September 1, 2020 at 5:00 am ET
Fortnite is one of the largest and most profitable online video games in the world. Thanks to its millions of players globally, Fortnite made $400 million in April alone and its parent company, Epic Games, is expecting $5 billion in revenue in 2020. But, despite its status as a giant in video games, Epic Games still believes it’s entitled to special treatment that exempts it from all fees charged by digital marketplaces.
Most app stores, whether from Apple, Google, Steam, or a myriad of others, charge developers for transactions. These stores then use this money to cover the cost of upkeep, safety checks for potentially malicious software, transaction fees, cloud storage, infrastructure, customer service, marketing and so much more — all to the benefit of developers who rarely have the bandwidth to do so.
In other words, these digital marketplaces are our virtual malls: They build and maintain the infrastructure needed to help connect sellers and buyers. And just like how it takes money to run a mall, it takes money to run an app store.
But instead of paying rent like retail stores do or fees like developers should, Epic Games wants an exemption. In fact, now that it’s a widely popular brand — largely thanks to these very app stores — Epic Games seeks to use antitrust law to benefit itself at the expense of a competitive app ecosystem and the businesses that foster it. Moreover, Epic Games has failed to make a substantial argument for consumer harm — the very stance it needs to prove to force antitrust action on these online app stores.
For decades now, online app stores have offered a “walled garden” preferred by both consumers and developers for its minimal cost for maximal results. In fact, this very system was adopted and popularized during the early days of the iPod and MP3 devices. In the late 1990s and early 2000s, many Americans acquired music by downloading it from less than reputable websites — namely Limewire and Napster — whose libraries were often flooded with poor-quality downloads, piracy concerns and even viruses. With the onset of the Zune library and iTunes, Americans saw a low-cost, secure platform for buying their songs and eagerly adopted it. The creators, in this case the musicians, also loved the iTunes model because it ensured profit while minimizing piracy.
Fast-forwarding to today’s app stores, we see a similar evolution. Americans have overwhelmingly adopted downloading and buying apps through platform stores. It’s easy, convenient and protects against malware. Likewise, developers embraced the walled garden system because it made it less likely for people to either rip them off or blatantly steal their software. This is the opposite of consumer harm, an argument required for Epic’s antitrust complaint. In fact, walled gardens are empirical and anecdotal examples of consumer benefit.
Perhaps this is why Epic, the company that owns Fortnite, created its own app store. Opened last year, the Epic Games store operates much in the same way as Apple, Google, Microsoft, Valve and Sony’s stores. And just like all those stores, the Epic Store charges its own fees to developers.
But that’s exactly what makes the move to attack other app stores so hypocritical. When developers sell games through the Epic Store, Epic gets its own cut of the transactions. These fees, like all the others, go to develop and maintain the marketplace — something Epic themselves is unwilling to pay and help foster in other app ecosystems.
It’s clear that Epic wants special treatment from every other store despite not giving the desired ecosystem to the very developers using its app store. And while that lets Epic maximize its profits, it hurts the app ecosystems that made Epic famous. By not wanting to pay the marketplace fees necessary to maintain these digital marketplaces, Epic Games will stifle smaller developers for years to come by burdening every other developer with the costs.
Instead of harming an ecosystem that benefits smaller developers looking to make the next Fortnite, Epic should celebrate its colossal success and help foster marketplaces that make the connection between developers and customers possible, easy and secure.
Carl Szabo is vice president and general counsel at NetChoice, a trade organization.
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