Epic v. Apple — are you not entertained?

It’s game on as Epic takes a direct stab at both Apple and Google with its latest overture to woo developers to offer content via the European Epic games store; the company will pay for participants in its free games program so customers can play — an attempt to exploit the EU’s Digital Markets Act (DMA), which has forced Apple to open up more.

Apple charges developers who want to sell games outside of the App Store a small fee once game installations achieve 1 million downloads during a year. Apple notes that the Core Technology Fee is not applied in numerous cases:

No fee is applied to free apps.

No fee is applied to apps from nonprofits, educational institutions, or government entities. 

There’s no charge for the first 1 million app installs.

Small developers (classified as those earning under $10 million in global business revenue) get a three-year fee on ramp, which means they won’t pay the CTF during the first three years.

No fees are applied for patches and updates, and users are not charged when they reinstall their apps using iCloud transfer.

With those restrictions, it’s pretty clear that as taxes go, the vast majority of entities don’t pay any tax at all when they choose to distribute applications using the CTF process. 

Which puts Epic’s offer in perspective.

What Epic is doing

Here’s that offer:

Epic’s mobile store will open to any game developer seeking distribution later this year.

For one year, Epic will pay the Apple Core Technology Fee for participants in its free games program.

The first 20 games to make it to Epic’s store are set to appear in the coming weeks.

“Our aim here isn’t just to launch a bunch of different stores in different places, but to build a single, cross-platform store in which, within the era of multi-platform games, if you buy a game or digital items in one place, you have the ability to own them everywhere,” Epic CEO Tim Sweeney told The Verge.

The idea that you can buy once to play anywhere is probably the best argument for openness I’ve heard yet. We’ll see if it turns out that way.

Another strong argument to Epic’s approach is that Apple’s CTF arrangement means that a developer of multiple apps is more likely to cross that 1 million download threshold, as it is applied across their app catalog, rather than per app. Apple also seeks that CTF fee for downloads across every store.

Who really benefits? 

All the same, once you do the math, it should be clear that the vast majority of developers already pay nothing when they choose to offer up apps — including games — through Apple’s App Store, or even via third-party stores in the regions in which they can. In fact, the games publishers most likely to pay these fees will be the largest publishers, particularly those who have succeeded in developing strong in-app economies. (Some games, such as Diablo Immortal, really take that to the extreme, with gamers complaining the entire game is overtly built around convincing people to spend money in-game).

But, what Epic is doing with this offer is directly pitching its own app distribution service to the largest games developers who are already making good money through Apple’s ecosystem. As I see it, the offer gives Epic a chance grab a slice of lucrative future income, while hitting Apple where it feels it most — revenue. In business terms, that makes sense.

At the same time, by positioning itself as some kind of freedom fighter, Epic manages to make this commercially-driven grab for revenue allow it to appear to be the good guy in the story. Though as most conflict resolution experts will probably tell you, everyone on every side is usually the hero in their own story. 

Apple thinks it is a hero, too.

What’s really going on here is a game of millionaires, with well-heeled companies on all sides strenuously negotiating for different business terms so that revenue is shared differently.

Epic’s making a probably accurate guess that the biggest App Store earners probably don’t care much that if they don’t pay more, smaller developers will have to do so. Nor, I think, do these commercial entities worry much that while consumers might get slightly better deals in some ways, they will eventually find they end up paying more for the same experience. Smaller developers landed with rising platform-related development costs will just charge customers more, and Apple will seek to guard its own bottom line. 

It always does.

End result? 

Sure, you might find some developers racing off to Epic’s store, convinced by all the “Apple Tax” rhetoric until they eventually find they are paying a different tax to Epic instead. Some larger developers will go all-in on third-party outlets, offering inducements to bring consumers across. It won’t be too long until Epic reaches its target 100 million store users, as people will probably follow the content. 

Eventually, people will get their software at Epic’s, Apple’s, and other stores, all with varying tech support and security levels, and Apple will still receive the first panic calls from the consumers who don’t understand who to call when things go wrong. 

Apple will legitimately argue that it should be compensated for this tech support, as well as platform and ecosystem development. However, if it fails to win that argument, you can anticipate the cost of both developing on and purchasing its platforms will increase. Don’t neglect that it wasn’t really that long ago Apple charged for operating system upgrades. It could do so again.

What I think will happen is that in exchange for buying apps you can use across platforms (good), and slightly better income for developers (also good), most prices won’t change that much, other costs will increase, and while Apple’s App Store power may be mitigated somewhat, the security environment will degrade.

No matter, however, as at least a handful of millionaires will have a few more dollars, while the cost of that wealth transfer will ultimately be shouldered by the group all sides claim to care about, consumers who simply want to use apps on their devices. This will not be a redemption song.

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