Key Sentence:
- According to a federal judge ruling on Friday in a month-long legal battle between Apple and Fortnite maker Epic Games.
The decision, which will take effect on December 9, will benefit Epic Games. The video game maker, led by Tim Sweeney, has developed its in-app payment system to avoid a 30% discount on Apple’s in-app purchases, which resulted in Fortnite’s ban from the App Store. Shortly after that, in August 2020, Epic sued Apple, alleging that Apple abused its monopoly and engaged in anti-competitive practices by only allowing Apple’s in-app payment system.
Unfortunately, Epic also did not fully support the judgment of US District Judge Yvonne Gonzalez Rodgers.
“The court did not find that Apple has an antitrust monopoly in the sub-market for mobile game transactions,” Judge Gonzalez Rodgers wrote. “However, he found that Apple’s behavior in imposing driving restrictions was anti-competitive.”
The judge also cited Epic’s covert efforts to bypass Apple’s payment system and said it had breached its contract with the Cupertino, California-based company headed by Tim Cook. As a result, Epic had to pay Apple 30% of its system revenue, about $3.5 million.
Analysts agree that this decision has a negligible financial impact on Apple. According to Dan Ives, an analyst at Wedbush Securities, the decision is a “potential legal blow to Apple.” However, he estimates that this change will be harmless than 5% of App Store sales.
“The Apple App Store remains a ditch and doesn’t move much.”
Apple currently collects 15 to 30% of app developer revenue when payments are made through its app store. Apple’s statement, released shortly after the verdict, focused solely on Judge Gonzalez Rodgers’ finding that Apple does not have a monopoly on antitrust laws. “Today, the court confirmed what we have always known: the App Store did not violate antitrust laws,” the statement said.
There is no mention of the new request for alternative payments on the App Store. “The decision is not as positive as Apple’s trying,” said Hirsch Kumar, an analyst at Piper Sandler. “That decision doesn’t matter how much financial impact it has on Apple. But Apple wanted complete control [of the App Store], and that’s not the case. “
Gene Munster, managing partner and co-founder of venture firm Loup Ventures, agrees.
“It’s a mixed bag for Apple and Epic,” he said. “Epic wins management, and Apple wins that it’s not a monopoly. The App Store accounts for about 7% of total sales and 14% of profits in terms of impact. I expect it to be a maximum of 2% of total sales and 4% of sales.”
The more profound impact of the app store with this solution remains to be seen. Currently, app developers like Epic Games can publish their apps on Apple’s operating system for free. “I suspect the App Store model could be changed in the order in which you as an app developer have to pay upfront if a large number of transactions go down,” said Kumar of Piper Sandler.