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I happened to start writing this column while I was in the city of Barcelona, which has a square dedicated to George Orwell, author of both Homage to Catalonia and 1984. The latter book is a reminder of the totalitarian society that could emerge if we allow one person too much power. This isn’t true for just politicians and governments. It’s also true for technology and gaming. I read Orwell’s books decades ago, and I see the warnings he offered us as relevant as ever.
Apple evoked this imagery in its famous 1984 TV commercial, announcing the Macintosh computer as a counterforce to the blandness of IBM. Openness and freedom should rule over closed ecosystems or walled gardens and corporate greed.
Epic Games, maker of Fortnite, brought the irony of this imagery back as it accused Apple of antitrust violations in a lawsuit filed in federal court in August 2020. The court ruled in Apple’s favor on most counts in September 2021, but the case is still winding its way through the courts, and Epic still has a similar pending lawsuit against Google. This week, Epic filed another reply to Apple in its appeal of the court’s ruling. Epic wants reversals on the lower court’s rulings on a number of major arguments and Apple held to account.
And so the question remains: Why are we still interested in this case? To me, as I pondered the meaning of Orwellian fears while I was in Barcelona, this legal battle between giant companies is interesting because it is a struggle for control of consumers between a big tech platform owner, Apple, and a major developer on that platform, Epic Games. I chose to use that time while I was in Spain to zoom in on some of the details of the case and zoom out to see the big picture. I can’t say that I have all of the answers, but I do have my point of view, and I am anxious to see how the details and the facts play out in the drama before us and sway that point of view toward favoring Apple or Epic.
Epic CEO Tim Sweeney has been a big advocate for openness, and he believes that we’re on the verge of a major change in platforms — moving from the app stores and distribution platforms to the age of the metaverse, the universe of virtual worlds that are all interconnected, like in novels such as Snow Crash and Ready Player One. Citi estimates the metaverse will be worth up to $13 trillion by 2030. That tells you something about how important the metaverse will be, and why it matters who rules it.
And Sweeney doesn’t want the tech platforms to rule the metaverse because that means they will be able to extract their royalty fees — Apple charges 30% for its share of the fees when someone buys something on its App Store — from the developers. This is like a car maker charging a fee every time you gas up your car, Epic argued. Just as the Oasis was ruled by one company in Ready Player One, technologists fear that walled gardens — like Apple or Meta or Microsoft or Amazon or Google — will rule the metaverse.
“And if you looked at the terms structure, Apple and Google have created terms that will give them a stranglehold over the metaverse, unless there are major changes in the practices they’re allowed to get away with,” Sweeney said in an interview with the Financial Times.
These companies say they favor openness, and they want to treat everyone fair. Do we believe them?
I would say that companies that create platforms that aggregate a lot of users deserve some kind of fee. But if they start to push around the developers that make the platforms valuable, then they are using a form of monopoly power, and we have to invoke the antitrust laws have to curb their power. Our antitrust laws are kind of antiquated, as the federal laws are more than 100 years old. But that could change if Epic rallies enough people — developers, regulators, lawmakers, and tech firms — to its cause, and we toughen antitrust enforcement.
Apple is going to launch a cool AR/VR technology one of these days that takes on Meta’s virtual reality and augmented reality platforms. And if Apple’s tech turns out to be amazing, developers will get rich making apps for it. If it succeeds, then Apple deserves its cut of the proceeds, according to those who believe that innovation and capitalism are working in our favor. Apple argues that it should be rewarded for the investment it made and the risks it took in building the iPhone platform. It does not believe the courts should strip it of the rewards for its intellectual property.
But Epic says that it’s been a long time since Apple did anything for us with its mobile platforms like the iPhone and App Store, and it argued in its brief this week that the U.S. District Court Judge Yvonne Gonzalez Rogers in Oakland, California got it right when she said Apple’s rules seemed to be too harsh for developers, and Apple’s market power was on the brink of being illegal. But Epic said she erred when she ruled antitrust law and case history suggested that Apple fell short of violating a lot of laws.
The judge did rule that Apple violated California’s laws against unfair competition when it came to a narrow but important matter of “anti-steering rules.” In that part, she said Apple was behaving in an anti-competitive way when it prohibited developers from saying within their App Store apps that they had better prices for virtual goods on their own websites. That is, the judge said Apple should not force developers to hide info about better discounts from consumers off of its platform.
Epic lost a major point as it argued it should be allowed to sideload apps on the Apple platform that enable it to redirect players so they can bypass Apple’s platform fees. Apple said this would pose a lot of security risks, and Epic argued that wasn’t true because Apple allows this to happen on the Mac. Apple’s execs argued that the Mac wasn’t all that secure because of this risk. I think that Apple has enabled the best apps to rise to the top of the app store, and those apps haven’t infected all of us with malware. Epic argues that Apple should find a compromise where some form of notarization of sideloaded apps would make them more acceptable.
If we were in a perfect world, the judges, regulators, and lawmakers of the world would be able to see the risks to new innovations and platforms like the metaverse. They would be able to act to stop those risks and preserve competition and enable equitable relationships to blossom between developers and those who enable them to reach big markets. They would prevent Apple from using its hold on a billion smartphone users to force them to only use its app store and its payment system, as Sweeney complains.
I think the gaming companies like Epic, Roblox, and Microsoft (with Minecraft) are better positioned than the big tech companies to deliver experiences that people really want. Brands would probably side with the likes of Epic as they pave the way in this brave new world.
If Epic wins its antitrust lawsuit on appeal, we might see alternative app stores gain traction, we might see developer fees fall, and we might see Apple’s monopoly on payments fall to pieces. These cost reductions and efficiency gains could be passed on to consumers in the form of lower prices, or they could be passed on to developers, enabling them to become healthier entities in the long term. That would benefit the entire game industry.
But we are not in a perfect world. The judge is hamstrung by a hundred years of case law. Lawmakers are clueless when it comes to evaluating important new technologies and the balancing act that happens between enabling competition and rewarding innovation. This case might not be the perfect one that changes the balance of power between platforms and developers or between enablers and creators.
In that case, we might have to see Epic Games prevail only by winning in the marketplace, perhaps by coming up with something that is even more desirable than its smash hit Fortnite. Or perhaps other entities, like the forces of decentralization behind crypto and blockchain games, could disrupt the status quo, take some power away from both developers and platforms, and give it back to the people.
Who would win in the battle for the metaverse? I believe it will be the company that does the best combined job with game development, user-generated content, and machine learning. It would take all three of those things to build out all of the content necessary to make a believable metaverse. Right now, Microsoft might be the leader in having a presence in all of those things, and it will be stronger if its acquisition of Activision Blizzard goes through. But the good thing is that no one company has a lock on all of that right now.
If I were to ask George Orwell what he would think would happen here, and what will be best for the people of the world, I wonder what he would say. But I do think he would say that this metaverse battle is one of the most important struggles of our time.