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Yesterday, Epic used Fortnite to essentially wage an open war on Apple and Google mobile app marketplaces. First, a discounted option "Epic Direct Payment" was added alongside the standard payment options iOS App Store and Google Play in Fortnite, which is a direct violation of the guidelines of these stores.
When Fortnite was then foreseeably removed from both platforms, Epic filed lawsuits against both companies alleging "anti-competitive restrictions and monopoly practices" in the mobile app market. That move came with a persistent PR flash, including a video urging players to "join the fight to keep 2020 from turning out to be '1984'". "
But throughout this public struggle for "open mobile platforms," as Epic puts it, there are a large number of closed platforms that the company appears to want to continue doing business with. We're talking about video game consoles, of course.
Happy to pay
Most, if not all, of the complaints Epic makes against Apple and Google also seem to apply to Microsoft, Sony and Nintendo in the console space. For example, all three console manufacturers are reducing all microtransaction sales on their platforms by 30 percent.
This DLC fee also makes up a huge chunk of these console manufacturers' revenues. "Add-on content" made up 41 percent of Sony's revenue from games and networks in the last fiscal quarter. Microsoft also recorded a 39 percent increase in gaming revenue in the quarter after Fortnite was released, which can be attributed to the "title strength of third-party providers". And the Switch saw similar digital sales increases after Fortnite after Nintendo announced that half of all Switch owners had downloaded Fortnite.
Enlarge /. Although consoles charge a 30 percent fee for all game DLCs, Epic still offered console gamers a discount that, according to their own statements, required "direct payments" on mobile platforms.
On mobile platforms, Epic calls the same 30 percent fee "exorbitant" and wants to offer a more direct payment solution so that "the savings can be passed on to players." On consoles, however, Epic was happy to introduce a permanent 20 percent discount on all microtransaction purchases, although there is no evidence that console manufacturers have changed their fee structure.
A brief history of console controls
The major console manufacturers also have full control over which games and apps can be displayed in their own walled gardens. Regarding iOS, Epic says, "By blocking consumer choices when installing software, Apple created a problem so they could take advantage of the solution." When it comes to consoles, Epic is silent on the same issue.
With that in mind, consoles are even more restrictive than Android, where games and apps (including Fortnite) can be sideloaded without using the Google Play Store. Still, Google has received a lawsuit over its role in this state, while the console makers have gone undisturbed.
In addition to the business impact, the console manufacturers' complete control of their marketplaces also has a direct impact on the type of content players can play. For example, any game that receives an adult-only rating from the ESRB is not welcome on any of the three main consoles. And if you want to use UWP to encode an N64 emulator that works on the Xbox One, Microsoft will download it ASAP.
That wasn't always the case, of course. In the days of the Atari 2600, anyone with programming skills and the ability to make cartridges could create games for the console. This condition resulted in a deluge of poorly-made Atari software inundating the market, a situation many observers blamed for the video game industry's crash in 1983.
Without full control over their software, console manufacturers fear another flood, such as the one that resulted in excess Atari cartridges being buried in a desert in New Mexico.
To keep history from repeating itself, Nintendo created a lockout chip for the NES that allows it to effectively control which cartridges can run on its hardware (and that allows it to pay a license fee from game developers for the privilege the manufacture of cassettes). When companies like Tengen tried to circumvent this restriction, Nintendo took it to court and won, cementing its right to control its Apple-style software market.
Decades later, this kind of absolute control over compatible software is treated as the de facto standard in the console sector. In the mobile phone world, however, companies like Epic are increasingly and publicly rejecting restrictions similar to anti-competitive monopoly practices. What is the difference?
Split the difference
Some might argue that console software restrictions are less effective because the hardware is designed only for playing games. As Epic puts it in its own FAQ, "Mobile devices are indispensable computing devices on which we conduct our social and professional lives, and conduct business and entertainment." In this FAQ, the mobile market is only compared to "other general purpose computing platforms such as the web, Windows and Mac". Consoles don't seem to fit into the same "general purpose" framework.
But that's an increasingly outdated view of what consoles can do. The Xbox One, to take just one example, includes a wide variety of non-game apps for features like video-on-demand, music streaming, VoIP, email, and more. That may not put it on the same level of software choice as a smartphone, but it does bring it closer and closer to the general purpose computing realm.
Some might point to the very different nature of the revenue model for different ecosystems. While Apple makes a significant profit on every iPhone sale, console manufacturers routinely sell their hardware at a loss or near no profit in order to grow the user base for future software licenses and sales.
This could explain why console manufacturers feel the need to prevent their 30 percent reduction in software and microtransaction sales. But it doesn't really explain why a company like Epic would be okay to pay that fee to Sony but not Apple.
(To update: Epic's Tim Sweeney actually pointed a little bit of that statement in 2018, telling GamesIndustry.biz that "there's a rationale for (the 30 percent fee) for consoles that make huge investments in hardware, often below cost and marketing campaigns broadly partnering with publishers. However, on open platforms, 30 percent is disproportionate to the cost of the services those stores provide, such as payment processing, download bandwidth and customer service. "Thanks to Christopher Dring for pointing this out .)
Perhaps Epic is simply more concerned about the potential for lost revenue on consoles compared to mobile platforms. A mid-2019 Newzoo study of three major battle royale games, including Fortnite, found that 71 percent of players played primarily on consoles, compared with just 17 percent on PC and 12 percent on mobile. To be cut off from these console gamers during a heated public battle would be a much bigger blow to the game's revenue stream.
"Epic Hearts Microsoft"
Or maybe Epic just has a better relationship with console manufacturers than cell phone manufacturers. Epic has long made the console the focus of its Unreal Engine development, in a way that was less applicable to cell phones.
Sony recently invested $ 250 million in Epic and featured Epic's Unreal Engine 5 in a recent major PlayStation 5 promotional demo. Even Nintendo, which traditionally uses its own technology for game development, has started using Unreal Engine for its own titles in the past few years. In a way, Epic can't attack these platform holders without attacking itself.
Sony and Epic practically held hands and hopped together for the launch of Unreal Engine 5 on PlayStation 5 in May.
And while Epic and Microsoft are known to argue about the universal Windows platform on PCs, the two companies publicly buried the hatchet during the launch of the HoloLens 2 platform last year. "Epic loves Microsoft," said Tim Sweeney at the time. "Epic Hearts Microsoft."
Apple and Epic are no strangers to the business world, however. For example, Epic's Infinity Blade and Unreal Engine were featured in a 2010 iPhone keynote presentation, and the company unveiled a "Zen Garden" demo for iOS 8 at WWDC 2014. However, Unreal Engine is an important part of the console landscape these days, the high-end 3D graphics that make it possible are still a niche on mobile platforms, which are often insufficient for these types of games.
Perhaps the answer is that Apple in particular is just a more mature target these days. Everyone from Microsoft and Google to email app manufacturers to European regulators have been striving to make the iOS market anti-competitive in recent months. Perhaps Epic doesn't want to be the only company to take over the Console Triumvirate in the same way.
With Epic not yet responding to our requests for comment, we can only guess why consoles have been spared the company's legal and PR anger. But in the end it can only be a matter of timing. Perhaps Epic is just focusing on mobile marketplaces at first, hoping to create a precedent that can also break the monopoly of control console manufacturers over their own hardware.
It is hard to imagine these days that console manufacturers cannot approve the software running on their systems. But if Epic succeeds in its attacks on the cell phone realm, we could be on our way.