WEBVTT - Rerun: The Epic Epic vs Apple Battle 0:00:04.400 --> 0:00:07.800 Welcome to Tech Stuff, a production from I Heart Radio. 0:00:11.800 --> 0:00:14.239 Hey there, and welcome to tech Stuff. I'm your host, 0:00:14.360 --> 0:00:17.080 Jonathan Strickland. I'm an executive producer with I Heart Radio. 0:00:17.120 --> 0:00:20.880 And how the tech are you. I am currently on vacation, 0:00:21.000 --> 0:00:23.680 so hopefully right now I'm doing great. I hope you 0:00:23.720 --> 0:00:26.319 are too. But obviously I don't want to leave you 0:00:26.360 --> 0:00:29.400 without an episode, so we are going to have a rerun. 0:00:29.560 --> 0:00:34.240 This episode is called the Epic Epic versus Apple Battle. 0:00:34.720 --> 0:00:37.879 It originally published in twenty twenty, and I think this 0:00:37.920 --> 0:00:42.320 one is an important episode because if you have been 0:00:42.360 --> 0:00:46.000 paying attention, you know that Apple is facing pressure around 0:00:46.000 --> 0:00:50.279 the world due to its policy of making developers use 0:00:50.400 --> 0:00:54.840 the in Apple payment processing system, where Apple gets a 0:00:55.480 --> 0:01:01.360 thirty chunk in most cases of every transaction. And Epic 0:01:01.800 --> 0:01:04.520 found kind of a work around on that and then 0:01:04.560 --> 0:01:06.720 got into hot water with Apple, and then Apple got 0:01:06.720 --> 0:01:09.680 into hot water all around the world. So really, while 0:01:09.720 --> 0:01:13.160 I wouldn't say this is the very beginning of the 0:01:13.200 --> 0:01:17.360 world pushing back on Apple, UH, for those policies, UH, 0:01:17.520 --> 0:01:21.920 this is probably the highest profile case. So let's sit 0:01:21.959 --> 0:01:26.440 back and listen to this episode. As I record this, 0:01:26.560 --> 0:01:30.240 it is August twenty twenty, and there is an epic 0:01:30.520 --> 0:01:36.360 showdown going on between two tech companies, an epic epic showdown, 0:01:37.200 --> 0:01:41.360 or or maybe an epic epic showdown. What I mean 0:01:41.360 --> 0:01:44.920 to say is that the company Epic or Epic Games, 0:01:45.000 --> 0:01:48.160 known for video games in general and the juggernaut game 0:01:48.360 --> 0:01:53.560 Fortnite in particular, is facing off against the sometimes trillion 0:01:53.680 --> 0:01:58.560 dollar monolithic company Apple, and things are getting spicy. But 0:01:59.320 --> 0:02:04.160 why are these two companies feuding and how are things escalating? 0:02:04.720 --> 0:02:07.200 As I research and write this, the fight is just 0:02:07.360 --> 0:02:10.799 gearing up, but it promises to get much nastier over time. 0:02:11.160 --> 0:02:15.079 Today we're going to learn about the conflict between these companies, 0:02:15.280 --> 0:02:17.520 as well as get a deeper understanding of the way 0:02:17.520 --> 0:02:22.320 that apps, services and Apple make money, because really that's 0:02:22.320 --> 0:02:25.280 what this all boils down to, the method that companies 0:02:25.320 --> 0:02:28.160 follow to make money and how they can make more 0:02:28.240 --> 0:02:31.000 money and keep more of the money they make. So, 0:02:31.760 --> 0:02:35.239 you know, spoiler alert, that's really what this is all 0:02:35.280 --> 0:02:39.160 about when you get down to it. But first some background. Now, 0:02:39.600 --> 0:02:43.280 I've done an episode about Fortnite that published back in 0:02:43.400 --> 0:02:45.799 February of two thousand nineteen, so I'm not going to 0:02:45.919 --> 0:02:49.240 go over the entire history of Fortnite. But let's do 0:02:49.320 --> 0:02:52.400 a quick rundown of Epic Games so we understand where 0:02:52.400 --> 0:02:57.240 they're coming from. Way back in, a guy named Tim 0:02:57.320 --> 0:03:01.120 Sweeney was programming video games and saying them onto floppy 0:03:01.200 --> 0:03:04.720 disks and then sending those disks out over the mail. 0:03:05.080 --> 0:03:09.240 And he was using the company name Potomac Computer Systems. 0:03:09.840 --> 0:03:12.320 He hired on a couple of important people as well, 0:03:12.520 --> 0:03:18.080 Mark Rhyan and Cliff Blazynski. In Sweeney would rename this 0:03:18.160 --> 0:03:21.960 company and it became Epic Mega Games, and the founders 0:03:22.040 --> 0:03:25.600 started creating lots of games that got a pretty good reception. 0:03:26.080 --> 0:03:30.040 A few years later, as computers got more powerful and 0:03:30.120 --> 0:03:33.960 graphics cards began to be a thing, Epic evolved into 0:03:34.040 --> 0:03:37.840 Epic Games and the company released a computer engine, a 0:03:38.160 --> 0:03:42.560 game engine called the Unreal Engine. So computer engines or 0:03:42.680 --> 0:03:45.320 video game engines are sort of a block of code 0:03:45.520 --> 0:03:49.400 that provide tools to game developers, like physics engines and 0:03:49.480 --> 0:03:53.080 graphics engines, and a game engine saves game developers a 0:03:53.120 --> 0:03:55.360 lot of time and a lot of effort. It provides 0:03:55.760 --> 0:04:00.360 some basic functionality that the game developers can then build upon. 0:04:00.440 --> 0:04:03.320 It's like the framework, and it keeps developers from having 0:04:03.360 --> 0:04:05.920 to reinvent the wheel every time they want to build 0:04:05.920 --> 0:04:10.080 a game. The Unreal Engine would become a really popular 0:04:10.240 --> 0:04:13.120 game engine, and that will play an important part in 0:04:13.160 --> 0:04:17.120 our story. Around two thousand and six, Epic Games began 0:04:17.200 --> 0:04:21.600 to saunter casually over to the world of console video games, 0:04:21.880 --> 0:04:26.520 developing titles or adapting existing PC games for the Xbox 0:04:26.560 --> 0:04:30.320 three sixty. The company was branching out beyond PC and 0:04:30.520 --> 0:04:34.000 Mac titles. Some of their earliest games that you know 0:04:34.080 --> 0:04:37.520 Epic produced were available on the Mac computer. That will 0:04:37.600 --> 0:04:41.040 also play an important part of our story. The company 0:04:41.080 --> 0:04:44.520 announced Fortnite in two thousand eleven, it would take a 0:04:44.520 --> 0:04:49.240 few years before it actually would debut, and in a 0:04:49.360 --> 0:04:53.400 Chinese company called ten Cent Holdings ended up buying a 0:04:53.560 --> 0:04:57.560 forty percent stake in Epic Games for a three hundred 0:04:57.680 --> 0:05:02.880 thirty million dollars, a princely sum. This, by the way, 0:05:03.120 --> 0:05:07.160 makes Epic another potential target in the ongoing political and 0:05:07.240 --> 0:05:11.039 trade battle between the United States and China for much 0:05:11.120 --> 0:05:15.240 the same reason that TikTok is under scrutiny. But that's 0:05:15.279 --> 0:05:18.760 a different topic that will probably not come back into 0:05:18.800 --> 0:05:21.240 this episode. I think I don't know. I'm just at 0:05:21.279 --> 0:05:24.760 the beginning of writing this, I'm reading my old notes, okay, 0:05:24.760 --> 0:05:27.200 so I can say definitively no, that's not going to 0:05:27.279 --> 0:05:31.040 come back in. In two thousand and fourteen, Epic announced 0:05:31.160 --> 0:05:34.200 that when Fortnite would launch, it was going to be 0:05:34.279 --> 0:05:37.040 a free to play game. Now, this is also a 0:05:37.080 --> 0:05:40.200 big part of our story. So a free to play 0:05:40.320 --> 0:05:44.839 game is a little bit deceptive. It is free to 0:05:45.040 --> 0:05:48.400 download and install and play one of these games, but 0:05:48.440 --> 0:05:53.480 it typically has in game transactions, and these are transactions 0:05:53.480 --> 0:05:57.719 where players can spend real world money and enhance their 0:05:57.760 --> 0:06:00.760 game play in some way. Games do this different ways. 0:06:00.960 --> 0:06:04.599 Some games allow players to purchase upgrades that give them 0:06:04.640 --> 0:06:08.680 an advantage in the game. The derogatory name for this 0:06:08.839 --> 0:06:12.400 style of game is called pay to win, the implication 0:06:12.480 --> 0:06:16.160 being that a mediocre player can dominate people who have 0:06:16.240 --> 0:06:19.040 spent more time and developed more skill in the game 0:06:19.440 --> 0:06:22.919 just by dishing out more cash for upgrades, and a 0:06:22.960 --> 0:06:27.400 lot of gamers view this as being inherently unfair. Other 0:06:27.440 --> 0:06:31.320 games only allow for cosmetic transactions, so it's stuff that 0:06:31.440 --> 0:06:34.520 changes the appearance of different elements in the game, like 0:06:34.960 --> 0:06:39.320 a player's outfit or their weapons, skins or whatever. And 0:06:39.400 --> 0:06:43.760 some games incorporate are element of randomness in the transactions 0:06:43.760 --> 0:06:47.440 with loot boxes. With these games, you don't buy specific 0:06:47.600 --> 0:06:52.440 upgrades or cosmetic changes. Instead, you buy a crate or 0:06:52.520 --> 0:06:56.119 a loot box which you then open within the game, 0:06:56.279 --> 0:06:58.760 and only then do you find out what you've got 0:06:58.960 --> 0:07:02.880 from inside the crate or box. It's a classic mystery 0:07:02.960 --> 0:07:06.000 bag idea. If you ever went into a store where 0:07:06.240 --> 0:07:07.960 the country stores used to do this all the time 0:07:08.000 --> 0:07:10.480 where I was growing up, where you would have bags 0:07:10.520 --> 0:07:13.080 that would just be a a mystery bag. There'd be 0:07:13.120 --> 0:07:14.920 a toy inside, but there'll be no way of knowing 0:07:14.960 --> 0:07:17.480 what toy was in there until you bought the bag 0:07:17.760 --> 0:07:19.920 and then you could open it, So you have no 0:07:19.960 --> 0:07:22.360 clue what's inside, and you have to take a gamble 0:07:22.600 --> 0:07:25.239 if you purchase it, maybe it will be something cool 0:07:25.400 --> 0:07:28.440 or maybe it'll be something lame. And on a side note, 0:07:28.520 --> 0:07:32.120 there's a definite art to designing these style of loot boxes. 0:07:32.440 --> 0:07:34.920 You want there to be just enough payout to keep 0:07:34.960 --> 0:07:38.720 players engaged and buying the crates, So you need to 0:07:38.800 --> 0:07:42.360 keep those payouts just rare enough so that it feels 0:07:42.400 --> 0:07:46.000 like an accomplishment to get, you know, a rare skin 0:07:46.240 --> 0:07:49.200 or something like that, but not so rare that people 0:07:49.200 --> 0:07:52.280 feel they're getting nothing but garbage every time they buy 0:07:52.280 --> 0:07:55.040 a lootbox. So this is not easy to do, and 0:07:55.080 --> 0:07:58.920 it's also something that can encourage unhealthy behavior as akin 0:07:59.000 --> 0:08:01.680 to addiction. And it's set the core of why games 0:08:01.720 --> 0:08:05.120 that have these sorts of transactions often come under scrutiny 0:08:05.160 --> 0:08:09.040 by various advocacy groups and governments around the world. Now 0:08:09.080 --> 0:08:12.240 that's another kettle of fish, but the micro transactions get 0:08:12.280 --> 0:08:14.720 to the very heart of the matter we're looking at 0:08:14.760 --> 0:08:18.559 in this episode. In two thousand nineteen, Epic Games made 0:08:18.640 --> 0:08:23.440 another big move. They launched the Epic Games Store. Now, 0:08:23.480 --> 0:08:27.680 over its relatively short history, the PC games industry has 0:08:27.720 --> 0:08:30.760 seen some pretty massive changes in how companies sell and 0:08:30.800 --> 0:08:34.640 distribute games. So in the old old days, you had 0:08:34.679 --> 0:08:37.880 game programmers like Sweeney who would build a game and 0:08:37.920 --> 0:08:41.360 then make copies of it on discs floppy discs, and 0:08:41.360 --> 0:08:45.160 then sell them either by mail order or sometimes going 0:08:45.200 --> 0:08:48.880 through like a local computer hobby store. And that evolved 0:08:48.920 --> 0:08:52.720 into game developers and publishers selling games through brick and 0:08:52.760 --> 0:08:56.280 mortar retail shops like game Stop or best Buy or 0:08:56.320 --> 0:09:00.840 Walmart or whatever. But over the last decade, the model 0:09:01.040 --> 0:09:06.439 has shifted dramatically over toward digital distribution. The vast majority 0:09:06.520 --> 0:09:10.160 of games are now sold through digital downloads, more than 0:09:10.240 --> 0:09:14.520 eighty percent since two thousand eighteen. This changes the model 0:09:14.840 --> 0:09:17.280 a lot, and it's one of the reasons why companies 0:09:17.320 --> 0:09:20.280 like game Stop are really in trouble these days. But 0:09:20.400 --> 0:09:23.560 you still need a place to sell your games. You 0:09:23.600 --> 0:09:26.720 need a shopping portal or something. Now you could try 0:09:26.760 --> 0:09:29.960 and do this through your own company's web page, but 0:09:30.000 --> 0:09:32.920 the problem with that is that you're asking gamers to 0:09:32.960 --> 0:09:35.680 go to a lot of different websites when they're in 0:09:35.720 --> 0:09:38.760 the mood to buy a game. Most gamers like to 0:09:38.800 --> 0:09:42.040 play a variety of titles from a variety of companies. 0:09:42.240 --> 0:09:44.400 There are very few gamers who are like, I'm only 0:09:44.400 --> 0:09:47.559 going to buy games from this one company, and smaller 0:09:47.600 --> 0:09:50.440 independent developers have a hard time standing out with so 0:09:50.520 --> 0:09:53.800 many big companies that are in the industry. So having 0:09:53.880 --> 0:09:57.679 a centralized digital store where you can look at titles 0:09:57.720 --> 0:10:01.000 from big or small companies that ended up being a 0:10:01.040 --> 0:10:04.000 really great idea, And that was an idea that a 0:10:04.000 --> 0:10:07.880 company called Valve, famous for video game series like Half 0:10:07.920 --> 0:10:12.040 Life in Portal had the Valve Digital store gave PC 0:10:12.200 --> 0:10:15.679 gamers a centralized location where they could shop for games, 0:10:16.040 --> 0:10:19.600 and Valve would end up making truckloads of cash off 0:10:19.640 --> 0:10:22.839 of this, because the company would take a cut out 0:10:22.920 --> 0:10:27.080 of every transaction made through the Valve Steam Store. If 0:10:27.120 --> 0:10:29.559 you bought a title on Steam, whether it came from 0:10:29.640 --> 0:10:33.600 Valve or not, Valve would get some of that cash, 0:10:34.040 --> 0:10:37.400 and for a while, it was effectively the only game 0:10:37.440 --> 0:10:40.400 in town, so to speak, unless you were to go 0:10:40.559 --> 0:10:45.120 directly to each publisher. In two thousand nineteen, that changed. 0:10:45.480 --> 0:10:48.520 Epic announced the Epic Game Store and also announced that 0:10:48.600 --> 0:10:51.200 it was going to take a smaller cut than what 0:10:51.440 --> 0:10:54.640 Valve was taking in their Steam Store. That would mean 0:10:54.640 --> 0:10:57.560 that video game companies would get to keep more of 0:10:57.600 --> 0:11:00.760 the money from those sales, and it would also mean 0:11:00.800 --> 0:11:02.760 that if a company were to hold a sale, like 0:11:02.800 --> 0:11:05.560 if they were to discount a title, they wouldn't take 0:11:05.600 --> 0:11:08.840 as big a hit on revenue as a result, and 0:11:08.880 --> 0:11:12.920 it introduced competition in the digital marketplace. Some of epics 0:11:13.000 --> 0:11:17.599 moves upset gamers, particularly when they heard about specific titles 0:11:17.640 --> 0:11:21.600 that would be exclusively sold through the Epics Store. Gamers 0:11:21.600 --> 0:11:24.280 are not crazy about the idea of having to manage 0:11:24.480 --> 0:11:27.080 to store accounts, I guess, but you could make a 0:11:27.080 --> 0:11:30.280 strong argument that competition would ultimately be a good thing, 0:11:30.600 --> 0:11:32.520 even if it meant you had to go to two 0:11:32.559 --> 0:11:36.040 stops when you were shopping for games instead of just one, 0:11:36.440 --> 0:11:39.319 And that really sets the stage for the show down 0:11:39.360 --> 0:11:44.360 with Apple. Epic Games has done something really smart with Fortnite. Actually, 0:11:44.400 --> 0:11:47.200 they've done a lot of smart things, including lifting the 0:11:47.280 --> 0:11:50.600 battle Royal concept that was working so well for video 0:11:50.640 --> 0:11:54.600 games like Player Unknowns Battlegrounds and then applying it to Fortnite. 0:11:54.600 --> 0:11:57.600 That transformed that game and made it into the juggernaut 0:11:57.679 --> 0:12:00.120 it is. But Epic has followed what I think of 0:12:00.360 --> 0:12:04.600 as the Netflix strategy. One of the things that Netflix 0:12:04.720 --> 0:12:07.920 really got right early on when it started making movies 0:12:07.960 --> 0:12:11.520 available to stream online is that the company worked hard 0:12:11.840 --> 0:12:14.800 to make sure that this service would be available across 0:12:14.880 --> 0:12:18.800 a ton of different platforms. Netflix wanted to make sure 0:12:18.840 --> 0:12:21.600 that users would be able to access the service no 0:12:21.640 --> 0:12:25.520 matter how they watch video, So that meant that Netflix 0:12:25.559 --> 0:12:28.679 had its web based interface, and then it also had 0:12:28.679 --> 0:12:32.440 an interface for smart TVs and one for smartphones and 0:12:32.440 --> 0:12:36.559 one for video game consoles. Essentially, the idea was, if 0:12:36.600 --> 0:12:40.160 this thing can play video, Netflix wants an interface to 0:12:40.200 --> 0:12:43.120 go on it, and the strategy paid off big time. 0:12:43.120 --> 0:12:47.000 It meant Netflix could cast a truly wide, you know, 0:12:48.200 --> 0:12:52.560 net to capture as much audience as possible. Epic has 0:12:52.600 --> 0:12:56.360 done something similar with Fortnite. Game developers often have to 0:12:56.360 --> 0:13:00.000 weigh some pretty tough decisions when it comes to making games. 0:13:00.720 --> 0:13:04.559 One strategy is to build games for a specific platform 0:13:04.760 --> 0:13:08.160 and just to focus on that exclusively. And that gives 0:13:08.160 --> 0:13:11.440 you the ability to really refine the game for that 0:13:11.559 --> 0:13:14.839 specific platform and and and make sure that everything is 0:13:14.880 --> 0:13:17.800 working well, and you end up with the most polished, 0:13:17.880 --> 0:13:22.160 well designed game you can create. So if you want 0:13:22.240 --> 0:13:24.640 the game to be available on more than one platform, 0:13:24.920 --> 0:13:26.560 such as let's say that you want the game to 0:13:26.559 --> 0:13:30.160 be playable on PC as well as on a PlayStation console, 0:13:30.800 --> 0:13:33.280 well then you have to devote time to adapting the 0:13:33.320 --> 0:13:37.559 game to work on the other platform. Because games are 0:13:37.559 --> 0:13:40.400 not just something you can copy and paste over on 0:13:40.720 --> 0:13:43.760 to one thing from the other. You can't just pull 0:13:43.840 --> 0:13:46.200 the code from a PC game and PLoP it into 0:13:46.200 --> 0:13:49.040 the PlayStation store. It doesn't work that way. So you 0:13:49.080 --> 0:13:52.920 really have two choices, one of which doesn't make much sense. 0:13:53.520 --> 0:13:56.920 That choice is to essentially recreate the game entirely for 0:13:56.960 --> 0:14:00.360 the new platform. This would mean building the same game 0:14:00.480 --> 0:14:03.840 two times, at least only the second time you're doing 0:14:03.840 --> 0:14:08.440 it for a different system. That's not really efficient. That's 0:14:08.440 --> 0:14:10.520 not a great way to go about it. It's certainly 0:14:10.520 --> 0:14:12.959 not a cost effective way to go about it. So 0:14:13.000 --> 0:14:16.800 the other way is to port the game over, which 0:14:16.840 --> 0:14:19.920 means you're really trying to keep as much of the 0:14:19.960 --> 0:14:24.440 basic code you built for the original game whatever platform 0:14:24.480 --> 0:14:27.880 moves on, like for PC, and only focus on making 0:14:27.960 --> 0:14:31.600 changes where it's necessary in order to run on a 0:14:31.680 --> 0:14:35.640 different platform like the PlayStation or whatever other platform you're 0:14:35.640 --> 0:14:39.040 developing for. Either way, it's a process that takes more 0:14:39.080 --> 0:14:43.000 time and resources to complete. Some companies will farm this 0:14:43.160 --> 0:14:46.400 sort of work out to other game developers, and this 0:14:46.480 --> 0:14:49.440 gives the original company the freedom to do other stuff 0:14:49.480 --> 0:14:53.680 like developed downloadable content or otherwise known as DLC for 0:14:53.760 --> 0:14:56.520 that original title, or to work on a brand new 0:14:56.600 --> 0:15:01.680 game with Fortnite, Epic developed versions for pretty much every 0:15:01.760 --> 0:15:05.680 conceivable platform. There are versions of Fortnite that you can 0:15:05.680 --> 0:15:09.640 play on PC, on Mac, on the Xbox One, the 0:15:09.680 --> 0:15:14.560 PlayStation four, the Nintendo Switch, on Android, phones and iOS 0:15:14.600 --> 0:15:19.000 devices like iPhone and iPads. So epics approach is again, 0:15:19.880 --> 0:15:23.520 if this thing can play games, we want to be there. Now. 0:15:23.560 --> 0:15:26.680 I say that knowing there are other gaming platforms out there, 0:15:27.160 --> 0:15:29.480 like you know, handhelds and stuff like that, So don't 0:15:29.560 --> 0:15:32.240 yell at me, you know what I mean. What's more, 0:15:32.800 --> 0:15:36.200 as an added value to the game, Epic has included 0:15:36.200 --> 0:15:40.120 the ability to have a lot of cross platform play. Now, 0:15:40.160 --> 0:15:43.440 this means that people playing the game on totally different 0:15:43.480 --> 0:15:48.240 systems can potentially play together in the same game or match. This, 0:15:48.360 --> 0:15:50.360 by the way, helps illustrate the fact that all these 0:15:50.400 --> 0:15:54.320 systems are ultimately computers when you really get down to it, 0:15:55.120 --> 0:15:58.240 and that would mean that you could play on PC, 0:15:58.400 --> 0:16:00.600 your friend could be on a PlayStation, and the two 0:16:00.640 --> 0:16:02.760 of you could actually play in the same game. Now, 0:16:02.800 --> 0:16:07.080 typically that doesn't really happen that much. At first, this 0:16:07.200 --> 0:16:10.680 cross platform ability wasn't quite universal. You would run into 0:16:10.680 --> 0:16:14.200 weird situations where player A could play with player B, 0:16:14.760 --> 0:16:17.640 but they couldn't play with players C, and player B 0:16:17.800 --> 0:16:21.400 could play with either A or CE, but they could 0:16:21.440 --> 0:16:24.960 not play with both at the same time. However, over time, 0:16:24.960 --> 0:16:28.080 Epic would roll out more a cross platform support. In 0:16:28.120 --> 0:16:31.200 two thousand nineteen, they tweaked this a bit so that 0:16:31.360 --> 0:16:34.640 players who were on Nintendo Switch would by default get 0:16:34.720 --> 0:16:37.720 grouped into games with mobile players, you know, people on 0:16:37.760 --> 0:16:41.520 Android phones or iOS devices, whereas Xbox and PS four 0:16:41.560 --> 0:16:46.200 players were by default grouped together. The company still allowed 0:16:46.440 --> 0:16:50.240 people to create parties to form across these technological divides 0:16:50.280 --> 0:16:53.360 if they really wanted to. It's just the differences and 0:16:53.520 --> 0:16:57.720 system power and controls really make a big impact on gameplay. 0:16:57.920 --> 0:17:00.360 It could be very difficult for someone on mobile to 0:17:00.720 --> 0:17:03.960 compete head to head against someone on PC, for example. 0:17:04.560 --> 0:17:07.720 But anyway, that's epics set up. When we come back, 0:17:08.000 --> 0:17:10.320 we'll do a brief rundown on Apple and then we'll 0:17:10.359 --> 0:17:14.119 talk about why these companies are waging war. But first 0:17:14.560 --> 0:17:27.160 let's take a quick break. So Apple, I've done a 0:17:27.280 --> 0:17:31.520 series of episodes about Apple, and it was one of 0:17:31.560 --> 0:17:34.719 the early personal computer companies to emerge out of the 0:17:34.760 --> 0:17:39.040 hobbyist scene of the nineteen seventies. The original Apple computer, 0:17:39.240 --> 0:17:43.520 the Apple one, was really a hobbyist computer. It wasn't 0:17:43.560 --> 0:17:46.040 until the introduction of the Apple two line that you 0:17:46.080 --> 0:17:48.280 started seeing machines that could appeal to people who were 0:17:48.680 --> 0:17:50.399 you know, they were geeks, but they weren't you know, 0:17:50.480 --> 0:17:55.720 like hardcore computer hobbyists geeks. Then you had the introduction 0:17:55.760 --> 0:17:59.359 of the Macintosh computer in four that's going to have 0:17:59.400 --> 0:18:02.639 an interesting call back later in this episode. Then co 0:18:02.800 --> 0:18:06.600 founder Steve Jobs either quit or was fired from the company. 0:18:06.760 --> 0:18:11.560 He was definitely pushed aside, And so even if he quit, 0:18:12.119 --> 0:18:15.960 that was because he had essentially been neutralized by company 0:18:16.000 --> 0:18:20.000 management at that time. Now, after the ousting of Steve Jobs, 0:18:20.280 --> 0:18:24.640 Apple executives would make a series of really bad decisions 0:18:24.880 --> 0:18:28.480 that ultimately put the computer in jeopardy. Now I'm not 0:18:28.520 --> 0:18:31.280 going to go into detail because they aren't really relevant 0:18:31.320 --> 0:18:34.119 for this episode, except to say I'm sure that the 0:18:34.160 --> 0:18:38.080 brushes with bankruptcy shaped the company as a result and 0:18:38.119 --> 0:18:41.960 created a sort of steely resolve to reverse course. So 0:18:42.000 --> 0:18:45.920 Steve Jobs, who had left the company in nineteen five, 0:18:46.240 --> 0:18:49.359 would end up being called back to Apple a little 0:18:49.400 --> 0:18:53.879 more than a decade later in to act as something 0:18:53.920 --> 0:18:57.159 of a like a counselor or advisor, And before long 0:18:57.440 --> 0:19:00.919 he was able to regain control or if you prefer, 0:19:01.080 --> 0:19:05.600 rest control of the company, first as an interim CEO 0:19:05.720 --> 0:19:10.199 and then ultimately as the permanent CEO. Apple was in 0:19:10.320 --> 0:19:13.320 bad shape and Jobs was determined to fix it and 0:19:13.320 --> 0:19:15.560 then make sure the company would never be in such 0:19:15.600 --> 0:19:19.080 a precarious position again. I think it's fair to say 0:19:19.560 --> 0:19:22.720 he had a bit of a ruthless edge to him. 0:19:22.800 --> 0:19:26.679 He was also a remarkable salesman and always had been. 0:19:27.240 --> 0:19:31.960 While the course corrections helped improve Apple standing, what really 0:19:32.000 --> 0:19:34.919 turned things around for the company was the introduction of 0:19:34.960 --> 0:19:38.199 a little device that could play music files. This was 0:19:38.240 --> 0:19:42.040 called the iPod, and Jobs unveiled it on October twenty 0:19:42.119 --> 0:19:47.200 three one. Two years later, Apple would launch the iTunes store, 0:19:47.359 --> 0:19:52.480 and that would really be a transformative moment for the company. Now, 0:19:52.520 --> 0:19:55.639 the iPod helped Apple get a new foothold in the 0:19:55.680 --> 0:19:59.280 consumer market. The company would strengthen that over time with 0:19:59.359 --> 0:20:02.639 the introduction the iPhone and, to a lesser extent, the 0:20:02.640 --> 0:20:06.359 iPad and the eye Watch. But the iPod and iPhone 0:20:06.680 --> 0:20:11.280 were slam dunks or touchdowns or Grand Slam home runs 0:20:11.320 --> 0:20:14.200 or whatever impressive sports analogy you would like to use. 0:20:14.520 --> 0:20:19.119 That's what they were. They weren't just popular, they became iconic. Heck, 0:20:19.160 --> 0:20:22.919 the iPod didn't invent the MP three player, but it 0:20:23.240 --> 0:20:27.479 certainly defined the MP three player. We usually call shows 0:20:27.520 --> 0:20:31.359 like mine like tech stuff podcasts for a reason, and 0:20:31.400 --> 0:20:34.720 that reason is the Apple iPod. But I want to 0:20:34.720 --> 0:20:38.720 tell you guys an important fact. The iPod helped turn 0:20:38.760 --> 0:20:43.120 Apple around. The iPhone secured Apple's place as the company 0:20:43.160 --> 0:20:48.119 that makes status symbols that are esthetically appealing technology. Though 0:20:48.160 --> 0:20:50.400 I should also admit that the company was on that 0:20:50.440 --> 0:20:53.320 path already with the redesign of Mac computers and the 0:20:53.359 --> 0:20:56.800 evolution of the iPod. But one thing that would truly 0:20:56.880 --> 0:20:59.800 set Apple apart was the introduction of the iTunes store 0:21:00.000 --> 0:21:02.960 back in two thousand three. So the company had first 0:21:03.400 --> 0:21:06.880 made an iTunes program in two thousand one, but at 0:21:06.920 --> 0:21:10.600 that time, iTunes was really just about letting users rip 0:21:10.760 --> 0:21:13.199 music from their c d s and then load the 0:21:13.240 --> 0:21:16.840 files onto their iPods. In two thousand three, the company 0:21:16.840 --> 0:21:20.240 began to act as a sort of music retailer, offering 0:21:20.320 --> 0:21:24.080 up downloads of individual songs. And this was the start 0:21:24.160 --> 0:21:27.520 of a massive change in how the music industry had 0:21:27.560 --> 0:21:31.399 been working. And it would presage you like that word, 0:21:31.880 --> 0:21:35.040 the change in the video game industry by you know, 0:21:35.080 --> 0:21:38.520 like a decade. So since the introduction of the long 0:21:38.560 --> 0:21:42.639 playing album or LP record, companies have been marketing full 0:21:42.720 --> 0:21:46.040 albums as sort of the preferred product. Now you could 0:21:46.080 --> 0:21:49.199 go and buy a single, typically with a B side 0:21:49.400 --> 0:21:53.040 song attached to it, but that was less common and 0:21:53.359 --> 0:21:55.200 for those of you who have never dealt with music 0:21:55.320 --> 0:21:58.320 on a physical medium, an album is a collection of 0:21:58.359 --> 0:22:01.680 songs by a band or ourist, and a single is 0:22:01.720 --> 0:22:05.000 a particular song off an album. Usually it's one that 0:22:05.040 --> 0:22:07.960 the artist and the music label feels has a particularly 0:22:08.040 --> 0:22:10.840 catchy vibe to it. The goal of picking a single 0:22:10.920 --> 0:22:13.640 is to pick out the standout hit or hits from 0:22:13.640 --> 0:22:17.280 an album. In other words, but now Apple was allowing 0:22:17.280 --> 0:22:22.240 people to purchase not just albums, but individual songs. Sometimes 0:22:22.600 --> 0:22:25.840 your favorite song off an album might not be a single, 0:22:26.080 --> 0:22:28.880 which means you normally wouldn't be able to buy just 0:22:29.520 --> 0:22:32.160 that song. You would have to buy the whole album, 0:22:32.320 --> 0:22:35.320 And if it's the only one you like off that album, 0:22:35.440 --> 0:22:38.080 you might deliberate about whether or not it's worth it 0:22:38.160 --> 0:22:40.399 to purchase the whole thing or not. Why would you 0:22:40.440 --> 0:22:44.240 spend your money if you really just want one song. Now, 0:22:44.240 --> 0:22:47.919 at the time Apple was introducing the iTunes store, music 0:22:48.000 --> 0:22:51.520 piracy was running wild. People were using all sorts of 0:22:51.520 --> 0:22:55.679 different services to share music and download specific songs. For 0:22:55.800 --> 0:22:59.240 the music industry, Apple was helping solve a problem by 0:22:59.280 --> 0:23:03.399 guarantee quality and safety to things that were not a 0:23:03.480 --> 0:23:08.040 guarantee if you were, you know, using piracy, Apple could 0:23:08.080 --> 0:23:12.280 convince people to buy music rather than just share it illegally. 0:23:12.760 --> 0:23:15.359 If a song costs less than a dollar and you 0:23:15.440 --> 0:23:17.640 knew it was going to be really good audio quality, 0:23:17.880 --> 0:23:20.840 plus it wasn't going to infect your computer with a virus, 0:23:21.200 --> 0:23:23.919 you might just go and purchase it. In fact, a 0:23:23.920 --> 0:23:27.000 lot of research shows that piracy doesn't always come about 0:23:27.040 --> 0:23:29.520 because people just don't want to pay for stuff. It 0:23:29.720 --> 0:23:33.040 usually grows because people don't have options when it comes 0:23:33.080 --> 0:23:36.920 to buying the stuff they like. So if you provide options, 0:23:37.280 --> 0:23:41.080 you remove some of the motivation for piracy. Now, this 0:23:41.160 --> 0:23:44.600 gave the iTunes store a nice healthy amount of support 0:23:44.720 --> 0:23:48.840 early on, and in return, because iTunes was acting as 0:23:48.880 --> 0:23:52.640 a sort of retail store for this music, Apple would 0:23:52.640 --> 0:23:56.800 take a cut of the transaction. The music label would 0:23:56.800 --> 0:24:00.200 get most of the money, but Apple would pocket air 0:24:00.240 --> 0:24:04.280 percentage as well. And for music labels this wasn't that 0:24:04.440 --> 0:24:09.040 big of a roadblock. Producing music on physical media is expensive. 0:24:09.359 --> 0:24:12.720 You're dealing with actual materials like c d s or 0:24:12.760 --> 0:24:15.840 cassettes or vinyl or whatever. It is. You want to 0:24:15.880 --> 0:24:19.600 produce enough of that to meet consumer demand, but you 0:24:19.600 --> 0:24:22.320 also don't want to go overboard and make more copies 0:24:22.359 --> 0:24:24.359 than you can sell, because that's just a waste of 0:24:24.400 --> 0:24:27.719 money in space. You also have to store that stuff, 0:24:27.760 --> 0:24:30.240 and you have to ship it. In other words, there's 0:24:30.240 --> 0:24:34.639 a cost associated with actually producing and selling music on 0:24:34.800 --> 0:24:40.080 physical media. Going digital helped reduce or even remove a 0:24:40.080 --> 0:24:44.119 lot of those costs, lowering the overhead, and so even 0:24:44.160 --> 0:24:46.919 with Apple taking a cut, this looked like a pretty 0:24:46.920 --> 0:24:50.639 good deal. That deal would send a precedent, one that 0:24:50.800 --> 0:24:53.560 Apple would extend when it debuted the App Store for 0:24:53.600 --> 0:24:56.280 the iPhone in the summer of two thousand eight. The 0:24:56.359 --> 0:24:59.320 iPhone had come out the year before, and its launch 0:24:59.400 --> 0:25:03.480 had been an enormous hit. The media went bonkers over 0:25:03.520 --> 0:25:09.800 the introduction of the attractive, sleek, exciting smartphone called the iPhone. Now, 0:25:10.280 --> 0:25:12.919 Apple was introducing the world to a marketplace where you 0:25:12.920 --> 0:25:17.240 could download apps to enhance your phone experience. You might 0:25:17.440 --> 0:25:21.880 download games, or productivity apps, or lifestyle apps or whatever 0:25:22.240 --> 0:25:25.399 I mean you you know what apps are. Some of 0:25:25.440 --> 0:25:28.920 those apps were free, some of them cost money. Some 0:25:29.000 --> 0:25:33.000 included ways to make a purchase within the app. Itself. 0:25:33.640 --> 0:25:37.440 So for most apps that involved any sort of transaction, 0:25:37.720 --> 0:25:40.800 whether that was the purchase of the app itself or 0:25:40.840 --> 0:25:44.600 a transaction that happened within the app, Apple would take 0:25:44.640 --> 0:25:48.400 a cut because it was the facilitator, it was the 0:25:48.520 --> 0:25:52.560 retail space, the marketer, the support system, it was how 0:25:52.760 --> 0:25:56.080 people could get access to that software in the first place. 0:25:56.359 --> 0:26:00.240 So it took a thirty across the board cut for 0:26:00.359 --> 0:26:05.040 certain transactions. Now, if an app is subscription based, Apple 0:26:05.040 --> 0:26:11.120 would reduce that to upon the second year of a subscription, 0:26:11.520 --> 0:26:15.280 but that covers a much smaller percentage of apps. Also, 0:26:15.320 --> 0:26:18.480 I should point out that for some transactions, Apple does 0:26:18.560 --> 0:26:21.960 not take a cut. For example, a ride hailing app 0:26:22.040 --> 0:26:25.639 like Lift or Uber doesn't have to share of affair 0:26:25.720 --> 0:26:28.800 with Apple. Nor does a food delivery service have to 0:26:28.800 --> 0:26:32.000 give Apple a cut for every order made through the 0:26:32.080 --> 0:26:36.080 iPhone app on that food delivery service. But in many cases, 0:26:36.320 --> 0:26:40.200 for every dollar spent within an iPhone app, Apple gets 0:26:40.240 --> 0:26:42.960 thirty cents and the other seventy cents go to the 0:26:43.000 --> 0:26:46.600 app developer or you know, whatever entity owns the rights 0:26:46.640 --> 0:26:50.960 to that app. Apple services make up a pretty sizeable 0:26:51.119 --> 0:26:54.359 chunk of Apple's revenue. Now, it's not the biggest chunk. 0:26:54.640 --> 0:26:57.920 iPhone sales are still the king there. They can make 0:26:58.000 --> 0:27:03.480 up to around of all revenue for the company. That's impressive. However, 0:27:03.880 --> 0:27:07.520 revenue and profit are two different things. Revenue is how 0:27:07.600 --> 0:27:10.840 much money you bring in by selling stuff. Profit is 0:27:10.840 --> 0:27:13.480 how much money you have left over once you deduct 0:27:13.520 --> 0:27:17.320 the costs of producing and selling things, essentially the costs 0:27:17.359 --> 0:27:21.240 of business from the money that you brought in. So yeah, 0:27:21.359 --> 0:27:24.600 iPhone sales make up the lions share of revenue, but 0:27:24.720 --> 0:27:29.119 it still costs money to produce each iPhone, though not 0:27:29.320 --> 0:27:32.520 that much money compared to how much Apple sales them for. 0:27:32.720 --> 0:27:35.520 But that's another matter. Now. While I haven't seen the 0:27:35.560 --> 0:27:39.720 figures and I can't make any definitive statements, I feel 0:27:39.800 --> 0:27:43.480 fairly confident that the profit margin on Apple's App store 0:27:44.080 --> 0:27:48.359 is much better than its iPhone sales. The more apps 0:27:48.400 --> 0:27:52.120 that join with in app transactions, the more money Apple 0:27:52.240 --> 0:27:56.240 collects as a result. Oh and there's one other important 0:27:56.240 --> 0:27:59.840 element to this. Apple only allows users to get iPhone 0:27:59.880 --> 0:28:03.520 apps through the Apple Store. That means, if you want 0:28:03.560 --> 0:28:06.680 to run an app on your iPhone and you don't 0:28:06.680 --> 0:28:08.480 want to go through the trouble figuring out how to 0:28:08.640 --> 0:28:12.160 hack your phone. So you can sideload apps, you have 0:28:12.280 --> 0:28:15.000 to go through the official app store. There is no 0:28:15.080 --> 0:28:18.480 other game in town. So any company that wants to 0:28:18.520 --> 0:28:21.199 make apps for iPhones, and there are a lot of 0:28:21.200 --> 0:28:24.840 companies that do, they have to play ball with Apple. 0:28:25.600 --> 0:28:29.800 Most companies just deal with this, partly because iPhone users 0:28:29.840 --> 0:28:33.520 tend to spend more money on apps than other smartphone 0:28:33.600 --> 0:28:37.879 users do. Numerous analysts have estimated that when it comes 0:28:37.920 --> 0:28:42.600 to consumers spending money on or within an app, more 0:28:42.640 --> 0:28:45.960 than six of the dollars spent on apps are going 0:28:46.040 --> 0:28:50.480 to io S app transactions, in other words, Apple transactions. 0:28:51.000 --> 0:28:54.840 Now that's particularly amazing because while the iPhone is popular, 0:28:55.280 --> 0:28:59.840 Android phones outnumber them in the world by a huge amount. 0:29:00.120 --> 0:29:02.880 Way more people have an Android phone than an iPhone. 0:29:03.520 --> 0:29:07.920 But we're seeing more people spend money through the iOS 0:29:08.000 --> 0:29:11.640 ecosystem than through the Android ecosystem. So while we've got 0:29:11.680 --> 0:29:14.800 way more Android apps out there in the wild, we 0:29:14.840 --> 0:29:17.840 don't have a lot of people spending money on apps 0:29:17.960 --> 0:29:21.600 through Android, not compared to Apple. So this means if 0:29:21.600 --> 0:29:24.480 you're a developer and if you want to make money 0:29:24.520 --> 0:29:28.000 off of the app you're developing, chances are you're going 0:29:28.040 --> 0:29:31.160 to want to make something specifically for Apple. It just 0:29:31.520 --> 0:29:36.120 makes business sense anyway. Developers have to submit apps to 0:29:36.200 --> 0:29:39.240 Apple for approval before it will be featured in the store. 0:29:39.600 --> 0:29:42.640 And note from Jonathan in the past, that was a 0:29:42.640 --> 0:29:45.280 lot of app noises all at once. I hope future 0:29:45.360 --> 0:29:48.360 Jonathan can say them without stumbling. I like it when 0:29:48.400 --> 0:29:52.440 I leave notes to myself. Developers also agree to keep 0:29:52.600 --> 0:29:56.760 in app transactions within the Apple ecosystem as well, meaning 0:29:56.880 --> 0:30:00.240 you can't sneakly do an out of app d le 0:30:00.400 --> 0:30:04.920 or a direct payment option and change things within the 0:30:04.960 --> 0:30:07.960 app that is running on iOS. You can't do that. 0:30:08.040 --> 0:30:10.200 You're not allowed to. You have to do it through Apple. 0:30:10.800 --> 0:30:14.200 So we've got Fortnite, a game that makes its money 0:30:14.200 --> 0:30:17.840 primarily through in game purchases, and we've got Apple, a 0:30:17.880 --> 0:30:21.320 game that generates revenue largely by taking a cut from 0:30:21.480 --> 0:30:24.480 an app purchases. I bet you can see where I'm 0:30:24.520 --> 0:30:29.080 going here. Epic Games decided to pick a fight with Apple, 0:30:29.280 --> 0:30:32.800 and this fight also extended to Google, but we'll cover 0:30:32.920 --> 0:30:35.400 that as well. And this is not an opinion. This 0:30:35.480 --> 0:30:39.000 is based on the timing of events that the company 0:30:39.040 --> 0:30:42.400 had clearly anticipated what was going to unfold. And I 0:30:42.440 --> 0:30:44.920 think Epic is counting on other companies to join in 0:30:44.960 --> 0:30:48.800 the fight at some point to protest apples cut. But 0:30:48.920 --> 0:30:54.600 here's how it played out. On August, Epic announced a 0:30:54.720 --> 0:30:58.520 change in the price of v bucks v as in Victory. 0:30:58.560 --> 0:31:01.240 That's the in game current and see for Fortnite, so 0:31:01.400 --> 0:31:04.760 you can give it as a virtual currency, so players 0:31:04.760 --> 0:31:08.480 will purchase v bucks with real cash, then they can 0:31:08.520 --> 0:31:12.120 spend the v bucks in the game itself on whatever 0:31:12.160 --> 0:31:16.719 they want. Epic called the change of price a mega drop, 0:31:17.120 --> 0:31:20.440 and announced that in game purchases would now cost twenty 0:31:20.520 --> 0:31:24.440 percent less than they had previously, So if you played 0:31:24.480 --> 0:31:27.720 Fortnite on PC or on a game console, you would 0:31:27.760 --> 0:31:30.640 see those prices reflected within the game itself. Whenever you 0:31:30.640 --> 0:31:32.800 went to make a purchase, you would see it at 0:31:33.000 --> 0:31:36.719 seven dollars nine cents for a thousand V bucks instead 0:31:36.800 --> 0:31:41.000 of nine dollars and cents. But for mobile it was 0:31:41.000 --> 0:31:45.040 a different story. Playing the game on either an iOS 0:31:45.160 --> 0:31:47.840 or Android device would mean that when you went to 0:31:47.880 --> 0:31:50.880 purchase v bucks, you would be presented with a choice. 0:31:51.240 --> 0:31:54.440 One choice was to purchase the virtual currency through the 0:31:54.520 --> 0:31:59.440 official Approved App Store or Google Play Store route, and 0:31:59.480 --> 0:32:02.600 that would also mean having to pay the older higher 0:32:02.680 --> 0:32:06.760 price of nine dollars and cents to get that tent 0:32:07.600 --> 0:32:11.520 marked down. You could make a direct purchase from the 0:32:11.560 --> 0:32:15.680 Epic Games Store by passing the app Store transaction in 0:32:15.720 --> 0:32:20.560 the process, so gamers would get that reduced price. But 0:32:20.760 --> 0:32:23.680 while the gamers might save some money on a transaction, 0:32:24.000 --> 0:32:27.040 there was a much bigger price to be paid. More 0:32:27.080 --> 0:32:30.640 on that in a second, but first let's take another 0:32:30.720 --> 0:32:42.560 quick break. Epic sidestepping the in app purchase part of 0:32:42.600 --> 0:32:46.880 having Fortnite run on iOS and on Android was a 0:32:47.000 --> 0:32:51.040 big no no, because that deal is codified. If you 0:32:51.120 --> 0:32:55.320 submit an app to iOS or Android, you're doing so 0:32:55.640 --> 0:33:02.480 with the understanding and the express agreement that you are 0:33:02.080 --> 0:33:05.400 on board with the conditions of that deal. And one 0:33:05.440 --> 0:33:10.320 of those conditions is that cut going to Apple or Google. 0:33:10.400 --> 0:33:13.200 I'll just keep talking about Apple because that's really what 0:33:13.320 --> 0:33:15.680 most of the attention is on, but just know that 0:33:15.720 --> 0:33:18.600 a lot of this applies to Google as well. Apple 0:33:18.680 --> 0:33:23.040 responded by removing Fortnite from their app store. Google did 0:33:23.080 --> 0:33:27.440 the same. Apple's official response was that Epic had flagrantly 0:33:27.600 --> 0:33:30.920 broken the rules that everyone had agreed to play by, 0:33:31.200 --> 0:33:34.000 and that they didn't even do it by accident, and 0:33:34.080 --> 0:33:37.200 Epic definitely did do it on purpose. The company released 0:33:37.240 --> 0:33:41.000 a statement that said, currently there are no savings if 0:33:41.040 --> 0:33:44.800 players use Apple and Google payment options, where Apple and 0:33:44.840 --> 0:33:49.600 Google collect an exorbitant fee on all payments. If Apple 0:33:49.640 --> 0:33:52.880 and Google lower their fees on payments, Epic will pass 0:33:53.040 --> 0:33:57.520 along the savings to players end quote. Epic also argued 0:33:57.560 --> 0:34:01.800 that Apple isn't consistent when it comes to applying that fee, 0:34:02.120 --> 0:34:05.120 and pointed out the exceptions like the right hailing companies 0:34:05.160 --> 0:34:09.080 I mentioned earlier, or food delivery services or Amazon purchases. 0:34:09.600 --> 0:34:12.359 So Epic was saying, hey, if these apps can use 0:34:12.440 --> 0:34:16.360 direct payments and not go through the Apple payment process, 0:34:16.920 --> 0:34:21.160 why can't games? Why are you holding us to a 0:34:21.200 --> 0:34:26.319 different standard than these companies? So Apple booted Fortnite from 0:34:26.360 --> 0:34:30.080 the App store, and then Epic filed a lawsuit against 0:34:30.120 --> 0:34:33.880 Apple and launched a media campaign to inspire support for 0:34:33.920 --> 0:34:38.920 its argument among the public and probably among other companies. Now, 0:34:38.960 --> 0:34:40.799 the fact that it was ready to go with all 0:34:40.840 --> 0:34:43.920 of this pretty much proves that Epic knew exactly what 0:34:43.960 --> 0:34:46.880 the consequences were going to be for their actions, and 0:34:46.920 --> 0:34:50.400 in fact, we're counting on it. The lawsuit argues that 0:34:50.440 --> 0:34:54.239 Apple has a monopoly over all iPhone apps because the 0:34:54.280 --> 0:34:57.680 company doesn't allow users to load apps from any source 0:34:57.840 --> 0:35:02.560 other than the Apple Store. Because Apple has this cut 0:35:02.600 --> 0:35:07.160 requirement on some but not all app transactions, Epic argues 0:35:07.239 --> 0:35:11.040 that Apple is engaging in unfair business practices. As for 0:35:11.080 --> 0:35:15.279 the marketing side, Epic got pretty darn cheeky with that. 0:35:15.880 --> 0:35:19.480 They created a parody of an iconic Apple ad. So 0:35:19.719 --> 0:35:23.160 let's do a quick story about that. Back when Apple 0:35:23.440 --> 0:35:27.279 was getting ready to unveil the new Macintosh computer in 0:35:27.320 --> 0:35:30.520 the early eighties, the company was determined to make a 0:35:30.600 --> 0:35:33.960 really big splash and cut through the dominant position that 0:35:34.080 --> 0:35:38.840 was then held by IBM. Apple had done well in 0:35:38.880 --> 0:35:41.840 the personal computer market with the Apple two series, but 0:35:42.000 --> 0:35:47.480 IBM absolutely dominated when it came to office computers. If 0:35:47.480 --> 0:35:50.600 you wanted a machine for productivity and doing you know, 0:35:50.920 --> 0:35:55.400 business e type stuff, you wanted an IBM computer. Plus, 0:35:55.680 --> 0:35:59.040 IBM had been getting into the personal computer market as well, 0:35:59.080 --> 0:36:02.279 and appley to tell the world that the Macintosh was 0:36:02.320 --> 0:36:06.160 a fundamentally different type of computer, one with a graphic 0:36:06.239 --> 0:36:09.880 user interface or gooey and features that the button down 0:36:09.920 --> 0:36:15.040 IBM computers just didn't support. Apple hired on a marketing campaign, 0:36:15.520 --> 0:36:18.560 and that campaign got hold of Ridley Scott, the film 0:36:18.600 --> 0:36:22.840 director who directed the commercial. In the commercial, dozens of 0:36:22.880 --> 0:36:27.239 people in sort of gray colorless outfits shamble into a 0:36:27.360 --> 0:36:30.120 room and are seated in a dark theater to watch 0:36:30.160 --> 0:36:34.319 a big Brother like figure spelled propaganda at them on 0:36:34.360 --> 0:36:38.439 an enormous screen. And then an athletic woman runs into 0:36:38.480 --> 0:36:42.200 the room and she hurls an enormous hammer that flies 0:36:42.239 --> 0:36:44.439 at the screen and destroys it, just as the Big 0:36:44.480 --> 0:36:48.840 Brother figure is, you know, ranting about tyrannical ideologies. And 0:36:48.880 --> 0:36:51.600 the implication was there that Apple was on a mission 0:36:51.640 --> 0:36:55.160 to offer a real alternative, to prove that the IBM 0:36:55.200 --> 0:36:58.600 way of doing things wasn't the only way to do it. 0:36:59.000 --> 0:37:01.880 And it was a really effective commercial, one of the 0:37:01.880 --> 0:37:05.920 most famous commercials of all time. Epic Games produced a 0:37:05.960 --> 0:37:09.200 parody of this. They actually showed it within the game itself, 0:37:09.200 --> 0:37:12.520 but they also released it to other video platforms, and 0:37:12.560 --> 0:37:16.880 they used computer generated Fortnite characters to replicate the whole sequence, 0:37:17.200 --> 0:37:20.880 except this time, the Big Brother figure wasn't IBM, the 0:37:20.920 --> 0:37:24.200 Big Brother figure was Apple, and the woman throwing the 0:37:24.239 --> 0:37:29.080 hammer would represent Plucky Little Fortnite. The video game that 0:37:29.239 --> 0:37:36.799 could plucky little global phenomenon billion dollar game Fortnite, And 0:37:36.840 --> 0:37:39.759 now the message was that Apple was being the tyrannical 0:37:39.800 --> 0:37:44.080 one by demanding this cut. If not for Apple, Epic 0:37:44.120 --> 0:37:46.799 Games was saying companies would be able to price things 0:37:46.880 --> 0:37:49.760 at a more affordable level for users because they wouldn't 0:37:49.800 --> 0:37:52.560 have to build in and a mark up to deal 0:37:52.600 --> 0:37:56.560 with Apple's cut. Big bad Apple's cut meant companies had 0:37:56.600 --> 0:37:59.279 to charge more for stuff in order to make money. Now, 0:37:59.360 --> 0:38:02.279 I admit I'm being a little snarky, you know, I'm 0:38:02.280 --> 0:38:06.040 definitely editorializing a little here, But mostly I want to 0:38:06.080 --> 0:38:11.400 state that from my perspective, nobody is looking particularly rosy 0:38:11.560 --> 0:38:14.600 in this situation, and it's about to get a lot worse. 0:38:15.239 --> 0:38:18.920 I think the industry's general approach to charging off the 0:38:18.960 --> 0:38:23.400 top is flirting with collusion, because it's not that just 0:38:23.480 --> 0:38:25.920 Apple that's doing it. Lots of companies are doing this 0:38:26.000 --> 0:38:29.600 sort of thing. Not that companies have necessarily all tacitly 0:38:29.760 --> 0:38:32.640 agreed that this is the way to do it, but 0:38:32.840 --> 0:38:37.600 effectively it means there's no real competition here. Plus with Apple, 0:38:37.760 --> 0:38:41.239 you could argue that from a pure ecosystem, there's no 0:38:41.280 --> 0:38:43.359 way to compete at all. You have to go through 0:38:43.400 --> 0:38:47.400 the Apple Store to have your game work on iOS, 0:38:47.480 --> 0:38:50.200 so there is no other option. If you take a 0:38:50.200 --> 0:38:52.600 step back, you can say, yeah, but you could just 0:38:52.680 --> 0:38:56.359 develop games for other platforms and leave iPhone alone. And 0:38:56.400 --> 0:38:59.120 that is true. So I guess it really just depends 0:38:59.160 --> 0:39:02.520 on your point of view. You thank you, Obi Wan Kenobi. 0:39:03.120 --> 0:39:08.080 But things escalated beyond Apple pulling Fortnite from the App Store. 0:39:08.320 --> 0:39:12.080 The company subsequently said that unless Epic Games reverse the 0:39:12.120 --> 0:39:16.320 move to offer direct payments, Apple would remove all support 0:39:16.520 --> 0:39:20.560 for Epic Tools in the App Store for developers, not 0:39:20.680 --> 0:39:24.680 just for iOS. That would mean that Epic would no 0:39:24.760 --> 0:39:27.839 longer be able to update anything that was running on 0:39:27.960 --> 0:39:32.279 iOS or the Mac operating system, and that includes the 0:39:32.480 --> 0:39:37.240 Unreal Game Engine. Now this is where things get really nasty. 0:39:37.600 --> 0:39:40.480 I'll quote the statement from Apple which says Epic wouldn't 0:39:40.480 --> 0:39:44.520 be able to perform any quote engineering efforts to improve 0:39:44.640 --> 0:39:49.160 hardware and software performance of Unreal Engine on Mac and iOS. Hardware, 0:39:49.520 --> 0:39:53.520 optimize Unreal Engine on the Mac for creative workflows, virtual 0:39:53.600 --> 0:39:57.080 sets and their c I slash build systems, and adoption 0:39:57.120 --> 0:40:00.480 and support of art Kit features and future or VR 0:40:00.560 --> 0:40:05.160 features into Unreal Engine by their XR teams end quote. Now, 0:40:05.200 --> 0:40:10.000 as I mentioned earlier, hundreds of games rely on the 0:40:10.080 --> 0:40:13.040 Unreal Game Engine, not just those from Epic but from 0:40:13.040 --> 0:40:16.520 other companies as well. So if a company developed a 0:40:16.560 --> 0:40:20.840 game that relied upon the Unreal Engine and they wanted 0:40:20.880 --> 0:40:25.520 to market it on iOS or on the Mac operating system, 0:40:25.600 --> 0:40:28.959 that game would no longer receive any engine updates because 0:40:29.000 --> 0:40:31.919 Apple would have cut off that capability, and that would 0:40:31.960 --> 0:40:35.759 cause an enormous disruption among game companies and could force 0:40:35.800 --> 0:40:38.480 developers who are working on new games to choose a 0:40:38.480 --> 0:40:40.959 totally different game engine when they're building out their games 0:40:40.960 --> 0:40:44.799 in the future, because it would mean that a large 0:40:44.840 --> 0:40:49.080 market for their game would be cut off automatically if 0:40:49.120 --> 0:40:52.800 they used the Unreal Engine. That would be an enormous 0:40:52.840 --> 0:40:56.000 blow to Epic Games as revenue as well, because the 0:40:56.000 --> 0:40:58.960 company makes a lot of money off of other developers 0:40:59.080 --> 0:41:03.040 licensing the Unreal game Engine. I think Apple making that 0:41:03.080 --> 0:41:06.839 move is kind of stupid, you know what. No, No, 0:41:06.920 --> 0:41:11.799 not kind of I think that move is monumentally stupid. Now, 0:41:11.800 --> 0:41:15.200 the reason I think it's stupid is because it appears 0:41:15.239 --> 0:41:18.520 to prove the point that Epic Games claims it is 0:41:18.560 --> 0:41:22.600 making that Apple can and does act like a monopoly, 0:41:23.200 --> 0:41:27.160 because it's very hard to not interpret Apple's move as 0:41:27.400 --> 0:41:32.520 extortion or retaliation, applying brutal leverage against Epic Games to 0:41:32.600 --> 0:41:36.840 force it to comply with Apple's standards. Now, yes, Epic 0:41:36.880 --> 0:41:40.799 Games agreed to those standards just through the process of 0:41:40.880 --> 0:41:44.160 submitting Fortnite to the iOS store in the first place, 0:41:44.400 --> 0:41:50.040 So Epic is not innocent here. They did violate that agreement. However, 0:41:50.320 --> 0:41:53.480 the retaliation and the impact of that retaliation, and the 0:41:53.520 --> 0:41:57.120 implication that Apple could do serious harm to Epic Games 0:41:57.120 --> 0:41:59.960 as business, as well as the business of unrelated companies, 0:42:00.239 --> 0:42:03.960 all that seems to lend credence to Epics argument that 0:42:04.000 --> 0:42:08.200 Apple is imposing its will on other companies. Now, it's 0:42:08.200 --> 0:42:10.920 one thing to remove an app that's in violation of 0:42:10.960 --> 0:42:14.839 the agreed upon policy. To me, that seems like it's 0:42:15.000 --> 0:42:17.920 pretty clearly on the up and up. But then to 0:42:18.000 --> 0:42:21.960 go further and remove all support for Epics products feels 0:42:21.960 --> 0:42:25.400 extreme to me, particularly since this has a cascading effect 0:42:25.520 --> 0:42:28.799 on other companies that did nothing wrong. All those other 0:42:28.840 --> 0:42:32.400 companies did was license a game engine that powers their games. 0:42:32.719 --> 0:42:35.720 So is it fair to make this kind of change 0:42:35.840 --> 0:42:38.200 one that's going to have a negative impact on third 0:42:38.239 --> 0:42:40.640 parties that had nothing to do with the dispute in 0:42:40.640 --> 0:42:44.160 the first place. I think epics experience in launching the 0:42:44.160 --> 0:42:47.880 game Store, which itself was a response to valves Steam 0:42:47.960 --> 0:42:51.520 store policies, gave the company the courage to try and 0:42:51.640 --> 0:42:55.360 launch this battle against Apple and to a lesser extent, Google. 0:42:55.960 --> 0:42:59.760 Seeing the escalation is more than a little bit worrying. 0:43:00.239 --> 0:43:02.960 And while the matter is going to the court system 0:43:03.080 --> 0:43:06.400 thanks to the lawsuits, we're going to have to wait 0:43:06.440 --> 0:43:09.839 a while for that to play out because you know, 0:43:10.120 --> 0:43:12.880 we know, the legal system moves at a let's call 0:43:12.920 --> 0:43:16.719 it a leisurely pace compared to the worlds of technology 0:43:16.760 --> 0:43:20.239 and business, so it might be a while before the 0:43:20.320 --> 0:43:23.719 law is able to really wade in into this now. 0:43:23.719 --> 0:43:26.279 My bet is that Epic is hoping that the more 0:43:26.360 --> 0:43:29.960 recent focus on companies like Apple and Google when it 0:43:30.000 --> 0:43:35.160 comes to antitrust issues will provide political pressure so that 0:43:35.520 --> 0:43:40.919 the companies can negotiate that cut, or somehow Epic can 0:43:40.960 --> 0:43:44.800 force Apple to allow for more direct pay options. Honestly, 0:43:44.920 --> 0:43:48.120 don't know how that's going to go for Epic. Apple 0:43:48.280 --> 0:43:52.880 is a huge and incredibly wealthy company, and it didn't 0:43:52.920 --> 0:43:57.480 get wealthy by capitulating to other companies. I don't think 0:43:57.520 --> 0:44:02.240 there's necessarily a hero in this story, because it really 0:44:02.280 --> 0:44:05.600 just comes down to money. I think Apple has behaved 0:44:05.600 --> 0:44:09.160 in ways that are anti competitive, but when it comes 0:44:09.200 --> 0:44:13.640 to cut that has become fairly standard and digital stores 0:44:13.760 --> 0:44:16.439 across the board, So it's not like Apple is being 0:44:16.760 --> 0:44:21.040 you know, greedier than anybody else's. And granted it is 0:44:21.080 --> 0:44:24.560 not always the case. Epic itself has set itself apart 0:44:24.640 --> 0:44:28.360 by taking smaller cuts of transactions in the Epic Game Store, 0:44:28.920 --> 0:44:31.920 but I don't know that you can argue that Apple 0:44:32.040 --> 0:44:35.000 stands out as being particularly evil because of this policy. 0:44:35.080 --> 0:44:39.000 Lots of digital stores have the exact same policy. Now, 0:44:39.000 --> 0:44:41.200 the fact that you can only get apps on an 0:44:41.239 --> 0:44:45.080 iPhone through the App Store without hacking your phone, that is, 0:44:45.520 --> 0:44:47.759 does make it a little more tricky because there's nowhere 0:44:47.800 --> 0:44:50.120 else to go when it comes to the iPhone, So 0:44:50.160 --> 0:44:53.839 I guess that does set it apart. In fact, this 0:44:53.920 --> 0:44:57.240 is one of the ways that things branch between Apple 0:44:57.280 --> 0:44:59.960 and Google. You can only get apps for the iPhone 0:45:00.320 --> 0:45:04.319 through the Apple App Store, but Android devices support a 0:45:04.320 --> 0:45:06.640 couple of different ways you can get stuff you can 0:45:06.719 --> 0:45:09.040 sideload stuff that's not from the Google Play Store. It 0:45:09.040 --> 0:45:11.480 requires you to change some settings on your phone, but 0:45:11.520 --> 0:45:14.600 you can totally do it, and Android users can download 0:45:14.640 --> 0:45:19.040 Fortnite onto an Android device directly from Epics app launcher. 0:45:19.760 --> 0:45:22.799 Google removed Fortnite from the Play Store itself, so you 0:45:22.840 --> 0:45:26.000 can't just download the app directly through Google Play. But 0:45:26.120 --> 0:45:29.120 you can still get Fortnite on an Android device, and 0:45:29.160 --> 0:45:31.560 you can still run it without a problem, you just 0:45:31.640 --> 0:45:34.720 can't go through the Play Store to do it. Google, 0:45:35.000 --> 0:45:38.280 like Apple, said that they removed the game because epics 0:45:38.320 --> 0:45:43.520 decision to offer direct pay violated store policy. But unlike Apple, 0:45:43.760 --> 0:45:47.040 Google hasn't gone all angry crime lord boss with threats 0:45:47.040 --> 0:45:49.719 about Epics tools set and saying like I want the 0:45:49.760 --> 0:45:53.080 app dead, I want the unreal engine dead, I want 0:45:53.120 --> 0:45:57.160 those s d gys in the ground. They haven't done 0:45:57.200 --> 0:46:02.920 that recently. Apples EO. Tim Cook appeared before Congress and 0:46:02.960 --> 0:46:06.960 he was asked by Representative Hank Johnson, who coincidently represents 0:46:07.000 --> 0:46:10.480 my state of Georgia if the company had ever quote 0:46:10.719 --> 0:46:15.000 retaliated against or disadvantaged a developer who went public with 0:46:15.040 --> 0:46:19.160 their frustrations with the app store end quote Cook's response was, 0:46:19.280 --> 0:46:23.719 quote sir, we do not retaliate or bully people. It's 0:46:23.719 --> 0:46:29.160 strongly against our company culture. End quote. I'm not certain 0:46:29.200 --> 0:46:32.920 how well that would go over today as the Epic 0:46:33.080 --> 0:46:36.960 versus Apple saga has been unfolding again. Not to say 0:46:37.000 --> 0:46:40.319 that Epic is without blame here, but the decision to 0:46:40.360 --> 0:46:44.239 remove Epics access to developer tools for iOS and mac 0:46:44.320 --> 0:46:49.799 os seems like retaliation and bullying to me. Removing Fortnite 0:46:49.840 --> 0:46:53.200 makes perfect sense. I mean, that was the the app 0:46:53.280 --> 0:46:57.080 that violated the policy. That makes sense to me. Removing 0:46:57.120 --> 0:47:00.600 Epics ability to develop for iOS and mac os entirely, 0:47:00.680 --> 0:47:05.239 thus impacting Epic and numerous other companies economically, that one, 0:47:05.280 --> 0:47:08.239 I think is harder to support. As I record this, 0:47:08.719 --> 0:47:11.600 we're in the very early stages of this particular fight 0:47:12.080 --> 0:47:14.120 at the moment, I think it's safe to say that 0:47:14.160 --> 0:47:16.760 the US government has a few irons in the fire 0:47:16.880 --> 0:47:20.319 right now that need tending to plus an election coming up, 0:47:20.600 --> 0:47:23.120 so I wouldn't be surprised if it takes a little 0:47:23.120 --> 0:47:25.600 bit of time to get around to taking another really 0:47:25.680 --> 0:47:29.800 hard look at allegations of you know, monopoly practices or 0:47:29.840 --> 0:47:33.680 anti competitive behaviors in the tech space. But it's clearly 0:47:33.760 --> 0:47:37.160 something that has become a growing concern and government as 0:47:37.200 --> 0:47:41.360 more practices in the tech space are held up to scrutiny. 0:47:41.480 --> 0:47:44.280 Now this gets complicated by the fact that Silicon Valley 0:47:44.320 --> 0:47:48.320 pours a lot of money. I almost used a different 0:47:48.719 --> 0:47:52.160 phrase that is not you know, family friendly, but a 0:47:52.239 --> 0:47:56.960 lot of money into lobbyists and campaign contributions. And thus 0:47:56.960 --> 0:48:00.200 Silicon Valley has a large amount of influence when it 0:48:00.239 --> 0:48:03.000 comes to US politics. But I expect we're going to 0:48:03.080 --> 0:48:07.480 see more shifting as governments feel pressure to regulate or 0:48:07.600 --> 0:48:11.759 break up or otherwise intervene in business practices in the 0:48:11.800 --> 0:48:15.960 tech space. Meanwhile, Fortnite players who play on iPhone or 0:48:16.040 --> 0:48:18.800 Mac are likely watching all of this with a little 0:48:18.800 --> 0:48:22.680 bit of stress and probably makes doing that flossing dance 0:48:22.719 --> 0:48:26.800 a lot harder. But to be less flippant, it really 0:48:26.880 --> 0:48:30.040 is a shame that they are caught in the middle 0:48:30.040 --> 0:48:34.000 of all this, That those players are stuck as these 0:48:34.040 --> 0:48:37.520 two giant companies battle it out. They just want to 0:48:37.520 --> 0:48:41.000 play a game that they enjoy, and they don't really 0:48:41.360 --> 0:48:46.359 have any options as far as having an impact on this. 0:48:46.760 --> 0:48:49.840 They can perhaps shift to playing it on a different platform, 0:48:49.880 --> 0:48:53.239 but not everyone has that, you know, luxury. So I 0:48:53.680 --> 0:48:56.960 really do feel for Fortnite players, even though I personally 0:48:57.040 --> 0:49:01.240 don't like playing Fortnite because I'm old and I don't 0:49:01.280 --> 0:49:06.000 do well at it and it confuses me. But I 0:49:06.080 --> 0:49:08.799 hope that things get resolved, that the players are able 0:49:08.800 --> 0:49:11.200 to play the games they want, and that we're able 0:49:11.239 --> 0:49:14.600 to take a good hard look at how these companies 0:49:15.080 --> 0:49:18.480 generate revenue, how they price things, and really come to 0:49:18.719 --> 0:49:23.120 a good conclusion that works out best for all parties involved, 0:49:23.200 --> 0:49:28.880 including us the consumers. I am skeptical that that will happen, 0:49:29.280 --> 0:49:33.359 but I'm hopeful. I hope you enjoyed that rerun of 0:49:33.800 --> 0:49:36.759 an episode from just a couple of years ago. And 0:49:36.800 --> 0:49:40.279 obviously in those two years that have followed, we've seen 0:49:40.440 --> 0:49:45.520 more pushback against Apple. We've seen Apple resist those regulations 0:49:45.560 --> 0:49:48.920 that have been placed around the world, and the story 0:49:49.080 --> 0:49:51.120 is far from over, so I'm sure we'll do a 0:49:51.160 --> 0:49:53.759 follow up in the future. If you have suggestions for 0:49:53.800 --> 0:49:56.680 topics I should cover on tech Stuff, please reach out 0:49:56.719 --> 0:49:59.080 to me. You can do so on Twitter the handle 0:49:59.120 --> 0:50:01.160 for the show is tech Stuff h s W, or 0:50:01.560 --> 0:50:04.560 you can leave me a talkback message on the I 0:50:04.719 --> 0:50:08.840 Heart radio app. Just go to the text Stuff entry 0:50:08.960 --> 0:50:11.440 in the I heart Radio app. There's a little microphone 0:50:11.640 --> 0:50:14.000 icon in there. You click on that you can leave 0:50:14.000 --> 0:50:16.239 a voice message up to thirty seconds. Remember let me 0:50:16.280 --> 0:50:18.520 know if you want me to use the voice message 0:50:18.840 --> 0:50:21.400 in a future episode, and I'll talk to you again 0:50:22.120 --> 0:50:30.680 really soon. Y text Stuff is an I heart Radio production. 0:50:30.920 --> 0:50:33.719 For more podcasts from I Heart Radio, visit the i 0:50:33.840 --> 0:50:37.080 heart Radio app, Apple Podcasts, or wherever you listen to 0:50:37.120 --> 0:50:38.000 your favorite shows.