Epic’s fight for “open platforms” ignores massive closed market consoles

Yesterday used Epic Fortnite essentially waging an open war against Apple’s and Google’s mobile app markets. First, it added a discounted “Epic Instant Payment” option in addition to the standard iOS App Store and Google Play payment options in Fortnite, in direct violation of the policies of those stores.

Then, when Fortnite was forcibly removed from both platforms, Epic filed lawsuits against both companies, claiming “anti-competitive restrictions and monopolistic practices” in the mobile app market. That move came alongside a heavy PR blitz, including a video asking players to “join the fight to stop 2020 from ’84 ‘.”

But due to this very public battle for “open mobile platforms”, as Epic puts it, there is one big set of closed platforms that the company seems happy to keep doing business with. We are of course talking about video game consoles.

Happy to pay

Most if not all of the complaints that Epic makes against Apple and Google also seem to apply to Microsoft, Sony and Nintendo in the console space. All three console makers are also taking a 30 percent cut in all microtransaction sales on their platforms, for example.

This DLC fee also represents a large chunk of the revenue of those console makers. “Add-on content” accounted for a whopping 41 percent of Sony’s Game and Network revenue in the last completed fiscal quarter. Microsoft saw a 39 percent increase in gaming revenue in the quarter thereafter Fortnite was also released, which coyly attributed the boss to “third-party strength.” And the Switch saw similar post-Fortnite digital sales increase after Nintendo announced that it had fully downloaded half of all Switch owners Fortnite.

On mobile platforms, Epic calls the same kind of 30 percent “exorbitant” fee and says it wants to offer a more direct payment solution so it “can pass on the savings to players.” On consoles, however, Epic happily introduced a permanent 20 percent discount on all microtransaction purchases, although there is no sign that console makers have changed their reimbursement structure.

A brief history of console control

The big console makers also all exercise complete control over what games and apps can appear in their own walled gardens. When it comes to iOS, Epic says that “by making the choice for consumers in software installation, Apple has created a problem so they can take advantage of the solution.” When it comes to consoles, Epic is silent about the same state of affairs.

In this sense, consoles are even more restrictive than Android, where games and apps (included) Fortnite) can be page loaded without using the Google Play Store. However, Google has earned a lawsuit for its role in this state of affairs, while the console makers have remained uneasy.

In addition to the implications of the case, the overall control of console makers over their marketplaces also has a direct impact on the types of content that players get to play. For example, any game that receives an Adults Only rating from the ESRB is not welcome on one of the three major consoles. And if you want to use UWP for a N64 emulator code that works on the Xbox One, Microsoft will pull it down as soon as possible.

Of course, this was not always the case. Back in the days of the Atari 2600, anyone with the programming skills and capacity of cartridge production could make games for the console. That state of affairs led to a flash of malicious Atari software flooding the market, a situation many observers blamed for the 1983 video game industry crash.

To prevent history from repeating itself, Nintendo created a lockout chip for the NES that gave it effective control over which cartridges could run on its hardware (and gave it the ability to earn a license from game developers for producing the privilege of cartridges). When companies like Tengen tried to get this restriction, Nintendo took them to court and won, cementing its right to Apple-style control of its own software market.

Decades later, this kind of absolute control over compatible software is treated as the de facto standard in the console space. But in the world of mobile phones, companies like Epic are increasingly attracting and publicly listing restrictions as anti-competitive monopolistic practices. What is the difference?

Split the difference

Some may argue that software restrictions on consoles are less influential because the hardware is only designed to play games. As Epic states in its own FAQ, “mobile devices are essential computing devices on which we lead our social and professional lives and participate in commerce and entertainment.” That FAQ compares the mobile market only with “other general-purpose computer platforms, including Web, Windows, and Mac.” Consoles do not fit into that same “general purpose” framework, it seems.

But that’s an increasingly outdated view of what consoles can do. The Xbox One, to give just one example, includes a wide selection of in-game apps for features such as on-demand video, music streaming, VoIP, email, and more. That may not put it on the same tier of software selection as a smartphone, but it is pushing it ever closer to the “general purpose computer” space.

Some may point to the very different nature of the income model for the different ecosystems. While Apple makes a significant profit on every iPhone sale, console makers regularly sell their hardware at a loss or at almost no profit to increase the user base for future software licenses and sales.

That may help explain why console makers feel the need to protect their 30 percent cut on software and microtransaction sales. But it does not really explain why a company like Epic would be OK with paying that fee to Sony but not to Apple.

Maybe Epic is just more concerned about the potential for lost revenue on consoles versus mobile platforms. A mid-2019 Newzoo study of three major Battle Royale games, including Fortnite, found that 71 percent of gamers mainly played on consoles, compared to just 17 percent on PC and 12 percent on mobile. Being cut off from console players during a hot public battle would be a much more important battle for the game’s revenue stream.

“Epic Hearts Microsoft”

Or maybe Epic just has a better relationship with console makers than makers of mobile phones. Epic has long made console the main focus of its Unreal Engine development, after all, in a way that has been less true for mobile phones.

Sony recently invested $ 250 million in Epic and prominently unveiled Epic’s Unreal Engine 5 in a recent major PlayStation 5 promo demo. Even Nintendo, which traditionally uses its own technology for game development, has in recent years started using Unreal Engine for its own titles. In a way, Epic cannot attack these platform holders without attacking themselves as well.

And while Epic and Microsoft famously spared the Universal Windows platform on PCs, the two companies last year buried the hatchet publicly during the launch of the HoloLens 2 platform. “Epic loves Microsoft,” Tim Sweeney said at the time. “Epic Hearts Microsoft.”

However, Apple and Epic are not exactly strangers in the business world. Epic’s Infinity Blade and Unreal Engine, for example, were unveiled in 2010 in an iPhone keynote presentation, and the company unveiled a “Zen Garden” demo for iOS 8 at WWDC 2014. But while Unreal Engine is a major part of the console landscape these days, is the high-end 3D graphics that make it possible to be even more of a niche on mobile platforms, which are often underpowered for these types of games.

Maybe the answer is that Apple in particular is just a repair target these days. Everyone from Microsoft and Google to emailing app makers to European regulators has been targeting the anti-competitive nature of the iOS marketplace in recent months. Maybe Epic does not want to be the only company to take the console-triumvirate in the same way.

With Epic still responding to our requests for comment, let’s guess why consoles have been spared the company’s legal and PR rage. But in the end, it can just be a matter of timing. Perhaps Epic is solely focused solely on mobile marketplaces, and hopes to put an advance that even the monopoly management console makers can break over their own hardware.

These days, it is difficult to imagine a world where console makers do not approve the software running on their systems. But if Epic is successful in its attacks on the mobile phone realm, then that may be where we’re headed.