The following article is a written adaptation of an episode of Thrilling Tales of Modern Capitalism, Slate’s new podcast about companies in the news and how they got there.
On Aug. 13, a simmering tension in the world of technology erupted into open war. Epic Games, maker of the wildly popular video game Fortnite, sued a pair of tech giants, Apple and Google, both of which have banned Fortnite from their app stores. It turns out this latest skirmish flows directly from the deep-rooted philosophy of Epic’s founder, Tim Sweeney, a multibillionaire who still sees himself as a guy who loves to make video games.
Back in June, I reported on how Fortnite became a massive moneymaker for Sweeney. If he wanted to, Sweeney could sit back, release occasional updates to Fortnite, and let the dollars keep rolling in. But recently Sweeney decided to take a huge gamble, one that could jeopardize the future of his biggest cash cow. Sweeney deliberately provoked Apple and Google, two of the fiercest opponents he could have chosen, and Apple and Google are fighting back. The result is a corporate battle royale that has the potential to hit reset on the whole gaming industry.
A lot of Fortnite’s revenue comes from players buying imaginary things inside the game. For instance, you can buy outlandish costumes for your character to wear, or you can buy your character the ability to do silly dances. To be clear, these don’t have anything to do with winning the game; they don’t make your character any stronger. But people will still pay real money for this virtual stuff—more than a billion dollars a year according to some reports.
The way people spend their real money in Fortnite is by buying Fortnite’s in-game currency, called V-Bucks, which they can then use to get the special outfits and dances and such. Fortnite players spend a lot of money on those V-Bucks, but Epic doesn’t get to keep it all. If you’re playing Fortnite on your iPhone and you buy V-Bucks, Apple takes a 30 percent cut. If you’re playing on an Android phone, Google takes the same 30 percent cut. Epic keeps the other 70 percent. This isn’t specific to Fortnite; it’s how in-app purchases work on the app stores. And that’s where things have gotten contentious. This month Tim Sweeney decided he was fed up with that standard deal. He put a new link inside the Fortnite app letting you buy V-Bucks directly from Epic, bypassing Apple and Google and denying them their cut. Sweeney passed on some of those savings to Fortnite’s users.
For a little while, this seemed like great news for gamers. But Fortnite was no longer playing by Apple’s and Google’s rules, so Apple and Google kicked the Fortnite app off their platforms. And it soon became clear that’s exactly what Sweeney was hoping they’d do.
“I don’t think for Epic it’s necessarily about the money,” says Joanna Nelius, a staff writer at Gizmodo. “It’s about the principle of it. And it feels like, based on the timing of all of this and the way that they had everything prepped, they are more than ready and more than capable to go to war with Apple and Google over this 30 percent commission.”
Nelius says the V-Bucks shenanigans were a careful trap laid by Tim Sweeney: When Apple and Google booted Fortnite out of their app stores, Epic was all ready to hit them back that same day with legal action. When Apple and Google kicked Fortnite off their platforms, that gave Sweeney an opportunity to bring the fight into court. Together, Apple and Google dominate the market for mobile phone operating systems, which makes them subject to antitrust scrutiny. By demonstrating how much power those companies have, Sweeney is aiming a spotlight at the issue.
To be clear, this isn’t David and Goliath. Epic is worth many billions of dollars, with huge corporate investors behind it. But that’s what makes Sweeney’s move so interesting. With all the money it’s raking in for digital goods—goods that have no marginal costs, that represent pure profit—Epic could afford to let that 30 percent go. For smaller game companies, it’s a much more painful concession.
“It hurts the little guys more than it actually hurts Epic,” Nelius says. “So Epic is trying to stand up for the smaller developers who are just trying to get their game out there and make a decent amount of money.” She says this is all in keeping with Tim Sweeney’s values, like when he let developers use Epic’s game development platform, the Unreal Engine, for free. He likes to help the people who actually make the games. Sweeney made his own game store on the web, where he takes a 12 percent cut from game makers instead of 30, but he can’t control what happens on people’s phones, and that grates on him. Nelius says, “Epic’s business philosophy for a long time has been [to] take as little percentage of commission possible from the developers because they’re kind of the whole reason why your store exists.”
Sweeney is choosing to use his considerable power and influence to change the reality on the ground. His effort to undermine the Apple-Google duopoly on mobile gaming platforms might turn out to be a bloodier fight than anything you see in Fortnite. A few other companies, like the New York Times, the Wall Street Journal, and Microsoft, have already joined the fight on Epic’s side. And Nelius says it’s all just getting started: “I think Epic is in a really good position, and it’s going to be a wild ride, that’s for sure.”