Epic Games Pays Apple $6 Million as Ordered by Court

[Velli]

Wrong…
Epic has reduced vbucks by 20% when purchased through Epic store. They did this last August, PR stunt or altruism?

Remember, the price of Vbucks is just funny money. The value is arbitrary. Epic can simply adjust what you can do with it, and end up extracting the same from you in the end.

Here’s how pricing works: You try to extract the maximum amount of money from your customers, with as low cost as possible to maximize your margin. What your cost is, has NO INFLUENCE on how much the customer is willing to pay. A shoe doesn’t inherently become more valuable just because you are inefficient at manufacturing, thus have high cost. Value is defined by the product you get, not by cost. If cost goes up, the company’s profit goes down. “Passing the cost/savings to the consumer” is all an illusion. The company will maximise their profits, even if their cost is zero.

In this context, you are very likely to spend the exact same amount of money on in-game stuff, regardless of how much you are actually getting, because you are not pying for a product. You are paying for the feeling of getting ahead, or in this case diversify yourself. Whether it takes 1 Vbuck or 1000 Vbucks to get ahead, is completely!! arbitrary. All it takes is for the company to create adjust the illusion if value.

It has been stated before, but it’s ironic how some people seem to think that Apple charging 30% of 10 dollars is unacceptable, while paying 7 dollars for some pixels to change colour on your screen is perfectly fine.

 

[Vjosullivan]

It is an industry standard. Everyone charges 30%. Android, Microsoft, Sony, Nintendo. It has existed for far longer then apple has an AppStore.

It's not "industry standard". If it is then there's a de facto cartel in place.

 

[Da_Hood]

P


It’s the other way round. You don’t add 30%. Apple takes 30% of the full amount. So if you want 1000 for yourself, the math is 1000/70*100=1428. Apple takes 30%=428, you get 1000. If you only add 30% to make up for Apples cut, you are cheating yourself.

We will assume that the 30% was priced in at launch. Epic was already paying this to Sony, and Microsoft so it‘s not like Apple extorted them unexpectedly.
Consumers, or in the majority of cases here, their parents were happy with this pricing.
We can only infer that Fortnite had reached peak IAP, the only way to drive growth was through discounting. Looks like bean counters were risk averse to diluting margin.

 

[Aydo2000]

It's not "industry standard". If it is then there's a de facto cartel in place.

Do you have the same logic for the supermarkets adding their own standard markup for the carton of milk you buy? Or landlords charging similar rent in surrounding areas? The whole world is a cartel for you? I wonder what laws and governments are doing it about it.

 

[threesixty360]

If Epic were a listed company the guy would have been out the door by now.
I also think his partners at the console games companies are going to be very wary of Epic and how they resolve disputes in the future. Lots of dark tactics used here to get to this situation.

The other thing is that the company can clearly do without Apple /iOS money so it feels like the hardship they were suffering by Apples rules was a bit over done. I dont think that helped their case at all. As many have suggested it was just billion dollar companies arguing with each other and has not much to do with the real world that everyone else inhabits.

 

[klunernet]

It's not "industry standard". If it is then there's a de facto cartel in place.

A cartel is not necessarily illegal. Feel free to start a case though.

for the record: not even epic dared do that, because it would be imposible to prove. (And likely because it does not actually exist)

 

[Velli]

Yeah but back in the day of Apple came out and told the market that would be charging 30% in royalties instead of the App Store … would be a dead duck!!! Anyone with a minimal understanding of the software industry can easily tell you that such a markup to access an OS APIs and docs is way over market prices.

So arguing that the App Store simply a different mechanism to charge for royalties / IP is not at least an intellectually honest argument.

By the way, don’t think the issue is one of killing the App Store. Anyway, personally multiple App Stores … don’t think is necessary but hey …

I did not argue that App Store is simply a different mechanism to charge royalties, it’s quite different. Which is also why the actual percentage is also not comparable. It’s 30%, BECAUSE not everyone is paying. If charging a license fee from everyone, the percentage would be much lower, big companies would pay less, small companies would pay more. Which, again, proves that small companies should be extremely happy about the current business model.

People react to the numbers being big. “Apple don’t need 30%, they have so much money already!”. What, so if you are a small company that doesn’t make money, 30% is fine? If you are LG and don’t actually know how to make money on phones, 30% would be fine? How much money Apple has, has zero relevance.

 

[Denzo]

Cry me a river. Apple is the most profitable corporation in the entire world. A slight reduction in profits wouldn't cause Apple any problems.

Is that how you operate, is it?

 

[bushman4]

Apple would make $6 million in 30 seconds of selling iPhones so the $6 million is irrelevant it’s the principal in this case
Doubtful Epic ever comes back to the App Store

 

[Velli]

Cry me a river. Apple is the most profitable corporation in the entire world. A slight reduction in profits wouldn't cause Apple any problems.

So, just because Apple already has billions, they should give more of it to… Tencent??? Why does the “oh, they can afford it” rule not apply to a Chinese conglomorate, only to American ones?

 

[Da_Hood]

A cartel is not necessarily illegal. Feel free to start a case though.

for the record: not even epic dared do that, because it would be imposible to prove. (And likely because it does not actually exist)

Would need competing stores to be cartel behaviour. Industry standard is appropriate, ironically owed to iTunes pricing structure.

 

[Da_Hood]

Apple did not make up the 30% Rule.

Yeah they did,
iTunes store kinda set the precedent. Remember when Apple extorted the record labels because of their own ineptness in dealing with peer 2 peer and torrenting.
Apparently Apple was in the drivers seat and the labels wanted to end the bad press Lars Ulrich was generating by suing Metallics fans.

 

[hot-gril]

Remember, the price of Vbucks is just funny money. The value is arbitrary. Epic can simply adjust what you can do with it, and end up extracting the same from you in the end.

Here’s how pricing works: You try to extract the maximum amount of money from your customers, with as low cost as possible to maximize your margin. What your cost is, has NO INFLUENCE on how much the customer is willing to pay. A shoe doesn’t inherently become more valuable just because you are inefficient at manufacturing, thus have high cost. Value is defined by the product you get, not by cost. If cost goes up, the company’s profit goes down. “Passing the cost/savings to the consumer” is all an illusion. The company will maximise their profits, even if their cost is zero.

In this context, you are very likely to spend the exact same amount of money on in-game stuff, regardless of how much you are actually getting, because you are not pying for a product. You are paying for the feeling of getting ahead, or in this case diversify yourself. Whether it takes 1 Vbuck or 1000 Vbucks to get ahead, is completely!! arbitrary. All it takes is for the company to create adjust the illusion if value.

It has been stated before, but it’s ironic how some people seem to think that Apple charging 30% of 10 dollars is unacceptable, while paying 7 dollars for some pixels to change colour on your screen is perfectly fine.

Yep, they're both perfectly fine from the free market perspective. As dumb as it is to buy ingame stuff.

 

[5232152]

Can you tell me where I can get free gigabits of Internet upload bandwidth, gigabytes of free cloud storage, free credit card processing without fees, and contract with free developers that will create world class development environments?

Not free, but the most civilized western world outside the US has rules in place to make sure Giga capitalistic companies don't treat citizens and the governments like puppets and dolls. America has crap internet prices, phone service prices, and credit card pricing. EU regulates all of these. Sure, cloud storage is not much different anywhere - but it is such an easy business to set up so it's a race for the bottom.

 

[hot-gril]

Not free, but the most civilized western world outside the US has rules in place to make sure Giga capitalistic companies don't treat citizens and the governments like puppets and dolls. America has crap internet prices, phone service prices, and credit card pricing. EU regulates all of these. Sure, cloud storage is not much different anywhere - but it is such an easy business to set up so it's a race for the bottom.

The EU tech scene isn't enticing. There's a reason everything is made here or even in China.

 

[danmart]

Epic will still have to charge 30% precisely because Apple conditions do not permit apps, etc. on their store to be available from a third party source at a price lower than on the Apple store.

I think this in an interesting part of the overall picture (on IAPs). The court ruling says Apple must allow the use of a third party payment service, but does not seem to strike out any of the other terms. So this condition would still apply. Meaning that you can buy Vbucks from Apple with your card details on file or you can get pushed to a third-party payment option and have to put your details in there.*

That will mean ‘alternative’ payment methods will have friction but seemingly won’t be able to give a lower sticker price to offset that. So a large portion of iOS users are likely to just stick with IAPs via the App Store.

‘Hearthstone’ from Blizzard is a good example - you can buy booster decks via IAPs in the iOS app or in their Mac app (and presumably the PC app - don’t have that) for the same price even though the purchase on a Mac doesn’t pay any cut to Apple.

*I am sure they will also allow you to put your details on file, but some customers will still be wary of this.

 

[N1noodle]

It is an industry standard. Everyone charges 30%. Android, Microsoft, Sony, Nintendo. It has existed for far longer then apple has an AppStore.

Its not a industry standard, Its common practice huge diffrence.

For it to be industry standard there would be a regulatory body of some sort that in writing says what all company that have a appstore what to charge which doesnt exist that i know of.

 

[hot-gril]

Epic will still have to charge 30% precisely because Apple conditions do not permit apps, etc. on their store to be available from a third party source at a price lower than on the Apple store.
This whole fiasco blew up because Epic wanted to sell at a lower price than Apple wanted.

Can they not remove the IAPs and require purchasing online? (In the theoretical scenario where they weren't banned.)

 

[Velli]

Yep, they're both perfectly fine from the free market perspective. As dumb as it is to buy ingame stuff.

I like your edit - It eould be interesting to see how much in-app revenue is actually from kids. I think a lot comes from adults.

 

[hot-gril]

I like your edit - It eould be interesting to see how much in-app revenue is actually from kids. I think a lot comes from adults.

Sorry for the ninja edit. Was thinking you'd not be online. Original version said basically I'd be upset if my kids bought this stuff.
Hard to tell. Kids have more time to play video games than adults, but there's the exception of adults who are single and without responsibilities, and they might have tons of money to burn.

 

[Velli]

Can they not remove the IAPs and require purchasing online? (In the theoretical scenario where they weren't banned.)

Yes, but the problem for Epic is that every barrier you create for the customer means that you lose a certain amount, who stops before actually putting in the money. This stuff is big business in e-tailing - the fewer clicks to complete a purchase, the higher the revenue. I’ve seen numbers as high as 80% not completing their purchase after putting the item in the basket. I would think this is especially true in gaming IAP’s, where purchases by nature is “spur of the moment”. As soon as you are taken to an external site to pay, you have a few seconds to think about whether what you’re doing right now is actually a good idea, and many will stop. This is why Epic is not satisfied with a link to an external processing, the revenue will be much higher if it is in-app. This is the real value of IAP.

 

[hot-gril]

Cry me a river. Apple is the most profitable corporation in the entire world. A slight reduction in profits wouldn't cause Apple any problems.

I don't care what happens to Apple at this point, since they've turned me from fan to mild disliker over the past decade. But I'll always be concerned about unnecessary interference with business. It might not stop at Apple.

 

[hot-gril]

Yes, but the problem for Epic is that every barrier you create for the customer means that you lose a certain amount, who stops before actually putting in the money. This stuff is big business in e-tailing - the fewer clicks to complete a purchase, the higher the revenue. I’ve seen numbers as high as 80% not completing their purchase after putting the item in the basket. I would think this is especially true in gaming IAP’s, where purchases by nature is “spur of the moment”. As soon as you are taken to an external site to pay, you have a few seconds to think about whether what you’re doing right now is actually a good idea, and many will stop. This is why Epic is not satisfied with a link to an external processing, the revenue will be much higher if it is in-app. This is the real value of IAP.

Makes sense, and that combined with devs still not being allowed to offer a discount outside means that Apple probably doesn't lose much from this.

 

[pauloregan]

Don't forget the whole reason that this happened is 30% cut is an obscenely large percentage. Apple were greedy and didn't scale down the percentage when the numbers started getting big.

 

[Velli]

Sorry for the ninja edit. Was thinking you'd not be online. Original version said basically I'd be upset if my kids bought this stuff.
Hard to tell. Kids have more time to play video games than adults, but there's the exception of adults who are single and without responsibilities, and they might have tons of money to burn.

NP. I think you are underestimating the amount of IAP from casual gaming - middle aged moms playing Candy Crush. Oh, and I don’t think singles necessarily have more money to burn, at least not if both parents are working. Personally, I have a “funny money” account that I spend on whatever I feel like (not often IAP, but it has happened…). All the necessities are on a joined account. So for me, an IAP just means I’ll have one less beer with the guys on Friday.