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The Apple versus Epic court case came to an end not with a bang, as so many expected, but with a whimper. While the court ruled in Apple’s favour on eight of nine counts, it ordered Apple to remove restrictions banning developers from linking to alternate payment systems in their apps, a move that will in turn let them dodge Apple’s much-criticised 30 per cent commission, as well as the total dominance the App Store has over gaming on iOS. That’s big in itself – but what happens next could be far bigger.
The case will likely set a precedent for countless bigger antitrust claims now hitting courts that could reshape the structure of the App Store itself and redefine how big tech companies are regulated worldwide. In doing so, it could also radically reshape the mobile games industry.
“It will be huge for Apple,” says Mikhail Shyshla head of development at software development company IDS Group. “Their whole ecosystem is based on the fact that the one source of things is the App Store.” Since the App Store launched in 2008 Apple has sold it as a “walled garden” – a totally controlled space for app development, offering safety, security and millions of people for developers to access – for a fee, of course. That fee has been a major money-spinner for Apple, generating roughly $19 billion a year in revenue. If Apple’s walled garden gets washed away by an antitrust wave then it could mean anything from forcibly changing their app development software, to allowing third party app stores on their devices, to new funding models for apps and maybe even side-loading apps from alternative stores.
While such changes would create a major headache for Apple, for video game developers it’s a chance to reshape the industry. For one, games companies will be able to make more money from transactions without paying Apple a commission. As a result, it seems likely that the free-to-play model, which already makes up 75 per cent of all app revenue, will explode in popularity. But more widely than that, changes to Apple’s 30 per cent commission leaves room for developers to explore different ways of making money.
“There are all of these different opportunities for developers,” says Brian Baglow, director of the Scottish Games Network, an industry trade body. “As these lawsuits start to create more cracks in Apple’s walled garden, it allows developers to be more creative with these kinds of models and it gives them the freedom to experiment.” As an example, he cites AdInMo, which creates billboards that appear in mobile games with adverts for real life products. Then there’s Audio Mob, which produces in-game audio adverts, almost like radio ads, that don’t forcefully interrupt gameplay. Even Facebook has branched out into this area with playable adverts. Then there’s subscription gaming services. With the total dominance of the App Store on iOS, the only substantial mobile gaming subscription service comes in the form of the Apple Arcade. Here, the approach that has worked so well for Amazon Prime and Netflix for TV and film has been scuppered by Apple’s 30 per cent commission.
Changes to the way games or apps advertise may seem insignificant right now, but they will play a huge part in the industry’s future. It’s no coincidence that free-to-play games like The Division, Fortnite and Destiny, which rely heavily on increasingly profitable micro-transactions, loot boxes and game subscriptions, are growing in popularity. “It could create new ways for people to appreciate, enjoy and engage with apps and lead to that next billion mobile users having a reason to join in for things that are meaningful for them,” says Baglow. “Which aren’t necessarily enormous barrel-chested space marines with huge blasters blowing shit up,”
But such change comes with risks. Historically, Apple’s walled garden has sold itself on its security, but as the wall crumbles that promise is harder to keep. Simply put, if all developers are allowed to link to payment systems outside of the App Store and beyond Apple’s control, maintaining security becomes more complex. Part of that comes down to the fact that these sites are outside of Apple’s control, but it’s also a result of having to move data back and forth. “These new revenue streams will be increasingly dependent on securing the communication layer on a lower level than is typically the case,” says Grant Goodes, chief scientist at digital security company GuardSquare. “We normally have to secure the water pipe but we’re going to have to secure the water droplets too, to some extent.” Goodes highlights the issues of in-game currency – if hackers are able to mimic the base code that makes up that currency then it’s easier to illegally clone it.
That balance between security, control and competition is at the centre of the legal row between Apple and Epic. And now the direction of travel seems to only be going one way. “I think it's the start of a much longer story,” says Jordan Ellison, a partner at the law firm Slaughter and May and an expert in antitrust law. “There’s been a huge change in the last five years on the issue of antitrust.” Even the judge in Epic ruling suggested an antitrust claim focused more on Apple’s absolute control of its App Store only failed in part “because [Epic] did not focus on this topic”.
To get an idea of what might happen next you need only look to South Korea. In August, the country passed a new telecommunications law banning app stores from having a monopoly on payments. As a result Apple is now in a standoff with the country over reinstating Fortnite to the App Store. Just weeks later, South Korea’s competition watchdog also announced plans to fine Google 207.4bn won (£128 million) for allegedly blocking other smartphone manufacturers from using other operating systems. Months earlier Apple was also handed a 100bn won fine over accusations it forced telecoms companies to pay for television advertising and phone warranties.
Faced with emboldened regulators, Apple and Google are increasingly likely to be on the receiving end of more fines if they don’t change the way their app stores are structured. And that’s much harder than it looks. “Those sorts of antitrust complaints have a lot more scope for success in European law,” says Ellison, who explains that it’s part of a much broader sea change on Big Tech regulation, as many countries are turning to regulation and antitrust enforcement instead of relying on companies to police themselves. More so than the battle between Epic and Apple, the most important showdown for the App Store is actually taking place in Brussels. In April, the European Commission accused Apple of an antitrust breach over its 30 per cent App Store commission which applies to music apps like Spotify, but not to Apple Music. This, the Commission said, gave Apple a financial advantage over its competitors.
From Epic to South Korea to the European Union, Apple’s control over iOS is now being challenged more than ever. How the App Store changes – and what impact such changes will have on the companies that rely on it – remains to be seen. But while the App Store’s walled garden has, until now, offered certainty and stability, the alternative is less certain, but also a chance for new ideas to emerge. “We’re just at the opening salvo,” says Baglow. “This is not finished by any stretch of the imagination.”
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This article was originally published by WIRED UK
