The Cuban Missile Crisis of mobile: Epic encourages off-platform purchases for Fortnite mobile

EDIT: Apple has removed Fortnite from the App Store

EDIT 2: Almost immediately following Fortnite’s removal from the App Store, Epic filed a legal complain against Apple, accusing it of monopoly abuses

On August 13th, Epic Games, the developer of Fortnite, announced a new permanent discount system for Fortnite mobile that offers an alternative in-app check-out method on both Google Play and the App Store called Epic Direct Payment. In the announcement, Epic describes the system as such (emphasis mine):

Today, we’re also introducing a new way to pay on iOS and Android: Epic direct payment. When you choose to use Epic direct payments, you save up to 20% as Epic passes along payment processing savings to you….Currently, when using Apple and Google payment options, Apple and Google collect a 30% fee, and the up to 20% price drop does not apply. If Apple or Google lower their fees on payments in the future, Epic will pass along the savings to you.

A screenshot of payments selection from the in-app purchase screen points to a direct comparison of prices on the two different payment methods:

This is nothing less than a declaration of war by Epic against the mobile platform owners: by integrating its own checkout system directly into the mobile app, Epic violates the terms of service that each platform articulates around in-app purchases. For the App Store, these are captured in term 3.1.1 in the App Store guidelines:

Epic CEO Tim Sweeney has been vocal about his criticism about the platforms’ demand — but specifically Apple’s — that in-app purchases be facilitated by platform-specific payment processors in the past, but until now the company has played by platform rules. Epic famously sidestepped Google Play when it launched Fortnite on Android, but it eventually relented and published to the store after about one year. I didn’t believe that Epic was setting a replicable example when it published outside of Google Play; in Fortnite skipping Google Play won’t disrupt the status quo on mobile, I wrote:

Considering the above points of value, which could any other game developer truly live without given the popularity of their own game? The list is small. Epic has the gravitas and Fortnite has the momentum to bypass Google Play, but that likely isn’t a reality for any other games unless they rocket into international notoriety — and seem poised to maintain that popularity — in the same way that Fortnite has, which was completely unprecedented. So while one of the most successful and fastest-growing games of all time can operate off of Google Play to its advantage, such a decision would be disastrous for most other developers.

But including a proprietary checkout method inside of Fortnite is a different story: it’s a direct contravention of platform policy, and it is something that other apps will replicate if Apple and Google do not aggressively correct or penalize it.

There are two things to note here:

1. Many apps actually incentivize off-platform purchases in order to skip platform fees. One example is the meditation app Calm: when a user downloads the app and starts their free trial, they are sent an email with an offer to purchase the subscription for 20% discount via a web-based checkout. This is an approach that many apps — but mostly subscription apps — have borrowed.
2. Some apps don’t even offer the option of making in-app purchases in the app, such as Netflix and YouTube, which famously canceled the subscriptions of all users that were active via in-app purchases and forced those users to subscribe via the web.

But what Epic is doing with an alternative in-app checkout method is different. Apple has turned a blind eye to the above techniques because the off-platform checkouts are not specifically linked-to (or in some cases, even advertised) in the app. But Epic is presenting its own proprietary payment method alongside the native platform payment methods, and at lower prices. This tactic undermines platform policy and directly attacks the platform fees that both companies collect.

I have argued that Apple’s 30% platform fee (and suppression of third-party payment methods) does not qualify the company as a monopoly, and I made the case against anti-trade accusations in this article. But Apple and Google are currently embattled: Apple is under increasing pressure by developers to change its fee structure and the generally closed nature of the App Store, and Google is in the midst of an anti-trust probe within an environment of increased anti-trust scrutiny of the consumer tech sector, with a Congressional hearing about the business practices of Facebook, Google, Amazon, and Apple having just concluded. Additionally, the App Store ecosystem has recently been thrown into a state of disarray with the deprecation of the IDFA, Apple’s device-level advertising identifier.

Perhaps Epic CEO Tim Sweeney sees an opportunity in this moment, with the platforms weakened by anti-trust review, to manifest the changes for which he has been tirelessly lobbying via Twitter for the past years. But Apple and Google surely will be forced to react: if they don’t, they tacitly forego the right to enforce compliance with their policies around using native payments systems.