Fortnite' Developer Challenges Google Over App-Store Fees
December 12 2019 - 4:26PM
Dow Jones News
By Sarah E. Needleman
The creator of "Fortnite" is challenging Google's policy of
taking a cut of payments made for app-related purchases at a time
when regulators have started scrutinizing those kind of
arrangements between tech companies and their vendors.
Epic Games Inc. is asking Google to release in its app store a
version of Fortnite with a built-in payment system that allows the
developer to keep all in-game revenue. Google, a unit of Alphabet
Inc., currently takes a 30% cut for the kind of in-game purchases
players make on games downloaded via its app store.
Epic's move effectively puts Google in the uncomfortable
position of having to either approve the game and forgo a lucrative
revenue stream or potentially provide antitrust regulators with
evidence it may be unduly pressuring smaller companies.
"We believe this form of tying of a mandatory payment service
with a 30% fee is illegal in the case of a distribution platform
with over 50% market share," Epic Chief Executive Tim Sweeney said
in a statement. "Epic doesn't seek a special exception for
ourselves; rather we expect to see a general change to smartphone
industry practices in this regard."
"Fortnite" is free to play and sells virtual currency for real
money that users can spend on in-game perks such as avatar costumes
and dance moves.
The shooter game has been accessible on mobile devices running
Google's Android operating system since last year, though only by
downloading it from Epic's website. Now the game maker wants to
distribute the free game also via Google's app store, called Google
Play, which could help broaden its reach. That is where Google then
takes a 30% cut on sales.
"Google Play has a business model and billing policy that allow
us to invest in our platform and tools to help developers build
successful businesses while keeping users safe," Google said in a
statement. It said it expected companies that want to distribute
their apps through its channel to "participate under the same terms
as other developers," adding they can also distribute their game to
Android users without going through Google's channel.
Google and Apple Inc., which also charges app developers to
distribute their software, account for the overwhelming majority of
sales generated from download fees and in-app purchases.
Legislators are investigating whether the companies are stifling
competition and making it too challenging for developers to profit
off their apps.
Other companies have fought back or sought ways around Google
and Apple's app-store fees. In March Spotify Technology SA filed an
antitrust complaint against Apple in Europe, in which the
streaming-music company accused Apple of abusing its app store to
limit competition against its own Apple Music. Spotify claimed that
Apple makes it difficult for rival subscription services to market
themselves to users without using Apple's payment system.
Apple defended its practice of taking a 30% cut of sales through
its App Store in response to Spotify's criticism. It has said it is
entitled to take a share of app sales because it built the store
and employs staff who review thousands of apps for compliance with
rules around privacy and content.
The tension came as U.S. regulators have been stepping up their
investigations of whether some of the biggest tech companies are
abusing their market position.
Google's app store policy also is under scrutiny overseas.
Disconnect Inc., another app developer, this year complained to
European regulators that Google was abusing its market position.
Google has called the complaint "baseless."
"Fortnite" also is available on Apple devices. Apple, which only
allows distribution through its App Store, gets a 30% cut from
Epic.
Apple has generated $15.3 billion in app store revenue this
year, while Google has collected $8.3 billion, according to
estimates from app-analytics firm Sensor Tower Inc.
Mr. Sweeney, in a June interview with the Journal, said that
even through the revenue-sharing arrangement still leaves Epic with
a decent profit margin, Google and Apple, with their 30% take, are
"making more profit than most developers themselves make."
"Fortnite" has been one of the most popular games on the
videogame market in the past two years. Epic, in March, said the
game had 250 million players. Nielsen's SuperData in June said the
game generated $3.9 billion in estimated lifetime revenue.
"Fortnite" launched in mid-2017.
Epic formally submitted "Fortnite" to Google for release this
week. Apps from developers that are new to Google Play, such as
Epic, typically must wait up to seven days to get a signoff from
Google.
Epic has sparred with Google before. When "Fortnite" came to
Android devices last year, Google researchers found a security hole
in the app developers software that left users' phones vulnerable
to hackers. Google publicly disclosed the flaw even though Epic
asked it to wait until the software had been patched.
Last year, Epic set up a rival game-download store. It collects
just 12% of sales from developers, who also have the option of
using their own payment system.
Write to Sarah E. Needleman at sarah.needleman@wsj.com
(END) Dow Jones Newswires
December 12, 2019 16:11 ET (21:11 GMT)
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