Apple claims Epic Games asked for unique App Store concessions

Apple, the tech giant that this week reached a $2 trillion valuation, claims Epic Games asked for a special deal in the App Store that other developers wouldn't get, contradicting Epic's own statements that its lawsuit was a move intended to push Apple toward offering better terms for all developers. Emails from Epic CEO Tim Sweeney indicate he was seeking to bypass App Store fees altogether and launch a new app store for Epic's games.

The lawsuit began after Epic's popular game Fortnite was pulled from the App Store following the company's decision to bypass Apple's in-app payment system and allow customers to buy items directly from Epic's website. Apple charges a 30 percent commission on in-app purchases or the first year of subscriptions (after a year, its cut of recurring subscriptions drops to 15%). Epic argues that's excessive. But it also says the picture Apple paints is disingenuous.

A calculated risk — Epic's move looked like an intentional bid to start a battle with Apple as it clearly knew ahead of time that Fortnite would be pulled for violating Apple's terms and conditions. Moreover, it's litigation was ready to go.

Many developers have been sounding the alarm of late about the Cupertino company's tight grip on its App Store and its seemingly arbitrary enforcement of opaque rules. Lawmakers have been weighing whether or not such behavior is stifling competition. But, at the same time, Epic knew the rules.

The lawsuit could have also been a cynical campaign to squeeze lower commissions out of Apple for a widely loved game. Epic launched a #FreeFortnite campaign, followed by a tournament in order to encourage gamers to pressure Apple. The problem for Epic is that, despite its deep coffers and huge user base, most of its users are teenagers... and while its pockets are deep, they're shallower than the President when compared to Apple's.

Apple argues lowering commissions for Epic is exactly what the lawsuit is intended to achieve. The company released emails showing that Epic CEO Tim Sweeney requested a "side letter" from Apple that would create a special deal for Epic to bypass in-app purchases and launch its own app store through which to offer downloads. Sweeney apparently emailed Phil Schiller, the head of the App Store, the same day Epic changed its payment system, saying it would "no longer adhere to Apple's payment processing restrictions."

If Epic doesn't bow to pressure and revert Fornite to a version that uses Apple's payment system exclusively, Apple will cancel the game developer's developer account. That'll mean that anyone using Epic's Unreal Engine won't be able to update their apps or games.

Toll road — While that doesn't look great for Sweeney or Epic, it seems Apple is being selective with the facts, too. Sweeney's email to Apple also adds that "we hope that Apple will also make these options equally available to all iOS developers." In other words, he's calling for the same "special deal" to be extended to all developers... though, there is the implication he might accept it even if it weren't.

Apple has been under fire from companies large and small who say it wields too much power over independent businesses that rely on delivering their services to users of iOS, which commands more than 50 percent of the U.S. smartphone market. If a developer doesn't agree with Apple's rules, it has little choice to go elsewhere — alternative app stores like the one Sweeney requested aren't allowed on iOS. Apple recently made Facebook remove mini-games from its Facebook Gaming app because it said offering them made it a competitor to the App Store.

The fundamental issue for many developers is that Apple is running the exclusive marketplace for iOS apps where it can pick winners and losers. For instance, there have been questions raised about why Apple can launch its own game subscription service, Apple Arcade, while simultaneously blocking Microsoft's xCloud over violations of rules that it itself created. Even when it allows competitors into the App Store it takes a cut of their sales. Either way, Apple wins.

Should the company have the right to wield total control over what apps iOS users can download after they've purchased their device? Some, including Epic, don't think so. At the same time, Apple argues the fees and rules are all in the interest of creating a safe experience for users, but the company has become heavily reliant on services revenue for its future growth. It built the platform app developers rely on for their livelihood, sure, but it also relies on them to keep it ticking over.