Apple changes its App Store policies as war with Epic Games continues

Apple and Epic Games’ dispute has continued to escalate with billion-dollar implications for both companies and the industry at large.

Apple Inc. has updated its App Store guidelines to allow game streaming services, such as Microsoft’s xCloud and Google’s Stadia, to run on the platform under certain conditions.

Game streaming services, which allow users to “stream” video games from the cloud, rather than having to purchase physical copies or download games onto their devices, had previously been blocked from the App Store.

Apple’s new guidelines don’t show any sign that the company is relenting over its battle with Epic Games, Inc and is reversing position on issues that Epic, in particular, has taken issue with in recent weeks.

Epic’s anger over the cut that Apple receives from in-app purchases has led to the removal of Fortnite, the company’s popular video game, from the App Store and has seen Epic Games embroiled in a legal battle against Apple.

Some cloud gaming providers such as Microsoft have greeted Apple’s new rules less than enthusiastically. The new guidelines have been seen as a way for Apple to continue taking its controversial 30% cut from in-app purchases.

Apple and Epic Games’ dispute has continued to escalate with billion-dollar implications for both companies and the industry at large.

Cloud gaming

Apple’s new guidelines reverse a long-standing rejection of cloud gaming services on the App Store.

Cloud gaming services such as Microsoft’s xCloud, which is launching this September, and Google’s Stadia will now be allowed to enter Apple’s tightly-controlled App Store ecosystem provided the companies abide by Apple’s conditions.

To be allowed onto the App Store, each game title offered by cloud gaming providers must be individually listed on the App Store so that Apple can exert close oversight over each individual game.

Cloud gaming providers can then offer a “catalog” app which links to these individually-listed games but they cannot offer an app that allows games to be loaded and played through one interface, the way you can both browse and select a movie to watch on Netflix, for example.

Apple’s previous unwillingness to allow cloud gaming providers onto the App Store was due to the company’s fear that, once there, Apple wouldn’t be able to control them.

The industry has not quite embraced Apple’s new guidelines with open arms.

Microsoft, the provider of the hotly-anticipated xCloud gaming service, has stated that Apple’s new guidelines would result in a “bad experience for customers” as they would force users to download potentially hundreds of apps to access cloud games, rather than having them consolidated into one central app, as intended by Microsoft.

Apple’s new guidelines would also mean that each individual game on its App Store would be subject to Apple’s 30% cut of in-app purchases.

Instead of caving to pressure from developers over this controversial policy, Apple has appeared to stand by it, allowing cloud gaming providers onto the App Store ecosystem only so long as they submit to paying Apple’s commission.

But the company has backed down over some more minor controversies. The new guidelines allow users who have subscribed to an app or service elsewhere to use that service on the App Store with full functionality without paying twice. This had previously formed the crux of Apple’s dispute with subscription-based email service Hey.

Apple refuses to back down

Apple’s refusal to back down over its 30% cut on in-app purchases comes as no surprise as its dispute with Epic Games has only escalated in recent weeks.

Epic Games initially provoked Apple into banning Fortnite from the App Store by instituting an unauthorized payment system that bypassed Apple’s commission. Epic was removed from the App Store as a result. Epic then launched a lawsuit against Apple alleging that its App Store should be classed as a monopoly for allegedly adopting anti-consumer practices.

Apple’s in-court response to Epic’s suit pins the blame on the Fortnite developer for allegedly creating this “emergency” voluntarily.

Apple’s response to Epic’s suit states that “in the wake of its own voluntary actions, Epic now seeks emergency relief. But the ‘emergency’ is entirely of Epic’s own making,” adding that “developers who work to deceive Apple, as Epic has done here, are terminated.”

It was also revealed in court that Epic chief executive officer Tim Sweeney had informed Apple of Epic’s decision to institute a new payment system in Fortnite that would bypass Apple’s 30% cut.

Fortnite had an estimated 116 million iOS players before its ban.

Despite Apple’s refusal to allow the new payment system, Sweeney went ahead with his company’s decision, writing that “we choose to follow this path in the firm belief that history and law are on our side,” hinting that any retaliation by Apple, such as a ban, would see Epic file a lawsuit.

This is, of course, exactly what happened. Epic quickly responded to Fortnite’s iOS ban with an ad campaign mocking Apple’s famous “1984” advert and charged that the App Store was a monopoly.

Apple is now seeking damages from Epic Games for what it alleges is a breach of its App Store contract, forcing the video game and software developer to go on the defensive.

Apple’s suit alleges that Epic’s conduct, deliberately conducted to provoke Apple, “threatens the very existence of the iOS ecosystem and its tremendous value to consumers.”

The suit also paints Apple, not Epic, as the aggrieved party, and states that Epic had agreed with “the terms on which Apple has since 2008 provided the App Store to all developers” without complaint, until it decided to “dupe a long-time business partner, pocket commissions that rightfully belong to Apple” and then seek a court ruling designating Apple’s App Store as monopolistic, destroying Apple’s 30% cut in the process.

Though at first glance they may not appear connected, Apple’s new guidelines regarding cloud gaming services are deeply connected to its ongoing dispute with Epic Games.

On both fronts, Apple is asserting the legitimacy of its App Store policy of a 30% cut on in-app purchases, which until now has proved hugely lucrative, with a significant amount of Apple’s US$18.3 billion digital content revenue coming from this so-called “Apple Tax” on in-app purchases.

Microsoft has so far refused to jump through Apple’s hoops, including submitting to its 30% commission, showing that Epic is not alone in its fight against what it perceives to be the anti-consumer policies of Apple’s App Store.

But with a judge ruling that Fortnite will remain banned on Apple’s platform until Epic’s dispute with the company is resolved, the futures of both companies remain uncertain.

For now, Apple’s defense of its 30% cut and Epic’s monopoly crusade shifts to a courtroom setting.

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