Entrepreneurs

Apple Won Its Case With Epic Games. Why It Wasn’t Worth It

On Friday, Judge Yvonne Gonzales Rodgers issued a highly-anticipated decision in the Epic v. Apple antitrust case. With one major exception, the judge found in Apple’s favor, declaring that the company isn’t a monopoly, and ordering Epic Games–the maker of Fortnite–to pay Apple 30 percent of the revenue it generated when it implemented its own in-app payment (IAP) system in August of 2020. 

Still, Judge Gonzales Rodgers had harsh words for Apple, especially about the company’s anti-steering provisions, which prohibit developers from pointing customers to other ways to pay for subscriptions or transactions, were a violation. She issued an injunction that bars Apple from:

prohibiting developers from (i) including in their apps and their metadata buttons, external links, or other calls to action that direct customers to purchasing mechanisms, in addition to In-App Purchasing and (ii) communicating with customers through points of contact obtained voluntarily from customers through account registration within the app.

That is similar to changes Apple made recently to settle a developer lawsuit, as well as an investigation by the Japan Free Trade Commission. Apple said it would allow developers of reader apps to include a “single link” where users can “set up and manage” their accounts. It will also allow developers to communicate with users via email about alternative payment methods.

In this case, however, the Judge’s decision goes further by making it clear that all developers should be able to freely tell users about alternative methods of payment, even within their apps.

To be clear, I think that this is absolutely the right decision. With a single paragraph, the Judge is fixing one of the most egregious problems with Apple’s rules. Beyond that, however, not much will change. Judge Gonzales Rodgers said that Apple isn’t a monopoly when it comes to mobile gaming transactions. 

It should be said, as the Judge did in her decision, Epic “overreached.” It also sought major changes, not on behalf of other developers, but for its own benefit. This was a billion-dollar company suing a trillion-dollar company over how much money is a fair cut of the sale of virtual goods in a video game. 

For that matter, Epic wasn’t just trying to reduce what it pays Apple, it wanted to replace Apple as the middleman so it could be the one charging a commission to other game developers. Epic was simply the wrong company to try to make this case.  

The thing is, it shouldn’t have required a lawsuit for Apple to see that its rules were costing it far more than whatever it might lose in commissions. In terms of developer relations, user experience, and public sentiment (three things the company says it cares about deeply), this was a very bad look that could have been entirely avoided.

Imagine if Apple had, as Phil Schiller suggested years ago, lowered its commission, say to 15 percent. Or, imagine if it had truly decided to operate the App Store as a revenue-neutral business, lowering the commission rate as the volume of transactions increased so that it covered expenses. 

Imagine if Apple had decided that developers could implement alternative payment methods, provided they offered the same level of security and privacy as Apple’s IAP. I don’t think there’s any question that a lot–if not most–people would continue to choose Apple’s version. 

It’s so well integrated and people trust that if they make a payment using Apple’s IAP, they’re not going to have their credit card information stolen. Never mind that if you’re already paying through Apple, most people won’t bother to go through the hassle of changing how they pay for common services. 

Instead, Apple has been fighting with developers, found itself on the receiving end of antitrust lawsuits, and is now facing regulation and legislation around the world. It’s hard to see how making small changes would have much of an impact on Apple’s extraordinarily profitable services division at all. 

On the other hand, the company’s unwillingness to listen to users and developers and make changes to its business model–something even its own executives suggested years ago–has had a real cost. 

That’s the lesson, by the way: Apple’s refusal to change seems like it has almost nothing to do with its customers. On the surface, it just looks like hubris. The biggest problem with hubris isn’t just that it makes you look bad, it causes you to make bad decisions–often expensive ones.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

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