
Apple responds to Epic Games lawsuit, says CEO asked for special treatment - dschuetz
https://www.cnbc.com/2020/08/21/apple-says-epic-games-ceo-wanted-a-side-deal-for-fortnite.html
======
pier25
Here's the actual email and response from Epic's CEO:

[https://twitter.com/TimSweeneyEpic/status/129691854162779341...](https://twitter.com/TimSweeneyEpic/status/1296918541627793411)

> _Apple 's statement is misleading. You can read my email in Apple's filing,
> which is publicly available. I specifically said in Epic's request to the
> Apple execs, "We hope that Apple will also make these options equally
> available to all iOS developers..."_

~~~
graeme
Note that the bulk of developers would not be in a position to run their own
appstores as epic wanted to. Their goal is to pay less revenue to Apple _but
also_ get rid of the level playing field of the App Store.

Even if Apple agreed to the demands and made the options available to all
developers, Epic would have an advantage.

They also have the advantage of being a trusted brand, whereas the games space
is full of scammy apps. There’s a reason google specifically requires IAP in
that space.

Right now you don’t have to trust a game developer on apple or google to pay
them. With Epic’s change, big brands would get a trust afvamtage they could
use to increase their dominance.

So asking to make the changes Epic requested was more self serving than it
seems. Lowering apple’s commission would benefit all developers. But own IAP
and separate app stores would benefit big developers, like epic.

~~~
tikhonj
Other companies would not be able to _run_ an appstore, but they would be able
to list their work on 3rd-party appstores (and maybe have their own direct
distribution channel like a website?). The point is to allow competition.

One thing that would enable is narrow appstores with active curation—sort of
what Apple promises but, if the store is fully of scammy games, doesn't quite
deliver. A company could run a game-specific store with much stricter
requirements than Apple's store.

~~~
threeseed
So your idea is that the world should revolve around developers.

As a user instead of going to one private, trusted and secure store I now have
to visit dozens. All of which are going to be competing on price which means
they will look to sell my user data to make money.

And what makes anyone think that the App Stores will simply not be dominated
by Amazon, Epic, Valve etc like most gaming is today. In which case this is
all about transferring money from one large corporation to another.

~~~
graeme
> All of which are going to be competing on price which means they will look
> to sell my user data to make money.

Didn’t even occur to me. It’s the obvious way app stores can earn money if
there was some legislated effort to cut the commission fee and force multiple
stores.

------
lapcatsoftware
Read the emails. "We hope that Apple will also make these options equally
available to all iOS developers" [https://cdn.vox-
cdn.com/uploads/chorus_asset/file/21807251/e...](https://cdn.vox-
cdn.com/uploads/chorus_asset/file/21807251/epic_apple_emails.pdf)

This was never a "negotiation". It's pretty clear from the beginning that both
Epic and Apple were writing their emails for public consumption, not to each
other. Epic knew Apple wouldn't give in, and Epic wanted to sue Apple from the
beginning.

~~~
SmartestUnknown
"we will understand that Apple is not willing to make the changes necessary to
allow us to provide Android customers with the option of choosing their app
store and payment processing system."

Did they intend to write iOS there? That's a pretty big typo in such an
important email.

~~~
lapcatsoftware
It's wild that there were not 20 people proofreading it beforehand.

Ah, to be a billionaire running a private company.

------
SyneRyder
This is such a genius move by Epic / Tim Sweeney. Apple's case hinges on them
being consistent with all developers - no special treatment. Apple even says
as much in their filing to the court:

 _" On July 10, Apple responded that "Apple has never allowed this... we
strongly believe these rules are vital to the health of the Apple platform and
carry enormous benefits for both consumers and developers.""_

Except, Apple _does_ allow it. For the WeChat app from China's Tencent:

CNET (2019): WeChat messaging app brings its own 'instant apps' storefront to
iPhones and iPads

 _" This is a big deal because WeChat's catalog contains over one million
apps, separately from the iOS App Store. Ordinarily, Apple would strictly
prohibit such a practice -- for security reasons at least, if not for platform
cohesion -- but if a western company wants to do business in China,
concessions must be made."_

[https://download.cnet.com/news/wechat-messaging-app-
brings-i...](https://download.cnet.com/news/wechat-messaging-app-brings-its-
own-instant-apps-storefront-to-iphones-and-ipads/)

The former head of App Review for Apple, Phillip Shoemaker, even said this
week "WeChat's continued presence on iPhones amounts to a special exception":

Apple lets China's WeChat bypass its rules, former app review chief claims
[https://www.telegraph.co.uk/technology/2020/08/15/apple-
chin...](https://www.telegraph.co.uk/technology/2020/08/15/apple-chinas-
wechat-bypass-rules-former-app-review-chief-claims/)

If we've reached the point that former Apple executives could be testifying on
behalf of Epic... wow, this got really interesting really quickly.

~~~
Despegar
Apple's case does not "hinge" on being consistent with all app developers.
Every app that Apple distributes could in theory be the result of a one-on-one
negotiation.

~~~
mthoms
>Apple's case does not "hinge" on being consistent with all app developers.

Maybe not legally. But the court of public opinion is much more fickle.

------
robert_foss
Several other companies have been granted special treatment.

Like Amazon for example. They pay 15% not 30% as everyone else. Way to
reinforce their market dominance.

~~~
chrisballinger
If you keep a customer with a recurring subscription for a year, Apple reduces
its cut to 15%. This applies to all developers:
[https://www.apple.com/ios/app-store/principles-
practices/](https://www.apple.com/ios/app-store/principles-practices/)

~~~
chillacy
But based on the articles I've read, it sounds like it's 15% for all new
subscriptions too, not just recurring subscriptions over a year.

[https://www.theverge.com/2020/7/30/21348108/apple-amazon-
pri...](https://www.theverge.com/2020/7/30/21348108/apple-amazon-prime-video-
app-store-special-treatment-fee-subscriptions)

[https://www.bloomberg.com/news/articles/2020-07-29/apple-
con...](https://www.bloomberg.com/news/articles/2020-07-29/apple-considered-
taking-40-cut-from-subscriptions-emails-show)

~~~
giovannibajo1
Yes but Apple has stated that it’s a special program for video subscriptions
that other developers can and has joined even before Apple (eg: Canal+). The
terms are not public but it looks like they’re made available as an option to
developers that have apps in that market. It looks like the discount is
available if your app implements all features in the Apple video ecosystem
(AirPlay2, Apple TV native app, etc.)

------
Animats
The first part of the filing reads like it was written by Apple's PR people,
not their lawyers.

The antitrust issue is tying. Apple may be able to insist on a cut of things
you buy via Apple. But products which create their own world in which other
non-Apple things can be bought are a separate market. Apple's use of their
control over the first class of sales to demand a share of the second is tying
a sale in one area to a sale in another. That's not permitted by US or EU
antitrust law.

~~~
scarface74
If that were the case is bundling any app with the OS illegal? Is Amazon Prime
illegal? Are cable/internet bundles illegal?

Could it possibly be that random people on HN don’t know the law?

~~~
Animats
_Are cable /internet bundles illegal?_

If the US had an Justice Department that wasn't totally out to lunch on
antitrust enforcement, they would be. US antitrust law is far stronger in law
than in practice. Wikipedia has a good summary of the history.[1]

In the UK or EU, you usually have several choices for Internet or TV service.
Their antitrust authorities didn't let them all merge.

[1]
[https://en.wikipedia.org/wiki/History_of_United_States_antit...](https://en.wikipedia.org/wiki/History_of_United_States_antitrust_law)

------
WalterGR
Apple gave Amazon special treatment to get Prime Video into App Store
(newsbreak.com)

2 points by dschuetz 1 hour ago

[https://news.ycombinator.com/item?id=24238110](https://news.ycombinator.com/item?id=24238110)

Not my submission so I can’t vouch for the site. Googling shows sites more
well-known are reporting on this as well.

------
swiley
It’s not about cost.

It’s about not being able to run bash on your phone.

~~~
glouwbug
Maybe it's time we _bash_ our phones

------
onion2k
I find it really surprising that Apple didn't grant the request given the
_potential_ outcome, if Apple loses (however unlikely), ranges from Apple's
app store fees being capped to Apple losing their store monopoly to even Apple
being broken up. Shareholders are going to be coming after Tim Cook with
torches and pitchforks if he could have easily avoided that simply by giving
Epic special treatment.

~~~
xibalba
Special treatment may have exposed Apple to even worse antitrust liability. It
is clear from their messaging that it is critical that they maintain the
appearance of treating all developers the same. Tim Cook heavily emphasized
this point in his recent Congressional testimony.

~~~
scarface74
Every company makes deals with other companies. It’s called business. It
amazes me how many lawyers are on HN.

~~~
anoncake
TIL when I buy groceries no business happens.

~~~
scarface74
So you’re saying that businesses don’t make special deals with other large
businesses?

I bet you also think that Beyoncé and Taylor Swift get the same record deals
as the random up and comer a label found singing at the bar.

~~~
anoncake
No, you're saying a business that treats everyone equally is a charity.

------
jonny_eh
This doesn't seem like a big deal. I imagine every CEO of such a big company
would dare to ask for special treatment from Apple. Not doing so would be a
dereliction of duty to their shareholders.

~~~
anorphirith
I agree, I'm having a hard time understanding why people are defending Apple
... Epic is one of the few companies who could afford this fight, kudos they
initiated it.

------
Vaslo
I’ve worked for large food manufacturing companies. It is not unusual for the
largest customers like Walmart and Target to ask for and receive better deals
than everyone else. It’s just like any supply power situation. We had even
given a Walmart a “Most favored nation” deal where if anyone were given a
better net deal than anyone else, we would be forced to give Walmart the same
deal.

I know that calling Epic a customer is a little weird but they really are when
you think about it.

------
siscia
I thought it was the exact same case with the Basecamp product.

But nobody is bringing it up, so there must be some qualitative differences,
are there?

------
gumby
Why should epic’s issues with its own products affect programs that embed the
unreal engine? When I see an article (like this one) end with that comment it
seems like a copy/paste from an Epic press release.

~~~
ffpip
Same Apple Developer tools issued to Unreal Team?

------
gridlockd
This headline makes it sound like there has been a change of heart, but Tim
Sweeney has been a vocal critic of walled gardens like the App Store and the
Microsoft Store, well before Fortnite was a success.

The "special deal" here wouldn't have been some sort of fee waiver, it
would've been to let Epic _open their own store_ on iOS. In other words,
having Apple give up its monopoly on iOS app publishing, just what the current
lawsuit intends to achieve. Obviously, they weren't going to get that, but
it's worth asking for it before starting a billion dollar lawsuit.

~~~
pjmlp
Apparently he doesn't have any issues with the walled gardens from game
consoles.

~~~
smnrchrds
If they are trying to set a precedent in the courts, it makes sense to go
after the most winnable case, and then try to use that ruling to win others.
So it would not be Android, where alternative app stores and side loading are
permitted, and not the consoles, where the manufacturers will argue they are
not providing a general-purpose device. iPhone and even more so iPads are the
ideal targets for lawsuits that aim to set precedents.

~~~
MayeulC
Side note: alternative stores are a pain: installing the F-droid privileged
extension for automatic updates requires root access, for instance. Why
couldn't that be a setting, like device administrators?

I feel Google is doing the bare minimum to avoid antitrust rulings, which they
probably do.

~~~
g_p
Google views sideloading as their inconvenient but necessary antitrust escape
valve, in my view. They don't want people using it, they want it as something
to point at and say "not guilty".

Interesting however is the wording of an old version of the Android Market
(old name before Play Store came about) developer agreement - the title of 4.5
is labelled "Non-Competition".

I think that title (which has unsurprisingly disappeared from more recent
versions) says it all. Sideloading was Google's attempt to avoid an antitrust
battle in the early days of Android, as they could say "we are new, anyone can
make a store". The trouble is the licensing agreements with OEMs contain all
sorts of restrictions, some of which have probably become public over time.
Perhaps more will emerge through the epic games lawsuit, as it seems they're
going after the restrictions on OEMs. There's many of those they can request
through disclosure if they don't have them already!

Ref:
[https://web.archive.org/web/20150107232223/https://play.goog...](https://web.archive.org/web/20150107232223/https://play.google.com/intl/ALL_uk/about/developer-
distribution-agreement/archive.html)

------
bobwernstein
you mean just like Amazon?

------
woofie11
<sarc> Yes. Very much special treatment: "we hope that Apple will also make
these options equally available to all iOS developers" </sarc>

Epic seems to be fighting the good fight against a company abusing market
power. I hope they win.

~~~
jmisavage
Are they abusing market power though? 30% seems to be the standard rate for
online stores. Google and Apple do it. Steam is 30%. And it’s been report that
Sony, Microsoft, and Nintendo also take a 30% cut. Physical store such as
GameStop, Best Buy, and Walmart take 30% too.

Epic only takes 12% which is great, but they’re also locking up games in
exclusive deals which I think is way worse.

Edit: I pulled these numbers from IGN’s article. Although I’ve seen another
report that matches the 30% in most places.
[https://www.ign.com/articles/2019/10/07/report-
steams-30-cut...](https://www.ign.com/articles/2019/10/07/report-
steams-30-cut-is-actually-the-industry-standard)

~~~
grumple
It’s a _lot_ for what’s basically just payment processing (that’s all it is
for in app sales).

Looks like price collusion by the major players as well, which is also
illegal.

~~~
smachiz
That's not true, it's also discovery, trust and an ecosystem to run your apps
in.

Calling the app store just payment processing is a ridiculous simplification.

Epic's store charges 12%, but has neither the hardware platform, or software
platform - and relatively little market share.

They arguably should be charging ~5% since it's actually closer to just
payment processing and delivery.

~~~
grumple
Apple takes 30% for in-app sales. People already have the app, there is no
discovery or trust benefit. The App Store is awful for discovery anyway. You
think we need the App Store to discover the Facebook app, Amazon app, Epic
app? These apps spread by network effects, not discovery in the store.

Users pay for the hardware platform.

I find games for the first time with the Epic Store. Market share isn’t really
super relevant, they are the newest entry in the market.

~~~
kube-system
I think Apple is probably on the wrong side of anti-trust law on this, but
there is certainly a trust benefit (and UX benefit) to a unified payment
platform.

The history of mobile/online payments is littered with instances of users
being confused/defrauded.

> Users pay for the hardware platform.

This isn't really relevant. Not only is an iPhone worthless without software,
but subsidization of hardware by services is very common.

~~~
grumple
Isn’t Visa/MasterCard the unified payment platform?

Obviously the iPhone is worthless without software, except it comes with a 1k
price tag. Part of that is for the OS. The hardware certainly doesn’t cost
that much (comparable offerings from hardware-only manufacturers cost less).
This is not a case where the hardware cost is subsidized. Numbers from various
sources suggest the iPhone sells for triple the cost of manufacturing.

~~~
sebastianmarkow
manufacturing cost != R&D cost

~~~
ac29
Apple's net sales for Q3 were ~$60B and R&D was ~$5B. No matter how you look
at it, the cost of an iPhone far exceeds Apple's cost to produce it.

[https://www.apple.com/newsroom/pdfs/FY20-Q3_Consolidated_Fin...](https://www.apple.com/newsroom/pdfs/FY20-Q3_Consolidated_Financial_Statements.pdf)

~~~
kube-system
You’re still neglecting ongoing operational costs, which are neither hardware
nor R&D.

But it still doesn’t matter, Apple is profitable, everyone knows that already.
It is legal to be profitable, and it is legal to have parts of your business
subsidize other parts.

What might not be legal is using a dominant market position to force out
competitors.

------
monadic2
"If we're going to extort our customers we have to do it equally"

------
m0zg
Whoever cut that sweetheart deal to Amazon is in so much trouble right now,
career-wise.

This is simply not going to happen for everybody else though. Apple will not
forego billions of dollars in revenue for "fairness", "etchics" or whatever.
This is the company which makes their product in Chinese sweatshops and
benefits from Uyghur slave labor. They couldn't care less about "fairness".

[https://www.aspi.org.au/report/uyghurs-
sale](https://www.aspi.org.au/report/uyghurs-sale)

------
ponker
Very surprised to see that trillion dollar lawyers addressing judges still use
lazy analogies like “it’s just like shoplifting.”

~~~
michalu
That's because there's jury and in the US in some states you don't even need
legal education to be a judge so in general it's a good practice to translate
technical terms into laymen and 5th grader language, if you actually want to
convince them about your point.

Naturally lawyers exaggerate or manipulate the words ... they're not there to
gain justice (although that's their intended purpose) but they're paid to get
the decision.

~~~
galuggus
You don't need a legal education to be a judge? Very interesting. Could you
give some more information about this. Are judges elected or bureaucrats? How
does someone become a judge? What parts of the US have this system?

~~~
michalu
Good article: [https://www.theatlantic.com/politics/archive/2017/02/when-
yo...](https://www.theatlantic.com/politics/archive/2017/02/when-your-judge-
isnt-a-lawyer/515568/)

Also federal judges don't need to be lawyers.

------
caiobegotti
Now I totally understand why Apple have piled up a huge mountain of cash and
never spent a dime. They are going to accept anyone's challenge to court if
necessary and use their 200M USD financial power to do whatever they can to
keep the status quo at any price. I sincerely don't believe we as customers
can win this one, fixing Apple (as we talk about here) would be something much
bigger than what had been done to Microsoft in the 90s.

~~~
graeme
You need to re-examine how you think about things. Court is expensive, but it
doesn’t take $200B dollars to go to court.

Further, Apple has spent a lot of cash on buybacks. Plus its own regular
spending: Apple is clearly willing to spend on R and D, production, etc

Not every fact in the world has to tie together into a narrative. Falling for
this is the first step in the road to conspiratorial thinking.

~~~
caiobegotti
You downvoted me with such condescending tone that borders an ad hominem
because you did read too much on what I said and left zero space for debate.
You must be proud.

~~~
graeme
If you think I’m wrong, feel free to present an argument that Apple has saved
$200 billion in cash to fight court cases, and that they have in some way
neglected to spend on priorities to fund this. _Your_ response was ad hominem.

I used a strong tone because you presented a very strong conclusion that I
don’t believe to be supported by evidence. You linked a fact you don’t
understand (Apple’s cash pile) to the topic de jour (Apple’s new court case).
I really do think this is a starting point to conspiratorial thinking: grand
conclusions on the basis of a couple ideas. Maybe the way I warned you wasn’t
likely to succeed, but I meant it completely sincerely.

Have a look at Apple’s stock buyback history: they spend $385 billion from
2012-2019:
[https://www.aboveavalon.com/notes/2020/4/23/apples-460-billi...](https://www.aboveavalon.com/notes/2020/4/23/apples-460-billion-
stock-buyback)

Dividends are harder to quickly find, but they seem to pay out about $12-$15
billion by year.

The money paid out to investors dwarfs their cash pile.

Two other facts:

* A lot of Apple’s cash is overseas. They can’t easily repatriate without tax consequences

* Apple has about $100 billion in debt. The cash offsets this

> Now I totally understand why Apple have piled up a huge mountain of cash and
> never spent a dime.

Given the fact above, your conclusion doesn’t seem very logical.

