Although Match settled its antitrust case with Google over $300 million Play Store fees, Fortnite maker Epic Games sued bring his case to trial this week. The game’s creator claims that Google’s commissions on in-app purchases are anti-competitive and that Google has used its market power to compete unfairly by negotiating special deals with developers and manufacturers running their own app stores.
We already have was aware of Epic’s allegations against Google, but now they have been presented in court, alongside the testimonies. Epic pushed to present this case to a jury instead of holding a bench trial — a key difference from its battle with Apple over the same case, which Apple largely won. (Epic is now asking the Supreme Court to rule on this point). With a jury trial, this case could play out differently than others, because ordinary people – mobile app consumers themselves – may interpret Epic’s claims about competition differently than a judge evaluating precedents set by contract law or antitrust regulations.
As oral arguments and testimony began this week, we learned a few things about Google’s Play Store business. Highlights included:
Google paid Activision Blizzard $360 million to launch its games on the Play Store
Epic Games’ lawyers presented details of Google’s “Project Hug,” which encouraged app developers to launch their games on the Play Store — or, as Epic puts it, Google “bribed” them. A significant example was reported in court, where Google proposed “Call of Duty” creator Activision Blizzard invested $360 million in 2020 to offer its games on Google Play at the same time they appeared on competing platforms. Epic’s argument is that Google used these payments to prevent developers from publishing games independently, such as through their own app stores. These deals also included an $18 million deal with Tencent’s Riot Games in 2020.
Google, however, countered by claiming that Project Hug was Google’s way of competing with other app stores, including Apple’s App Store, Samsung’s Galaxy Store, and Amazon’s Appstore. . He also told jurors that game developers were not prevented from launching their own app stores under these deals, which include things like advertising credits and marketing opportunities, Bloomberg reported. But Google’s arguments may have been undermined by documents showing how Activision Blizzard’s King division and Riot Games were frustrated with Google’s 30% cut and were considering launching “off-line” distribution platforms. Play”.
Google offered Epic Games $147 million to launch Fortnite on the Play Store
In addition to its agreements with Activision Blizzard and Riot Games, Google also confirmed that Epic was offered a $147 million deal to bring Fortnite to the Play Store, The Verge reported. The deal would have been paid over a three-year period ending in 2021, but Epic rejected the offer. Documents presented to the court said Google feared a “risk of contagion” if other major game developers followed Epic’s lead by launching its game outside of Google Play, costing Google billions in lost revenue. . Documents revealed that Google predicted a loss of $130 million to $250 million in revenue following the loss of Fortnite and that if other major game developers like Blizzard, Valve, Sony and Nintendo also left the Play Store, the loss could increase at $3.6 billion.
Google rejected apps for “steering” – or for indicating other payment methods outside of the Play Store
Testimony of Benjamin Simon, whose company Yoga Buddhi makes an app called Down Dog, confirmed that Google had rejected his app for “steering” – a term that can refer to linking to or even simply pointing customers to an app from others. ways to pay for the app’s services externally. from the Play Store where Google Play Billing is used. Down Dog on the Play Store costs $60/year or $10/month, but the developer charges less on its own website ($40/year or $8/month) because it doesn’t have to pay Google’s commissions . This has obvious benefits for the consumer, but “steering” is something Google and Apple prohibit in their developer agreements with app stores. This is actually the only area where Apple lost in its legal battle against Epic Games. The court ruled that Apple was not a monopoly, but it anti-management clauses deemed illegal under California’s unfair competition law.
The Play Store makes Google more than $12 billion a year, but Epic’s Games Store is unprofitable
Epic’s lawyers demonstrated the dominance of the Play Store, noting that 90% of all Android apps in the United States are downloaded from that marketplace. He also indicated that the Play Store generated more than 12 billion dollars per year in operating income and achieved a profit margin of 70%, compared to 24% in 2014, VentureBeat reported. Google countered these arguments by emphasizing that other major apps, like OpenAI’s ChatGPT, would launch on iOS first. This competition from Apple means it cannot be a monopoly, Google’s lawyers said. Meanwhile, testimony from Epic’s Steve Allison indicated that the Epic Games Store, which only takes 12% of developers’ revenue and developers keep 88%, it’s still not profitable.
Google Gave Netflix a Special Deal, and Maybe Spotify Got One Too
Google negotiated a special deal with Netflix to retain payment processing on the Play Store. Documents presented during the trial indicated that Google offered Netflix a reduced rate by 10% in 2017, allowing Netflix to keep 90% of its revenue from in-app purchases, The Verge reported. But Netflix did not accept the deal. It requires users to register through its website before streaming through its Android app. Google also asked the court to seal the documents linked to Spotify’s deal, the outlet also said, which allows the streamer to use Google’s new user choice billing option – a way for the developer to process its own payments. Typically, this gives the developer a 4% discount, so Google’s request to hide the terms of the Spotify deal seems suspicious. Google’s lawyer said this would be “damaging” to conversations Google was having with other parties. Epic was also offered the option to adopt user-choice billing, but rejected it.