Epic Games and Apple, having a slapfight.

[garote]

Epic Games wants to be able to distribute their software onto iPhones, and entice people into giving them money for usage of that software on iPhones, without paying anything to Apple in the process, except a microscopic (to them) yearly developer fee. You could call it "cutting out the middle-man", except that in this case the "middle-man" is the entity selling and maintaining the entire platform.

Well, if they wanted an alternative distribution channel, they could have one right now! Here's what they can do:

Hand out the source code for Fortnite, and let end-users compile it themselves in Xcode, sign it, and then side-load it onto their own devices. It would take several days of work and an Xcode developer license for every single Fortnite iOS player, but it could be done. There's your "app store alternative". I'm pretty sure it doesn't technically violate any Apple license terms.

And it makes sense, really. If you make money off the payment channel built into the software, like Epic does, the best way to make it secure is to open-source it and have John Q. White-Hat hammer at it for a few years, exposing all the flaws. Meanwhile Apple doesn't need to host your data files, vet your API usage, scan your code for malware, do any advertising for your app, or give you any free cloud data hosting for your app state. That's all up to you. A perfect solution! Train every customer of your software in the art of software development and proper security!

Of course, there's a problem here that reveals an additional wrinkle in the case:

If you give out your app's code and/or allow users to side-load whatever they like and connect to your servers and use your payment platform, you are deliberately creating a giant security hole that you then need to fill: Users can hack your app to do an end-run around the payment platform. Blizzard's struggle with Battle.net is a great example of this. For a very long time they fought with hackers who distributed alternate versions of Battle.net, in order to play unrestricted or custom games of Starcraft, Warcraft III, etc. They have now implemented a very sophisticated scrambling, encryption, and digital signing mechanism inside Battle.net and every game distributed through it, to combat that problem and ensure their payment platform is the only choice. It took a lot of expensive developer time, and didn't completely eliminate the problem - since they are distributing Battle.net to eminently hackable PCs - but it did raise a barrier against casual piracy.

That barrier is one of the things Apple is transparently providing, by maintaining only one app store, and maintaining a high barrier to side-loading random software. It is another thing Epic gets when they distribute their app on iOS: A userbase that is consistently forced to use the one payment channel, rather than what they would prefer, and what hackers are happy to give them: Not multiple alternate payment channels; but NO PAYMENT CHANNEL AT ALL. I.e. good old software piracy.

Epic's public bleating about "open for everyone" is an obvious smokescreen to give them the appearance of a more altruistic legal footing. They don't give a crap about opening up other companies' ability to bypass Apple's payment structure -- it in no way affects their business, except negatively. It's another piece of their try-hard PR positioning, in one of the most blatant examples of a stage-managed lawsuit I've seen in many years.

They could have filed their lawsuit without changing their app, without getting it banned, without crapping a childish 1984-ad parody onto the internet, without timing it just before one of their own "seasons", and without making the boss of that season an apple wearing a suit. Every one of those deliberate choices is an effort by Epic to cast themselves as a victim and underdog. They are neither. They make 5 billion a year and are now attempting to strong-arm their own storefront into other people's hardware.

"But, no!" you cry. "It's not Apple's hardware, it's mine as soon as they sell it to me! Then I own it! And from that point on, Apple has no right to say who can sell apps to me!"

Say what now?

"I suppose you think it is legal for Ford to tell me whose tires I have to buy, whose gas I have to use, et cetera, because it is a Ford product and I can always buy a Chevy? No!!"

Sorry, that is a false equivalency. It blurs the line between selling software that is loaded onto a device, and selling hardware that physically modifies a device. The two really do not compare. For a start, the things you do with "your" information transmission/storage/execution device regarding other people's information, are legally regulated.

For example, it is legal for you to buy a record pressing machine and sell records, but it is not legal for you to dub someone else's record onto your own, and sell those copies.

Sure, Ford can't dictate whose tires you buy. But the government can tell you what firmware you can install on the emissions control computer under the hood of your Ford. It is also legal for Ford to constrain the usage of the software they install there -- for example, you are not allowed to extract it and place it in a Chevy. You'd have to rip the entire computer (the PCM, or "power-train control module") out of your Ford and find some way to physically install it into the Chevy. That's the only way to avoid violating the software license you agreed to when you bought the car.

The main point I want to get to, is that there's actually a pretty big difference between an "app store" and the process of merely putting different software on a device. But first, a diversion. Here's some fun background applying to cars:

Third party dealers sell customized firmware for embedding into Ford PCMs. (Installing it voids your warranty, by the way.) To be specific, they do not exactly sell firmware, they sell customized firmware they originally downloaded from Ford by paying a hefty access fee, which they then tweak in various ways. Even those tweaks are subject to government regulations (for example in California) if they affect the emissions of the vehicle. (Meeting those regulations costs money -- a cost that those third party dealers pass on to you.) If you sneak around the internet, you can find software that actually lets you write custom assembly code for loading directly onto a Ford PCM. You could conceivably write an entirely new firmware for your Ford -- a tough prospect considering how complicated Ford's own code is, which you would not be able to use as a template without violating both copyright law and license terms. (Not to mention meeting the state emissions regulations...)

Now, turning to iPhones:

You can install customized software on your iPhone that is not sanctioned by Apple, by jailbreaking it. Jailbreaking is not illegal. Hacking Apple's iOS into some bastardized form and then loading that on via jailbreak -- that is illegal. Same thing: Violates both copyright law and license terms, and probably a dizzying number of patent licenses as well. Woe be to you if you try and sell that on any kind of market. You'd basically be committing garden variety software piracy. KRACKED BY MR. KRACK-MAN, etc.

You could legally write your own OS for iPhones and sell it, assuming you could get it to run on Apple's hardware. But Apple has absolutely no interest in letting you do this, which is why they now build their devices with a custom bootloader that checks the software against a digital certificate. If you got ahold of that and managed to sign your OS using it, you could still get around Apple, but only for a brief moment while Apple reissues the certificate and finds a better way to bury it in new versions of their hardware.

Does Apple have a "right" to do this? It would be rather odd if they didn't. If I made an appliance that used hardware working in tandem with software on a CPU inside it, I don't think it would be right for other companies to legally require that I build in some way of swapping out the software, so they could sell their own. That's extra work for me. I might do it as a courtesy, or if I thought it would increase my market share, but it should still be my choice.

Now, when you talk about an "app store", you are not just talking about swapping out firmware, or an operating system. You are talking about something with quite a few moving parts, many of them made of software. A basic "app store" relies on an operating system, a delivery method, a platform for money transactions, and an interface for search and discovery. On top of that, add digital signing and encryption, anti-malware scanning, a host of developer tools, advertising, content ratings and warnings, user reviews, a support mechanism...

There was no "app store" when Apple first released the iPhone. You could use Apple's software to put music and movies onto it, and (slowly) run a web browser, and that was it. They added an "app store" a few years later in what was effectively a firmware upgrade. I'm putting "app store" in quotes because, before Apple released that upgrade, there was no such term. (The closest equivalent was Handango InHand, which described itself in much more labored terms than "app store" because no one knew what the hell they did until they used it.)

My point is, Apple essentially created a new kind of marketplace on their device, and then developed and managed it - and the device - so well that the iPhone became the single most successful consumer product in all of history. Was it the wrong move to aggressively retain control of how all users of their device browsed and paid for new functionality? It depends on who you ask, since that store makes money for Apple (after effectively operating at a loss for years) and consistently makes more money for developers than any other.

(Before you jump to point out that there is some revenue split at work due to Android supporting multiple stores, note that this fact also remains true for in-app purchases and subscriptions, which do not split across stores. That is, a typical user of an app on iOS tends to send more money to the developer via in-app purchases and subscriptions than a typical user on any other store, making more money for developers despite the 30% transaction fee.)

Apple's userbase skews more towards people with disposable income. Companies like Epic know this, and know that they could extract even more money from that userbase if they somehow didn't have to pay Apple's 30% fee. Does that fact make them - or anyone - _entitled_ to that extra money? Why would it? If people can conceive of a way to divide part of a product out from the other parts, and theorize some profit stream inherent in just that part that they could grab for themselves if they swapped it out, does that mean they have a legal right to compel it into existence? Apple has that high-end userbase because they do a damn good job designing and programming their device AND their on-device marketplace. You want to draw a line between the two - device and "app store" - because -- why exactly? Because Google did? (Note that even Google insists you cannot distribute an alternate app store via their own Google Play store. They "allow" other stores to keep their appeal to the widest possible range of hardware manufacturers, but they personally loathe the idea.)

Since I'm on a roll, here's another thought experiment: Apple could have declined to add an app store, and declared that the iPhone would only contain Apple apps. It could have also made an app store and declared that all the apps on it HAD to be downloadable for free, and that furthermore they were not allowed to support third-party payment systems either, which would not have been a "store" per-se; more like a free library. Would there then be some kind of populist movement to allow developers to charge money for them? In other words, should we be allowed to legally or morally compel a hardware developer to create an apparatus for us to sell our shit though their hardware, where none exists? Is an injustice that Apple isn't allowing additional middle-men between their userbase and developers, to siphon off more money ... or is it an injustice that Apple is allowing anyone to siphon money at all, because compelling people to pay for changes in software on a piece of hardware they own is morally wrong?

By the way, if you insist on having a physical analogy for what's going on with Epic and Apple's App Store, here's a much better one you can throw around.

Apple is running a high-end hotel chain. There are other hotels out there, but when people can afford it, they stay in an Apple hotel. One of the things they like about the Apple room is the big, well-stocked fridge. Apple makes it clear that every time you take an item out of that fridge, they will add the cost to your bill. Apple also adds a 30% markup to the price of every item in that fridge.

Suppliers of drinks and snacks make a lot of money jockeying for position in that fridge, because people who stay in Apple hotels have disposable income and the fridge is very convenient.

Enter Epic Root Beer. They see Apple adding a 30% markup to the bottle in their fridge, and they want a bigger slice of that pie. So they modify their root beer bottle: Now it comes with a credit card slot. To open the bottle, you have to send Epic $5 via the credit card slot. Then they tell Apple the "price" of their root beer is zero. 30% of zero is zero, so Apple stocks the root beer in their fridge, but gets zero money for it.

You can see why Apple Hotels would boot Epic Root Beer out of their fridge.

Comments

[zeugma92]

totally with you on all of this. the Epic lawsuit just seems like a naked money grab with no conceivable upside for anybody except Epic.

[garote]

So, can Apple (and Google, Sony, Microsoft, Nintendo, etc.) through the legal morass that is an End User License Agreement, compel developers to only use a specific method of in-app purchases, while collecting a fee on them?

Apple has been walking an increasingly narrow path here, and right now it's laid along the distinction between "changes confined to the behavior of the device" and "everything else". That is, if your fee is for helping users purchase lunch, Apple doesn't take a cut. If your fee is for adding a digital skin to an in-game character, Apple takes a cut. They had to draw that line for pretty obvious reasons:

If there was no line and they didn't charge a fee, they would make no money at all from the app store. Every single app would quickly become "free to install" with "unlockable functionality" via in-app transaction.

If there was no line, but they still charged a fee, sellers of real-world goods everywhere would loathe it and shun the app store, using web-hosted "apps" running in Safari instead. It wouldn't matter if iOS had one app store on it, or five, or fifty. Also, the argument against it is not just based on the strength of the players, i.e. "eBay and Amazon and Target and Walmart are so big that they would fight us and win," it's based on the border between one marketplace and another. Is Apple selling software, or are they selling toilet plungers? As long as they stick to a fee from transactions for software and software services, they are on stable legal ground.

This path has been narrowed even more by so-called "reader apps", where you sign in with an account purchased elsewhere, and since there's no commerce taking place on the app, Apple doesn't collect. Developers are chipping away aggressively at the times and places they make transactions happen, and eventually it will get to the point where Apple will no longer be able to guess how much money they are even "passing on" to developers through the App Store because developers will be making it half a dozen different ways, most of which Apple won't be able to track. By then the whole debate over "one store versus several" will seem pointless.

What about hardware used exclusively for gaming? It is "right" for Sony, Microsoft, and Nintendo to limit the ways game developers on their platforms get extra money out of their players?

If it's not, that would basically amount to a declaration that any company can be in the hardware business, or the content business, but NOT a combination. (E.g. you can sell a widget, but you can't collect any money when content is viewed with it. Or you can sell content, but you're not allowed to also sell a content player, or the software that connects them.) Because if Sony, or Microsoft, or Nintendo, refused to publish a game on their platform that made them no money but enriched the developer through an alternate transaction system, they could be sued.

Then there's storefronts like "Steam" and "Battle.net". No one - as far as I know - has argued that those are not allowed to dictate how the games they host make money from player. But a few years back, Valve (makers of the "Steam" storefront) started selling "Steam Boxes", which were basically commodity PCs with Linux installed on them, and "Steam" installed on top of that. Did being in the hardware business immediately challenge their right to decide what was hosted on "Steam"? (The product cratered so no one really had time to ask that question.)

It might be best to let the market handle this.