Sep 20

Sep 20 Here's How You Capitalize From the Apple vs. Epic Court Ruling

While it’s fun and entertaining to follow Epic’s crusade on Apple, I think it’s equally important to discuss how these court battles impact tens of thousands of game developers around the World.

To discuss the first court rulings from the perspective of a mobile game publisher I sat down with non-other than the powerful Eric Seufert from Mobile Dev Memo and the extremely knowledgeable Chris Hewish, President of Xsolla.

Below you’ll find our conversation on YouTube and podcast. And if you don’t want to watch or read, say no more! We got you covered with a shortened transcript of few of the topics discussed. Consider it an appetizer to the content.

Eric Seufert (Mobile Dev Memo), Chris Hewish (President, Xsolla) and your truly discuss how to make the most out of out-of-app marketplace.

What has happened

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 last week, 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.

Who will this ruling benefit the most - small, mid-size or, large publishers?

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 PC devs have been doing for years.

Basically, 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 webshops 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 (to answer the question) 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 (Xsolla) 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; and 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. This is something we’ve seen companies doing 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 webshops.

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; Battle State 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, 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.

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

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. We’ve all known for years 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.

What’s the best way for developers to capitalize on this ruling?

The injunction specifically says that you can include a link or a metadata button that leads to some sort of alternative payment page. As of now, there's no real clarity there on what that means. So there are some questions that have come up in the Mobile Dev Memo Slack such as, can that be a WebKit view?

At the core of this ruling is that publishers, who are looking to gain revenue outside app stores need to secure a payment provider. While this sounds trivial, it’s far from it. Setting up an external storefront is straightforward, enabling cross-play, providing rapid customer support, having fraud protection, and handling international taxation laws can quickly become demanding, to say the least.

While initially, publishers will look to provide discounts to players who purchase directly from their top-up sites, that is not the optimal approach. A far better would be focusing on bundle packages that would give resources from multiple games in the publishers’ portfolio and thus function as cross-promotion. Another good way to capitalize on the new rule is to use the native top-up shop to test various price points on a country level. Finally, you can use your native store as a destination for re-engagement ads.

What will Google do?

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 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 instance), 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.

Will Epic continue its pursuit?

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 (dare I say)… 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 being able to more effectively monetize our games and connect more deeply with our players.