if you want to install an iphone app you must get it through the apple app store
where apple charges developers 30 on all digital purchases
well epic games thinks that's bunk so in august they sued both apple and google
for that matter who also charges 30 on the play store alleging monopolistic
practices now if epic can convince a judge that the apple tax must be reduced
or that iOS should allow competing app stores it would be a huge boost to app
developers bottom lines including epic games so is this just a silly slap fight
between giant billion dollar sorry excuse me tim apple trillion dollar
corporations or is it a conflict that may just shape the
future of digital content platforms well okay the way i ask that makes it pretty
obvious that i think it's the second one but you should keep watching to find out
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the reason this conflict is so important is because no matter what you think of
epic games their ceo tim sweeney and his sassy tweets or 10 cents stake in his
company a win for epic here could essentially
mean the death of the walled garden ecosystem all together
imagine it a future where iphones and ipads for that matter could have
multiple app stores side loading of apps or even custom operating systems without
jailbreaking and you might think well gosh that sounds great but apple doesn't
which is why in the lead up to the full hearing on september 28th they've been
fighting this lawsuit tooth and nail and it's gotten pretty nasty
it all started on august 13th when epic snuck
such sneaky guys there a new payment option into an update for the iOS and
Android versions of fortnite that allowed players to purchase v-bucks the
in-game currency directly from epic at a
discount rather than buying them at full price using the store's built-in payment
processors now this is forbidden by store guidelines so apple immediately removed
fortnite from their store and for that matter so did google but of course it
was a trap that very day epic fired off
60-page lawsuits to both companies alongside the release of a short film
parodying apple's infamous 1984 ad
you know the one that portrayed apple as the agent of change breaking ibm's
monopoly over the computer market in epic's version titled 1984 night
apple has taken ibm's place as the monopolistic bad guy with the bright
bomber fortnite character replacing apple's idealistic one
in a nutshell epic's argument is that apple's practice of forcing developers
to a distribute iOS apps only through
the app store and b only use apple's own in-app payment
option constitutes a monopoly
now Android allows third-party app
stores and allows app side loading but
epic argues there that google makes those options prohibitively difficult to
use at scale effectively shutting out any real competition
more on that later now after the suit was filed google mostly remained quiet
while apple and epic filed multiple injunctions and counterclaims against
each other including a particularly petty threat from apple that would have
inflicted unnecessary damage on third-party developers who just happened
to use epic's unreal engine for their own games
the bottom line is epic wanted a judge to force apple to reinstate fortnite
while the suit proceeds while apple sought damages against epic games for
breaching a contract that they obviously entered into willingly which if you
think about it it's kind of a fair point why would epic risk the revenue that
they were getting from fortnite players on iOS a third of the game's player base
accounting for tens of millions of dollars per month
for this expensive and precarious legal
fight what is epic after here well epic wants the opportunity to
directly compete with apple services on iOS by either offering their own in-app
payment option or by even launching their own iOS app store presumably for
gaming and they don't just want this for themselves they want any developer to
have the option to build or use these competing services they actually tried
to do both of these things on Android fortnite's Android version was initially
available only through the epic games website avoiding the play store and its
30 cut of purchases unfortunately though this meant that the
game wasn't nearly as accessible to less technically savvy Android users since
Android requires changing system settings and dismissing scary malware
warnings in order to install non-play store apps oh and then there was also
the problem of actual malware infected copies of the game being out there on
the web eventually at least the way epic tells
it they were more or less forced to release fortnite on the play store now
they also tried making deals with oneplus and lg to pre-load an epic games
launcher onto those companies phones but epic claims google stepped in and
blocked those deals from happening epic claims that this behavior together with
the nine or so extra steps that users have to take to side load Android apps
constitutes google's version of a monopoly now you'd think that epic
having been shut down by the biggest tech giants in the world would just
lie down and play by the rules but that's the weird thing
it doesn't seem to me anyway like epic is just trying to make a few extra bucks
here although as we've said they certainly are trying to do that it seems
like the company is actually trying to affect industry-wide change that would
benefit all developers not just them
now pc gamers are especially well acquainted with their epic game store
and accompanying shenanigans and it was pretty frustrating to see them snatch
egs exclusives away from steam but tim
sweeney maintained all that time that the goal of that disruption was
ultimately to get more revenue to developers
and his story kind of checks out the epic game store could still compete with
steam if it took a 25 or 20 percent cut
but it takes a 12 cut only with further
discounts actually given to unreal engine games and that's compared to
steam's 30 percent cut and hey actually now that we bring it up
there's that thirty percent number again so yeah it turns out that that's just
the standard cut found on basically every major digital platform including
the app store google play the microsoft store all the major consoles and even
otherwise physical stores like best buy and walmart
and i don't know what's wrong with that right a 30 cut leaves
70 percent for developers well yes
but also no between platform fees licensing and
other infrastructure costs developers can sometimes take home way less
you see that standard 30 store cut is actually really old and comes from a
time when most goods were physical rather than digital and needed to be
inventoried warehoused picked packed and
shipped well nowadays there's a case to be made that the distribution of digital
goods doesn't require nearly as many resources so stores could make do with a
much smaller cut but of course the incumbent stores
including apple obviously don't want that to happen
in 2019 apple's cut of digital content sold on the app store accounted for an
estimated 18.3 billion dollars with a b
and in earnings calls the company includes the app store in its services
category along with products like apple music apple tv plus apple news plus and
apple arcade so that 18.3 billion
accounts for nearly 40 percent of apple's services revenue justifying
apple's investment into other more prestige products like jennifer aniston
and steve carell so apple google and all the rest are in no
hurry to give up that 30 cut and the only way anything is going to change is
through a legal attack like epics so how strong then is their case well it's
going to come down to how the judge ends up defining a monopoly
apple does not have a monopoly on mobile
devices iphones actually account for under 50 percent of the market while
typical monopoly cases in the past have dealt with much higher market shares say
around 80 to 90
but as we've said epic sued both google and apple and will
be making the case that the two of them actually constitute a duopoly
and the argument starts to look stronger here because with so few players in the
space it's very easy for these companies to have an unspoken agreement to just
not rock the boat so each of them can maintain control over app distribution
and the in-app payment methods on their respective platforms
for apple then the crucial objective will be to convince a judge that an
iphone is fundamentally unlike general
computing devices like pcs or macs
steve jobs told the new york times in 2007 that he doesn't want people to
think of the iphone as a computer i mean
you don't want to install a bunch of weird third-party app store things on
your phone and then have it not work because it got a virus right you can't
miss that business call so from the get-go apple has seen iOS
the app store and apple's own in-app payments as simple elements of one
product the iphone not separate products in a market
so a judge might think that epic's argument that apple has total control
over the iOS app distribution market is nonsensical because of course they do
that's iphone baby furthermore apple might argue developers
are all treated equally on the app store and all the other app developers are
abiding by these same guidelines to the mutual benefit of everyone involved the
problem is well that's just not true
amazon prime video and other high profile apps have negotiated their way
to paying apple only 15 and then there's apple's strange
distinction between apps that provide primarily digital or primarily physical
goods for example uber and airbnb provide real
world services so they are actually allowed to include direct payment
options in their iOS apps you can just plug your credit card number in but then
games like fortnite and other apps that only provide digital services
must use apple's in-app payments this leads to a kind of absurd situation
where some apps like netflix for example avoid paying the apple tax by removing
the ability to sign up for services in-app and just redirecting users to
their website but then email app hey
used that same strategy and ended up getting removed from the app store for
guideline violations only to then be reinstated once it added a two-week free
trial using a temporary email address i mean i get i guess that's that classic
apple simplicity right so if epic were simply asking for special
treatment it actually wouldn't even be that out of the ordinary
but they're not doing that they're trying to change the situation on iOS
and on Android for all developers
it's an incredibly ambitious undertaking and maybe even a foolhardy one most
legal analysts say that the law as it stands now anyway is not on epic side
but that's where the other prong of epic's two-pronged assault comes in the
people fortnite players have been mobilized
against apple here and even some large companies have come out in support of
epic's overall goal a huge consortium of influential news publishers wrote a
letter calling for apple to drop the 30 fee down to just 15
microsoft wrote a letter asking apple to not revoke access to the unreal engine
for developers and facebook even submitted an update to their app drawing
attention to apple's thirty percent cut needless to say apple rejected
facebook's update calling the bit about the thirty percent cut
irrelevant information you don't say
now full disclosure our sister company or one of them Floatplane has actually
had its own clashes with apple and their app store policies in the past but
that doesn't mean that i'm completely against them here apple deserves
compensation for building and maintaining an ecosystem that is unlike
anything that came before it and as apple will surely point out the app
store has created from nowhere a whole
industry for developers where there was none and provides exposure that many
small developers simply couldn't afford to pay for through direct marketing and
there are even consumer benefits direct ones like the fact that the app store
has by and large done a pretty good job of keeping malware off of i devices over
the years and indirect ones as well iphone users love rubbing their five to
six years of software updates in the faces of us Android plebs who are lucky
to get two or three years guys that ain't an accident
most Android phone makers only make money at the time they sell you the
device or by serving you intrusive ads after the fact they are financially
incentivized to sell you more phones more often
by contrast apple certainly makes money when they sell you a phone but they also
continue to enjoy an ongoing revenue stream for as long as you keep using
your device greatly increasing their motivation to keep it working for as
long as possible so you can keep buying candy crush gold bars or whatever it is
you spend your money on so those are all reasons that i think most
developers and consumers would actually want to continue to use apple's official
app store even if an alternate one existed
so the real goal here seems to be to force apple to lower their cut either by
negotiating with them directly which was actually epic's first strategy or by
forcing them to allow third-party stores which would then undoubtedly try to woo
over customers with lower rates incentivizing apple to compete with them
so epic figures apple is abusing its powerful position and apple says my
playground my rules which in fairness
does kind of sound like abusing your powerful position but
i'm not a lawyer and neither are you
unless you are in which case good for you
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description you know it occurs to me now actually this didn't make it into the script but
apple could have a bit of a weaker argument on their hands for the
the differentness of the iphone when the same processor is going to end up in
like macbooks and imacs in a matter of months
oh no this is not a general purpose computer it just
has a screen and the same processor and
oh also oh snap you know like max can also run
iOS apps now uh-oh the water is getting pretty muddy isn't
it oh if you enjoyed this video uh maybe uh go watch what's another like more
analytical video we've done recently oh yeah the uh buy a computer right now
video about the effects of supply chain problems on overall computer supply and
pricing that's a good one