Apple earned over $100 million from 'Fortnite' [u]

AppleInsider

An Apple employee testified that Apple earned more than $100 million from "Fortnite" via the 30% commission on the App Store.

Epic Games versus Apple trial continues

The Epic Games versus Apple trial continues with revelations about both companies and how they operate. One of the more significant topics on trial is Apple's 30% commission and lack of developer payment options.

According to a report from Bloomberg, head of App Store business development for gaming, Michael Schmid, said Apple earned more than $100 million in revenue from "Fortnite" on the App Store. He would not specify a dollar amount and would not say if the number was over $200 million.

The exact amount could be closer to $300 million, as Epic earlier in the trial said it earned about $700 million in revenue from iOS App Store sales.

Epic launched "Fortnite" on the App Store in 2018 and had to pay Apple's 30% commission for each in-app purchase sold to customers. Over that time, estimates from Sensor Tower place Apple's revenue over $354 million, well north of Apple's "greater than $100 million" stated.

A report from the marketing firm in 2018 stated that "Fortnite" generated over $100 million in purchases on the App Store in just 90 days.

Schmid said Apple spent $1 million in marketing "Fortnite" during its last 11 months on the App Store. Epic's lawyer said the ad spend was a good tradeoff for the $100 million in revenue that Apple earned.

The Epic Games versus Apple trial will continue for another week as it approaches its end. Apple's CEO Tim Cook is due on the stand Friday, and ultimately the judge will decide the resolution to the conflict.

Updated with information on Epic's revenue from App Store sales.

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EsquireCats

Is there a reasonable rationale for Apple not being entitled to the commission? 

rob53

EsquireCats said:

Is there a reasonable rationale for Apple not being entitled to the commission? 

Not at all. We all know other businesses charge a lot higher percentage for hosting and selling things.

sflocal

Assuming $100m, that means Epic made (roughly) $300 million on those "7% of Fortnite users on iOS".  Not a bad return.

I just don't get this.  Apple is charging the same as other retail operations.  If Epic feels they're being ripped off, then by all means get off of iOS and move on.

Epic may have developed Fortnite, but Apple continues to create more and better iPhones, which in turns brings in customers, and loyalty, and provides a service level that few companies can provide and an entire ecosystem that makes freeloaders like Epic a lot of money.  30% is chump change compared to how it was in the early years of boxed software.

I'd rather have 70% of $300 million than 100% of $0.  

  

Beats

Funny one-sided story.

So Epic made over $233 million from Apple.

xyzzy-xxx

EsquireCats said:

Is there a reasonable rationale for Apple not being entitled to the commission? 

Well, I think it's not about that someone get a commission, but that there is only one possible channel (the Apple AppStore) that dictates the commission. Since there are only two platforms (Android and iOS) this is treated as a monopoly.

mike1

xyzzy-xxx said:

EsquireCats said:

Is there a reasonable rationale for Apple not being entitled to the commission? 

Well, I think it's not about that someone get a commission, but that there is only one possible channel (the Apple AppStore) that dictates the commission. Since there are only two platforms (Android and iOS) this is treated as a monopoly.

More than two platforms. Add Microsoft and Sony and Nintendo to your list.

cpsro

Wow, that's a lot of money going to Epic. Are they solving world hunger?

chelin

sflocal said:

Epic may have developed Fortnite, but Apple continues to create more and better iPhones, which in turns brings in customers, and loyalty, and provides a service level that few companies can provide and an entire ecosystem that makes freeloaders like Epic a lot of money.  30% is chump change compared to how it was in the early years of boxed software.

  

Consumers pays for the iPhones, which gives Apple a fair piece of change already. The comparison of AppStore with a brick and mortar store is simply ludicrous. If that was the case Apple should be charging by the square footage [MBs] of storage and transport not what the product actually costs. 

mike eggleston

xyzzy-xxx said:

Well, I think it's not about that someone get a commission, but that there is only one possible channel (the Apple AppStore) that dictates the commission. Since there are only two platforms (Android and iOS) this is treated as a monopoly.

First off, there are more than just those two platforms. But, let's just argue for sake of argument that those are the only two in question. The fact that there are two, would suggest it is a Duopoly, not a Monopoly (which is singular). Then there is the fact that Epic is complaining about how Apple is asking for too much. Mind you, it is the same exact amount as the rest of the industry, but hey, let's not let little things like facts cloud our "Apple Bashing". The entirety of this case is pure greed from one company; and that company isn't a fruit company.

genovelle

rob53 said:

EsquireCats said:

Is there a reasonable rationale for Apple not being entitled to the commission? 

Not at all. We all know other businesses charge a lot higher percentage for hosting and selling things.

If Apple made 100 million, then Epic made 566 Million off a game using Apple’s platform. This is using 15% because earlier testimony pointed out that nearly all of Apple’s commissions from Epic were at the lower rate. Considering Apple is supporting these games, what is Epics cost for the IOS version since the games are finished and works on multiple platforms? Sounds like pure profit. 

auxio

chelin said:

sflocal said:

Epic may have developed Fortnite, but Apple continues to create more and better iPhones, which in turns brings in customers, and loyalty, and provides a service level that few companies can provide and an entire ecosystem that makes freeloaders like Epic a lot of money.  30% is chump change compared to how it was in the early years of boxed software.

  

Consumers pays for the iPhones, which gives Apple a fair piece of change already. The comparison of AppStore with a brick and mortar store is simply ludicrous. If that was the case Apple should be charging by the square footage [MBs] of storage and transport not what the product actually costs. 

It's really not.  There are costs involved with creating and maintaining the App Store just as there are renovating a space, decorating it, paying employees, and paying rent for it.  Sure you can put a lot more products in a virtual store than you can a real one, but there's no guarantee all those products will sell (or even charge anything).

Sales of iPhones shouldn't be related because the iPhone has its own creation and maintenance (service and warranty) costs which are independent of the App Store.  Using one to fund the other doesn't make sense.  Why should the person buying an iPhone foot the bill (pay more for it) to cover the cost of maintaining the App Store?  Sure they benefit from the apps, but it's ultimately the people selling their apps on the App Store which profit from its existence.

lkrupp

So this really all boils down to Epic being mad that Apple money in the deal, money Epic thinks is theirs. I think that’s called greed.

foregoneconclusion

$100 million on commissions sounds big until you realize that the mobile share of the market for Fortnite was the smallest, not the largest. That means that the $$ Sony and MS made for commissions on consoles was much larger than that. 

avon b7

EsquireCats said:

Is there a reasonable rationale for Apple not being entitled to the commission? 

The commission amount is irrevelant really.

The fact that the control of the commission lies in the hands of one controller is a different story. 

mattinoz

avon b7 said:

EsquireCats said:

Is there a reasonable rationale for Apple not being entitled to the commission? 

The commission amount is irrevelant really.

The fact that the control of the commission lies in the hands of one controller is a different story. 

If anyone of the 5 companies reduced commissions then others would be driven by market forces to match very quickly. 

sdw2001

xyzzy-xxx said:

EsquireCats said:

Is there a reasonable rationale for Apple not being entitled to the commission? 

Well, I think it's not about that someone get a commission, but that there is only one possible channel (the Apple AppStore) that dictates the commission. Since there are only two platforms (Android and iOS) this is treated as a monopoly.

Monopolies are not necessarily illegal, deepening on jurisdiction.  Here, it's more of a duopoly.  The question is whether Apple is using its monopoly power to illegally harm competition and thereby consumers.  As mostly a legal layperson, I think that's a tough hill to climb here.  Apple's position that this is a business dispute between the companies makes sense to me.  

sdw2001

avon b7 said:

EsquireCats said:

Is there a reasonable rationale for Apple not being entitled to the commission? 

The commission amount is irrevelant really.

The fact that the control of the commission lies in the hands of one controller is a different story. 

Why?  That happens all the time.  If I sell my house, I would pay 6% in commissions and another 1% for title.  I can try to negotiate that 6%, but it's not illegal for the Real Estate industry to set the rate.  If I really don't like it, I can avoid using a certified Realtor and give up access to the MLS system they control.  No one is saying that's illegal.  How is it different?  

sdw2001

The more I hear about this case, the more I take Apple's side.  Epic's strategy seems to be to portray Apple as a bully that needs to be brought down to size. They earn hundreds of millions! Look at how big they are! They can afford to open up their platform to help "little" developers like us!  It's almost like their claims are based on emotion and their view of morality instead of the law.  

You never know with a trial, but I just can't see this going Epic's way.  They willfully violated the terms to which they agreed, and they did so to provoke removal from the store and the eventual lawsuit.  Now they want the court to force Apple to make changes to the product and system they created...against Apple's will.  They want the court to substitute its judgment for Apple's.  Their line of argument on how much money Apple makes from "them" seems to be designed to get the court to say "you know what? That's too much money. Apple can share it."  For the sake of the free market, I certainly hope this precedent isn't set.  

As for the argument that Apple has a monopoly, it's nonsense.  They aren't even the biggest smartphone maker.  What they've done is say "if you're going to buy our product, this is how you're going to download apps.  If you develop for the platform we created and want access to our user base, you will abide by these terms."  People may think Apple should open up iOS.  They can make that case all they want.  If they get enough people to apply pressure, it may actually happen.  But the court forcing Apple to make changes Epic wants because Apple is big and successful would be absurd.  The fact is there are market alternatives, particularly Android.  

So, Apple is not acting as an illegal monopoly.  Consumers clearly benefit from the current system and are generally satisfied with it. Epic deliberately violated the terms of its agreement to provoke removal, all so they could sue.  This might end up being what my lawyer friends call a "bench slap" against Epic.  

avon b7

mattinoz said:

avon b7 said:

EsquireCats said:

Is there a reasonable rationale for Apple not being entitled to the commission? 

The commission amount is irrevelant really.

The fact that the control of the commission lies in the hands of one controller is a different story. 

If anyone of the 5 companies reduced commissions then others would be driven by market forces to match very quickly. 

That's a different story. Here, it is Apple and Apple alone. That's the point in many of the current investigations.

If there were 5 companies representing app stores on iDevices and matching pricing, then no doubt the word 'cartel' would be popping onto the competition radar.

That isn't the case though. First we have to see how these investigations play out for Apple. 

foregoneconclusion

sdw2001 said: Consumers clearly benefit from the current system and are generally satisfied with it. 

The consumer angle is always the most important when it comes to antitrust issues. Epic's problem is that they can't supply much in the way of evidence to support the idea that customers are being harmed somehow. The commission rates have always been in line with the rest of the industry and haven't been raised, only cut. Anti-steering clauses are a standard throughout the industry and no relevant prior court verdicts have been raised by Epic that would cast doubt on their legality. And there's an avalanche of evidence in Apple's favor regarding security. It's an obvious benefit to consumers and Epic has failed to show that Apple was either disingenuous about their concern per security or that they haven't demonstrably made iOS better for security than macOS. 

Like you say, people are free to talk publicly about what they would prefer Apple to do and complain to the press or write op-eds in the WSJ. But those kinds of things don't meet a courtroom standard.