AAPL Apple Inc

By Sarah E. Needleman 

"Fortnite" players have been drawn into an off-screen battle between the company behind the popular videogame, Epic Games Inc., and tech giants Apple Inc. and Alphabet Inc.'s Google. Here is a look at what's involved in the dispute.

What is the fight about?

Apple and Google on Thursday pulled "Fortnite" from the App Store and Google Play, respectively, after Epic Games introduced a new in-game payment system that would skirt the 30% fee certain developers are required to pay the companies for in-app purchases.

In response, Epic Games sued Apple and Google in federal court, accusing them of monopolistic behavior over how they distribute apps to devices and process payments for digital content. Apple and Google have defended their business practices, saying the commission fees are necessary because of the services the stores provide, including security and safeguarding user privacy.

Epic has argued for marketplaces to lower fees on app developers. It has also called for Apple to open up to competition in the iOS app distribution market.

Does this mean I can't play "Fortnite" on my phone?

Not necessarily, but you'll only be able to continue playing "Fortnite" if it was already installed on your iOS or Android device before the title was removed from the App Store and Google Play. The removal means players can't download the game or receive app updates from those two app marketplaces. "Fortnite" is still available for download on Android devices through other app marketplaces. The spat doesn't affect "Fortnite" gameplay on gaming consoles, PCs or Macs.

How did companies arrive at charging 30% as a commission?

Apple started charging a 30% commission on apps in certain categories in 2008 when it launched the App Store, prompting other online marketplaces to follow suit. Google launched the Play Store in 2012, bringing multiple digital services under one umbrella.

Apple settled on the 30% number more than a decade ago because its chief executive at the time, co-founder Steve Jobs, was looking to undercut the 35% fee that cable TV companies were charging for distributing pay-per-view movies, said Wedbush Securities analyst Michael Pachter.

Apple has cited economic research it commissioned showing that the fees it collects from developers are in line with those charged by other app stores and videogame marketplaces.

Critics of the 30% fee commonly refer to it as a "tax."

What's at stake with the fees?

App marketplaces are big businesses and generate significant revenue for Apple, Google and other operators. For the first seven months of this year, nearly $39 billion was spent within Apple's App Store world-wide on in-app purchases, subscriptions and premium apps, while almost $21 billion was spent within Google Play, according to research firm Sensor Tower. Both figures were up more than 25% from the comparable 2019 period.

Analysts estimate the App Store is responsible for about $15 billion of Apple's annual revenue.

What do regulators think?

U.S. Rep. Hank Johnson (D., Ga.), during a tech antitrust congressional hearing last month, questioned Apple CEO Tim Cook about whether the company treats app developers equally, citing its moves to take a lower cut of some App Store sales from Amazon.com Inc. and to allow China's Baidu Inc. to fast-track app approval.

Apple has defended its policy, arguing, among other things, that its fees are a fraction of what developers paid to distribute software through retailers before the App Store's 2008 inception. The European Union opened an antitrust probe in June over the App Store.

Write to Sarah E. Needleman at sarah.needleman@wsj.com

(END) Dow Jones Newswires

August 14, 2020 14:01 ET (18:01 GMT)

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