the epic, apple, battle royale

by Bryant
September 3, 2020

From the Fortnite feud to the TikTok ban, many recent events pertain to one company: Apple. More specifically, all these issues affect Apple's most prized operating system, iOS, and all the iPhone owners who use it. iOS is a walled garden, which means that every aspect of the operating system is controlled by Apple themselves. This comes with some amazing benefits, such as improved performance, better security, and increased connectivity between Apple devices.

The App Store, arguably Apple's most valuable iPhone application, remains the only way users are able to download new apps on iOS. This also means that all applications on the App Store either put up or shut up with Apple's notorious 30% transaction fees. In contrast, Google Play, Google's "App Store", is not the only app distribution platform on Android. Other parties, such as Samsung, maintain their own app distribution platforms in the form of Galaxy Store, or Huawei Store, etc. Because of this, when Fortnite was banned from Google Play, Android users weren't concerned at all, as the app could still be downloaded from other stores. After all, when Fortnite first launched on Android, it wasn't even offered in Google Play anyways.

This comes to one of the main advantages of Android. Due to its nature as an open platform, any Android device can sideload apps, meaning they can download apps directly from the internet, like, say for example, Epic Games' website. This means no matter how many apps get removed from any Android app store, Android users still have a way to obtain any application they want (or need). Thus, the 30% Google transaction fee can be easily ignored/avoided.

This is not the case with iOS. Any application, and all its subsequent updates, that make its way into an iPhone must be approved by Apple first. This is great, especially in terms of protecting iPhone users from unknown threats or viruses unchecked apps may carry. But as recent events show, any attempt to undercut (i.e Epic) or even warn (i.e Facebook) users of Apple's 30% transaction fee is cause for a blockage to the app store.

Fortnite is only the latest company to come out against Apple's 30% cut. Spotify, for example, has been warring with Apple for years, as multiple App Store changes have consistently hurt the music streaming platform on iOS while simultaneously, (and suspiciously) helping Apple's own streaming service, Apple Music. Spotify brought its struggles to light in a campaign, Time to Play Fair, which launched in March of 2019. Time to Play Fair also pushed for the European Commission to "level the playing field" for the App Store, which subsequently launched the recent antitrust investigations between Apple and the App Store. Even earlier this year, Apple has only gotten more aggressive, banning Microsoft's Project xCloud and Google's Stadia from the App Store, citing security issues once again, while simultaneously promoting Apple Arcade, their new video game streaming service, which just so happens to be in direct competition with xCloud and Stadia.

So if the App Store is so finicky to deal with, why not just leave iOS? Simple. These apps cannot survive without iOS. More specifically, these apps need to tap into iPhone consumers to survive and grow. According to data published by App Annie, in 2017, the App Store accounted for only 30% of app downloads, but 66% of app consumer spend. The data holds true even today, where the App Store accounts for 11.6 billion in mobile game revenue as opposed to Google's 7.7 billion. Not only are iPhone users willing to pay a premium for their device, they are also willing to pay a premium for the services on their devices as well. Apple knows this, and is able to leverage this position in ways that are favorable to themselves.

Over the years, Apple has shown how powerful their walled garden is, and why people are so willing to be a part of it. For starters, Apple has offered solid products that have consistently been best in the market since the start of the company. The release of the iPhone and its predecessors have cemented Apple as part of cultural history, while its premium pricing has allowed the product to be an aspirational item and status symbol. Yet the iPhone still represents the gold standard of the smartphone experience, and nearly every phone is compared in relation to it. Because of this, they still command smartphone market perception, despite the fact that they do not hold the largest market share (sorry Samsung).

This is best illustrated with the release of the iPhone 7, arguably Apple's most controversial iPhone. The iPhone 7 introduced two trends to the smartphone industry: first, it notably removed the headphone jack, and second, the plus version added a second rear camera. On any other phone in 2016, the first would be considered suicide, and the second was considered a marketing gimmick. But with the release of Airpods later that year, it became clear that Apple had just changed the smartphone industry.

In 2020, it’s hard to find a phone without at least two rear cameras. Samsung, after 4 years of holding out, has eliminated the headphone jack from all the flagship phones, meaning that headphone jacks are now a minority in the flagship space. It speaks to the power of the iPhone platform; Apple dictates the positioning for the iPhone, and the rest of the market is forced to adapt accordingly. If Apple can change the way people consume music from 3rd place in the smartphone industry, it's hard to imagine what a single app can do in a platform Apple has near complete control over.

What is most interesting for me about the Epic Games vs Apple feud is how small developers will react. The court has upheld that Epic Games' ban from the app store is fine, but that attacking Unreal Engine developers was not. Epic Games has urged its players and developers to take a stand against Apple's monopolistic practices and demand for more fair pricing. A loss of Unreal Engine to iOS would possibly cripple Apple Arcade and a host of other games in the App Store, because so many apps are built on Unreal Engine. In fact, PUBG, a Fortnite competitor which Apple cheekily promoted, also runs on Unreal Engine.

On the flipside, Apple's threat of removing Unreal Engine from iOS would impact the developers who rely on Unreal Engine to develop their apps, and the App Store to distribute them. These developers would also lose the gold mine of iPhone consumers. Competing game engines, such as Unity, will be much more attractive to use on iOS.

However, it's not easy to switch game engines either, as developers would have to learn an entirely new program and possibly recode the entire game. Small developers have a tough choice to make: stand with Epic Games' and demand for better cuts at the risk of getting booted from iOS entirely, or play it safe and side with Apple, at the expense that Unreal Engine no longer exists for iOS.

Perhaps this is Apple's next iPhone 7 moment, the newest test of the strength for the walls of its closed platform; after all, a cut in transactions on iOS would surely mean Google Play following suit. Conversely, an exodus of notable apps, like Fortnite, Spotify, and TikTok, would make Apple's eden a little more barren. Maybe then, the same walls that keep iPhone users safe will start to look a little more like prison walls.