let your players know about it and drive a substantial amount of business that you don't have to pay that 30% fee on.

Michail: In terms of examples of games that do that, if you go to the Supercell store and check it out, you'll find that you can buy passes and bundles for Clash of Clans. Is that essentially what you mean by top-up pages?

Chris: That's exactly right.

Michail: How long does it take to make a top-up page?

Chris:  I can only speak for ourselves, and I don’t want to sound like the salesy guy on the show here, but for us, we can get it up and running in no time at all. We have a system that basically points at your app page, scrapes the metadata, and will automatically create a page for you with pricing, links, and the whole thing.

I’m curious to see how developers and publishers are going to lean into this and start building out a community hub and where they can really start to engage with their players. I think on the mobile side, you haven’t seen those communities the way you do on PC, and to me that’s an exciting opportunity.

Michail: How did Spotify, Netflix, and other subscription services monetize outside of iOS before, and why wasn’t this done by gaming companies?

Chris: I think when you look at Spotify and Netflix, companies like those already have a strong presence beyond just mobile. They're not viewed as just a mobile product, and they have a great web presence, and they are good examples of cross-platform products. Their content is consumed all over the place and not just on one piece of hardware. 

That really allows them to engage with their users off-platform easily, and when you're looking at the game side of it, there's a parallel there. If you look at cross-platform games, game companies are already doing this and taking advantage of it.

You don't have a lot of people going online trying to find Flappy Bird communities to talk about events and what's coming up. But you do in other games, like Roblox, for instance, and Nexters is doing it with Hero Wars. These are all examples of companies that have a big enough game and community. That community is engaging with content everywhere, so it makes it a lot easier to communicate with them on the web since they’re already there.

Honestly, it's been surprising that more developers haven't done this. I think it's an opportunity with a lot of upsides, with little downside and little upfront cost, and now we're going to see more of it.

Michail: Chris, who do you think this ruling benefits the most - small to mid-size developers or large size publishers? 

Chris: It benefits developers and publishers of various sizes to different degrees. But from our perspective, the common benefit relates to devs finally being able to create a bridge between their apps and their presence on the web, where they can do all the commerce, community, and marketing things that PC devs have been doing for years. 

It's a great opportunity for mobile developers to earn significantly more money while building deeper relationships with their players. You can link out to web shops where you can monetize without paying 30%, collect all the data you want, build direct relationships with your players, and leverage all the marketing power the web has to offer to acquire new users. 

But this requires resources and bandwidth, which means the obvious winners are the larger developers and publishers who have the resources and bandwidth to take advantage of everything this has to offer. We’ve actually been helping some pretty big developers do exactly this for the past year. 

When done right, we’re seeing revenue bumps upwards of 40% by driving spend outside of the app store; this is being done under the current restrictive, and now illegal, anti-steering app store practices.

These large, or as we call them, “enterprise," companies can afford to build their own ecosystem outside of the app store and drive traffic back and forth. We've seen companies doing this for a while, with web/mobile games linked via cross-play or top-up pages where players can spend outside of the app. Nexters, Roblox, and Supercell are three different examples of companies already benefiting from monetizing outside the app stores. They’re all doing it really well and stand to benefit greatly once they can openly connect players directly from their apps to their web shops. 

You also asked about mid-sized and smaller devs. They can benefit as well, although the upside isn’t as obvious since they don’t have large player bases to migrate or extra people internally to run secondary ecosystems outside the app. This is an area I’m really keen to see evolve. We’ve seen mid-sized and indie devs find great success on PC by operating outside platforms like Steam; Battlestate Games is one great example. They make the wildly successful Escape from Tarkov yet run it all from their own website. They’re having triple-A success without being on Steam, the Epic Games Store, GoG, or any other platform. I think there’s a parallel where mid-sized and indie devs can find ways to monetize and socialize with users outside of the app store, creating a new form of acquisition and virality that hasn’t been possible before. 

Michail: What is the effect on the app ecosystem as a whole?

Chris: The biggest effect has been moving scrutiny of the ecosystem from industry wonks to the mainstream and the resultant attention from legislative bodies around the world. For years we've all known that big platforms, like the App Store, are unresponsive and predatory; and have zero incentive to tend their gardens. The incentives have simply been misaligned, and there haven’t been any real alternatives. Sure we’ve all benefited, but at what cost? Well, we’ll now have the opportunity to find out. I personally believe that one of the biggest effects will be the opportunity for mobile devs to finally build closer relationships with their players, without fear of getting the ban hammer by driving users to other parts of their own ecosystem; whether it’s for better prices, community building, or anything else. It’s finally the chance to have that connection that the walled gardens have blocked everyone from for so long. 

Michail: Do you think Google will follow suit?

Chris: Yes, I do. Interestingly, Google has already been working on some things to make it easier for third-party app stores to operate on par with Google Play. Last year Google said, “… some developers have given us feedback on how we can make the user experience for installing another app store on their device even better. In response to that feedback, we will be making changes in Android 12 (next year’s Android release) to make it even easier for people to use other app stores on their devices while being careful not to compromise the safety measures Android has in place. We are designing all this now and look forward to sharing more in the future!”

A few months ago, the website XDA found documentation indicating that third-party app stores will be able to update apps on Android 12 without constant user interaction. This effectively allows third-party stores, like the Epic Games Store, for example, to function much like Google Play does today. Instead of the user getting pop-ups during install or having to manually update apps from a third-party store, these processes will be automatic. There are details and nuances to this, but it’s a big deal nonetheless and shows that Google is arguably being more forward-looking and inclusive than Apple on this topic. 

Michail: Epic’s intent behind the suit was to prove Apple was in violation of antitrust laws. They didn’t achieve that. Do you think that Epic will continue this pursuit? After all, Apple sees this as a win,and Epic sees this as a loss. 

Chris: We’ve just finished the first round of this fight, with many more to come. Epic is definitely playing a bigger and longer game here, with the end goal, we think, being to hang the monopoly tag on Apple. This would have a far-reaching impact on how Apple can treat devs and publishers. I don’t think Epic will consider it a win until they can get their Epic Games Store onto one of the largest platforms on the planet. 

Another way to look at this, and we’re going to get a bit futurist here, is that this becomes even existentially critical when you look past the iPhone and start to question what new technologies are coming that Epic sees are crucial to an open and interconnected ecosystem, such as… the metaverse. Technologies that Apple will likely be the leader in and which will require content delivery via the App Store. In this context, I can start to see why Epic considers this a loss. Just think about it. Tim Sweeney is all about an open, connected, and free-flowing metaverse. Anything that stands in the way of this vision is a loss for Epic. 

Meanwhile, we all get to sit back and benefit from more effectively monetizing games and connecting more deeply with players.

--

Are you ready to take advantage of the changes coming on December 9? Step up and learn all about Web Shop for Mobile Games, and how it lets you do everything the App Store does and more, for only 5%. Check out our one-pager for more information and an integration guide, and download our free ebook with in-depth details, best practices, and everything you need to get started. We're here to help, and we can't wait to see you succeed.

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