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Apple versus Epic Games: When Steve Jobs called Facebook "shit book"

2021-05-07T22:31:30.304Z

The process between the "Fortnite" manufacturer Epic Games and Apple is about billions of dollars in the long term. But the dispute also brought sensitive company issues to light - including a confidential email from Steve Jobs.



Enlarge image

Apple CEO Steve Jobs (2010): Intentional or just a typo?

Photo: ROBERT GALBRAITH / REUTERS

A game company valued at $ 29 billion thanks primarily to "Fortnite" is taking on a tech giant worth more than two trillion dollars: In a court in Oakland, California, Epic Games is currently arguing with the iPhone manufacturer Apple about its allegedly unfair situation Fees for sales on its platform.

In the case of Epic Games, they are 30 percent.

It's a dispute that preoccupies both the gaming and tech industries - and a dispute that involves many millions, and in the long run probably billions of dollars.

Because if Epic Games were to prevail in the long term - although Apple would initially be expected to be appointed - many other developer companies could also benefit from the new rules for app store fees, to the financial disadvantage of Apple and perhaps other store operators.

But the court case in Oakland is not only interesting because it deals with the fundamental question of whether and to what extent platform operators can hold out their hands if someone wants to sell them digital currency for games, for example.

It is also exciting because in the course of the dispute, numerous internal documents and conversations from the companies involved become public.

And third companies like Microsoft, whose representatives appear as witnesses in the process, give the court remarkable insights into their business.

Here are seven examples of what the process has brought to light so far.

1. A dispute with tradition: Apple and Facebook

Since Apple announced an anti-tracking system for its devices in the summer of 2020, the conflict with Facebook has escalated.

But it has actually been smoldering for much longer, as an email exchange from 2011 shows, reported by CNBC.

Apple's software boss Scott Forstall informed company boss Steve Jobs and marketing director Phil Schiller about a conversation with Mark Zuckerberg.

According to his mail, Forstall had informed the Facebook boss that the social network would not embed its own apps in the Facebook app that was being planned for the 2010 iPad.

Enlarge image

The Facebook logo on an iPad

Photo: Regis Duvignau / REUTERS

Zuckerberg, who wanted to make Facebook a platform for apps and games at the time, was not at all happy about it, but made four compromise proposals, wrote Forstall. Except for suggestion number three - users should be allowed to post comments about apps in the news feed - they are all sensible.

Steve Jobs apparently saw it similarly and wrote: "I agree - if we delete Fecebook's third suggestion, it will sound reasonable." This now well-known sentence caused quite a stir, because the English word "Feces" means "feces", which led some to conclude that Jobs hated Facebook profoundly. However, this thesis cannot be substantiated. While the Apple co-founder was not known to often make spelling mistakes, it is quite possible that this was a typo and not malice.

By the way, Zuckerberg tried to push through his proposals, but obviously failed because of Phil Schiller, who wrote: "I don't know why we should do that."

After all, Facebook apps would not run natively on Apple's tablet, according to Schiller, they would not have a business relationship with or licenses from Apple, would not use the company's programming interfaces, could not be rated by Apple and would not use the App Store.

The conflict finally ended with a different compromise, namely that Facebook's digital currency "credits", which were needed for in-app purchases in games, could not be used in the iPad app.

2. Tim Cook: "Is that the guy who was at our rehearsals?"

Meanwhile, many game fans are interested in an email in which Steve Jobs' successor Tim Cook addressed Marketing Director Phil Schiller. "Is that the guy who was at our rehearsals?" Asked Cook Schiller about an email Tim Sweeney had sent him in 2015. The boss of Epic Games - already well known at the time - suggested to the Apple CEO to open iOS for downloads from other platforms.

Sweeney argued that the Apple Store did a lot of good for the industry. But with the platform now close to a billion users, it's time Apple gave up sole control over it. Specifically, Sweeney proposed "to separate the curation of the iOS app store from the compliance check and app distribution." Apple should therefore allow downloads from other providers, but still ensure system-wide security.

Cook's response to this suggestion is apparently not in the court filing.

What is clear, however, is that representatives from Epic Games had praised Apple's graphics technology Metal at Apple's WWDC developer conference a few weeks before Sweeney had sent his email.

Sweeney himself was not on stage, but it can be assumed that he was at least on the sidelines, including the rehearsals.

At that time, Epic Games presented a very early version of "Fortnite" - on a Mac Pro.

3. Netflix subscriptions: the carrot and the stick

In 2018, the streaming service Netflix Apple made it clear that they were dissatisfied with the in-app subscription sales on iOS devices, reports "9to5mac".

In an internal email, Apple manager Carson Oliver wrote that Netflix was worried about the high number of subscriptions.

Apple suspected that the situation could be explained by the fact that those users were given Netflix prepaid cards, which is why they canceled the app and then redeemed their credit on the Netflix website.

Netflix apparently had other theories about this, but these are not included in the court records.

The Netflix app on an iPhone

Photo: Rolf Vennenbernd / dpa

But one thing is clear: Netflix wanted to test this theory for two months and switch off in-app purchases in some countries so that customers can only take out subscriptions directly with Netflix. Carson Oliver responded internally by asking whether one should respond to this attempt with punitive measures - for example, by not advertising Netflix in the App Store while the tests are running.

Eventually, however, Apple manager Sheryline Chapman tried another way to convince Netflix to stick with Apple's in-app payment system.

In a presentation, the streaming service was promised a permanent premium position in the App Store.

Joint promotions were also being considered, and even a bundle offer for the Apple TV set-top box with Netflix was an issue.

But despite all these offers, Netflix ended the ability to pay for subscriptions via Apple's in-app system in December 2018.

4. "Fortnite" income: It works best on the Playstation

It has long been clear that "Fortnite" is a gold mine for Epic Games. But now reasonably concrete figures have become known. Accordingly, the action game, which is primarily financed through in-app purchases, brought in more than nine billion dollars for the game company in 2018 and 2019 alone. So »Fortnite« was by far their most important source of income. In relation: its Unreal Engine, which other development studios use for their projects, brought in $ 221 million for Epic Games in the same period.

According to its own statements, Epic Games makes most of the money with "Fortnite" on the Playstation.

Between March 2018 and July 2020, around 47 percent of revenue came from the Sony console, the company disclosed.

The iOS version of the game, which Apple threw out of its app store in August 2020 because of a rule violation, was only responsible for a comparatively small part of the "Fortnite" revenue at seven percent.

But there is still talk of more than 700 million by the time of the expulsion.

5. Game gifts: This is how much Epic Games new customers are worth for its marketplace

On the PC, Epic Games operates its own marketplace with the Epic Games Store (incidentally with a fee of 12 percent).

Since its launch in December 2018, the computer game store has been attracting regular visitors with free games that you can unlock and then keep for free.

Some store users have built up such a considerable collection of games without paying Epic Games even a cent.

A table now revealed how much Epic Games paid individual developer studios to be able to give away their games for a few days as advertising material for its store between the end of 2018 and autumn 2019.

For example, Epic Games paid $ 150,000 for the action game "Alan Wake" and $ 1.5 million for the "Batman: Arkham Collection".

Whether such deals are worthwhile is a matter of judgment: "Alan Wake" brought the platform around 63,000 new registrations, the "Batman" game collection, which was accessed 6.4 million times for free, led to almost 614,000 new users.

According to the table, Epic Games spent almost $ 11.7 million on game gifts over the entire ten months, which brought the store a total of around five million new registrations.

6. "Borderlands 3": Epic Games paid more than $ 100 million for its exclusivity deal

Epic Games also made public what the studio cost an exclusive deal about which many game fans were annoyed in 2019: In order to get the right to be the only one to sell the PC version of "Borderlands 3", Epic Games paid its creators $ 115 million.

Because the deal contained further agreements on game offers, it was a total of 146 million dollars.

The bottom line is that the Epic Games Store has been a losing business so far, with a loss of several hundred million dollars.

For Epic Games, the marketplace is more of a long-term bet anyway - as an attempt to steal market share from the most important PC game platform, Steam.

He does not expect the store to be in the black until 2024 at the earliest, said Tim Sweeney in court.

7. Xbox Business: Microsoft makes nothing from selling its consoles

Why is Epic Games so bothered by Apple's 30 percent fee on iOS when it pays it on other platforms such as the Playstation or Xbox without public grumbling? When confronted with this question, Tim Sweeney referred to different starting positions in court: The iPhone is highly profitable, explained the head of the game company, while the sale of console hardware is considered a loss-making business where the money only comes in through the sale of games and game subscriptions .

That this is really the case, confirmed on Wednesday Lori Wright, a manager who looks after Microsoft's Xbox business. She said Microsoft had never made a profit from just selling an Xbox game console in its history. You also do not see the App Store as a competitive platform, explained the manager. "If you want to buy a game on iOS, that's great," Wright said.

Source: spiegel

All tech articles on 2021-05-07

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