Thus far, the Epic vs. Apple case has been anything but Epic. I wrote a much more expansive Op-Ed in Fast Company sharing more of my thoughts on the case and the main arguments, but there is a more nuanced element I want to bring out.
As I pointed out in my Fast Company article, Epic is not the best candidate to bring this complaint against Apple. I say that because it is tough to argue that game distribution channels have no competition. This paragraph from my article is the one I want to focus on today.
Another challenge I see in Epic’s overall stance is it has singled out Apple amidst all the other game stores that charge similar 30% commissions and have many, if not all, of the same regulations as Apple. Epic has gone into battle with Apple while still willfully participating in all other game stores from Nintendo, Sony Playstation, Microsoft Xbox, and others. The other particularly curious part of Epic’s stance is that it makes more money from these other game stores than it does from Apple’s, yet it attacks Apple’s marketplace and not the others.
When pressed on this, Epic executives, including CEO Tim Sweeney, stated that consoles are generally sold at a loss or break-even and recoup their costs through the commission they collect. Epic is insinuating they are sympathetic to consoles because of this business model, but not sympathetic to Apple for their business model of making money on the hardware and the App Store itself. The latter is a claim they can’t prove, but they are using the argument anyway. I find this reasoning perplexing that Epic is more supportive of giving a commission to consoles simply because their business model is to sell hardware at a subsidized rate and then recoup those costs via commission on software sales.
With this stance of Epic more supportive of hardware sold at a loss angle in mind, the true breakdown comes when we understand Epic’s end game. Epic is seeking a total change to all stores, not just Apple’s App Store, that will allow them to bypass the stores entirely. If Epic wins this case against Apple, I see no reason they don’t force the other games stores (XBOX, Playstation, Switch, Steam, etc.) to comply with similar rules letting game developers bypass stores and offer store within a store, where Epic is under no obligation to give a commission.
In this scenario, if Epic forces this change to all game stores, including the console game stores, Epic would not be the only developer/publisher who will want to go to lengths to avoid giving a commission. In the end, this will ultimately hurt console hardware the most because they don’t make money on the hardware. The business model Epic says they are sympathetic to becomes nearly impossible if most game devs and publishers bypass their stores. The result would inevitably be a higher cost of console hardware that could kill the console category.
I make this point to highlight the often common issue of antitrust regulations having unintended consequences that lead to higher prices somewhere in the value chain. The intended result of any such antitrust remedies is to keep costs from rising, especially for consumers. However, should console game stores be forced to take less commission on game sales or have their commission bypassed entirely then, there is no way the result is not higher prices of console hardware.
The irony of this scenario is not lost on me. The console subsidized hardware business model Epic says they support in sharing commission will go away when game publishers no longer have to share a commission with said console makers.