The process between Epic Games and Google is currently ongoing as part of the commission affair for microtransactions in the Play Store. Enough to learn a lot about the relationships between the two companies, which are giants in their respective fields.
The case is slowly coming to light again, but is still not resolved in court. Epic Games is suing Google in a San Francisco court, challenging in-app purchase fees. For him, Google has an illegal monopoly with its store in Android.
After the trial between Epic and Apple, it is Google’s turn to defend itself against the American justice system. The Verge journalist Sean Hollister was able to be present at the hearing and reports on the relationships between Epic Games and Google, but not only.
Epic Games had a project with Activision-Blizzard King
Internal company documents show that Epic Games was considering a plan to bypass Google in late 2019. The Verge describes it like this: It involved starting a mobile games store either with Activision-Blizzard King (ABK) and Supercell or on its own. A store that would have allowed you to download Call of Duty: Mobile, Diablo Immortal, Clash Royale, Candy Crush or even Fortnite.
These mobile gaming giants have therefore joined forces to form a “Steam of Mobile Gaming”, as Armin Zerza, financial director of ABK, describes it. In order to convince as many publishers as possible, the competitive advantage was achieved by reducing microtransaction fees: 10 to 12% compared to the 30% that Google charges.
And if the project had seen the light of day, ABK would have wanted to do the same on the iPhone. But at the same time, the company was negotiating a $100 million deal with Google to “strengthen ABK’s economics in mobile, YouTube, advertising, media spending and cloud.” “.
In the end, an agreement was signed for an amount of over 100 million dollars: according to Don Harrison, head of partnerships at Google, “billions of dollars are circulating between the two companies.” »
Source: Epic Games
For Epic Games, the situation is clear: Google paid Activision-Blizzard King not to launch its application store. According to the company, Google fears that all major publishers will leave its Play Store after Epic Games and others.
For Google, the store ABK was working on was just a project to exert pressure. According to the company, 45 to 70 employees worked on the project, which seemed very small for such a goal. According to Armin Zerza, it didn’t go ahead because it wasn’t financially interesting enough.
Project Hug: Google’s millions to escape the onslaught
What this process also reveals is Google’s “Project Hug.” The company paid millions of dollars to major mobile game makers to prevent them from developing their own app stores.
The impact was broader: Google admitted that it didn’t want the loss of titles from the Play Store to “start a chain reaction and more and more titles leave Google Play.” » For Epic, these agreements were sufficiently secret to be considered unlawful, which Google argues is not the case.
Why Google charges 30% commission on microtransactions
Paul Gennai, vice president of product management at Google, spoke in the case in a San Francisco court. In his opinion, if developers are successful, Google must also be successful. For Jonathan Kravis, Google’s lawyer, Paul Gennai “is not satisfied with collecting the service fees of the Play Store, but that he invests in the latter because he knows that he has to compete with Apple.” »
A necessary method to convince consumers to buy an Android smartphone instead of an iPhone.
Fortnite is at its best on this P50 Pro. // Source: Frandroid – Robin Wycke
As Sean Hollister points out, Google didn’t just copy features from Apple’s App Store. The lawyer stated that Google was the first company to introduce promotional codes and pre-registration periods for applications. The Play Store also offered applications for children and subscriptions to a game catalog.
Additionally, the Play Store would provide both Android smartphone manufacturers and consumers with a secure and privacy-friendly store.
Google’s response to the court
Google has defended its position on microtransaction share. It would not be praiseworthy for society if all players reduced these commissions, but only for the large publishers. It proposes to “reduce Play’s effective revenue share while maintaining the current rate and restore this value so that it goes to Google.” »
However, the latter recognizes that the current revenue share rate “may not be sustainable in the long term”. Google wants to change this rule before courts or laws enforce it.
Why Google doesn’t treat all app publishers equally
According to Play Store programs, developers working with Google will not be charged a 30% commission. The Living Room Accelerator Program or the Audio Application Program may at times see some of these drop to 15%.
Fortnite // Source: Ali A on YouTube
However, some developers did not use Google’s billing service and were not required to do so. The issue has since been resolved, although Spofity and Netflix benefit from a 0% rate. What constitutes a reproach for Epic is the inconsistent billing of the Google Play Store.
Few consumers are switching from Android to iPhone
Epic Games lawyer Lauren Moskowitz pointed to an internal Google document that shows that switching from an Android smartphone to an Apple smartphone is not common practice. Additionally, those who switch platforms “tend to be younger and live in urban areas,” we read.
22% of iOS users are considering switching operating systems, but only 9% actually intend to do so. Meanwhile, according to a 2021 document, 17% of Android users are considering switching operating systems, and only 7% intend to do so.
How Google would have thought about closing the Galaxy Store
In addition to the Play Store, Samsung smartphones and tablets also have the Galaxy Store, the South Korean brand’s own app store. It is also possible to make app purchases, which means a loss of revenue for Google, especially since Samsung is one of the largest and by far the first manufacturers of Android devices.
The Epic Games application in the Galaxy Store to download Fortnite // Source: Frandroid
Internal Google documents show that managers wanted to set up a “Samsung Zone” in the Google Play Store to replace the Galaxy Store and paid Samsung to do it. According to the company, this benefited Samsung, which would then no longer have to “waste resources.” All for $50 million a year.
Does Fortnite deserve to earn 100% of microtransactions made through Google Play?
Google is also asking questions throughout this process, particularly to Matthew Weissinger, vice president of marketing at Epic Games. The company releases internal publisher documents showing that the launch of Fortnite on mobile devices generated 38% of new accounts daily in 2019. However, in this document we learn that “retention on mobile devices is low compared to other platforms.” On Android it is 4% after 30 days, compared to 16% on PlayStation 4 or 11% on Xbox One.
Additionally, Google argues that players buy their V-Bucks (Fortnite’s virtual currency) not on Android, but on their console: only 0.7% of purchases were made on Android. However, all of these statistics predate Fortnite’s original release on the Play Store.
Source: Epic Games
Google also revealed that Epic was aware of obstacles to installing Fortnite other than its absence from the Play Store. In addition, the game is greedy and cannot run smoothly on all devices and requires a certain amount of storage space.
On the other hand, if a game is installed via the downloaded installation file (in APK format), a window in Android will warn that the phone may be damaged, which could deter users.
The Fortnite game on the Oppo Find X3 Pro // Source: Arnaud Gelineau – Frandroid
An internal Epic document shows that only 260 million smartphones met the minimum requirements for Fortnite at the time. The Verge reports that “Epic estimated that 37% of users gave up between clicking “Download on the web” and opening the Epic Games app, but that 40% gave up after opening the Epic Games app and before reaching a Check that you have given up the minimum specification.”
It was Epic that founded a lobbying group “for application fairness.”
In 2021, Sean Hollister himself revealed that Epic Games had founded an “Application Fairness Coalition”. The publisher did not confirm this at the time, but it did in court. Matthew Weissinger admits paying $100,000 to a consultant to create this influential group.
However, this coalition publicly stated in 2020 that the founding members were Epic Games, Spotify, Basecamp, Match Group, Tile, Blix and Deezer.
Epic Games wanted to file lawsuits against Apple and Google, but not against Samsung
Matthew Weissinger also admits that he decided not to target Samsung. This whole anti-competitive practices lawsuit against Google and Apple was a “secret plan” called “Project Liberty” and that’s why the App Fairness Coalition was formed.
However, Samsung has actually done things that go against the values of this coalition. For Epic Games, Samsung is one of the “exceptional advertising partners that truly exceed expectations.” »
Secret agreements between Epic Games and smartphone manufacturers
In order to forego the Google Play Store, one of the solutions for Epic Games was to have Fortnite pre-installed on Android smartphones. Many applications, even the most popular ones (Facebook, LinkedIn and other mobile games), use this approach.
This even happened with Huawei, which pre-installed the game on Honor smartphones before the American embargo on relations between American and Chinese companies.
In Fortnite we use the vibrant screen of the Galaxy S21 // Source: Arnaud Gelineau – Frandroid
During the process, we learned that Epic had signed an agreement with LG to develop a gaming smartphone. The publisher also signed a four-year deal with Samsung in 2022 to publish Fortnite on the Galaxy Store. With Samsung, the agreement was crucial: in 2018, “Epic estimated that 56% of the devices capable of running Fortnite outside of China were Samsung devices.” »
On OnePlus’ side there was also a pre-installation agreement that could have been implemented worldwide, but was ultimately only implemented in India. According to Hans Stolfus, director of strategic partnerships at Epic, this is because “Google has blocked the proposal to pre-install our application on its devices outside India”: he relies on his contacts at OnePlus. Google responds that the brand made its own decision. After all, the company had spoken to Razer, Lenovo and others.
Google and Epic had a win-win deal with Fortnite
The two companies had a contract with Project Liberty, which Google said was broken. The latter told judges that he helped bring Fortnite to Android, with support from a 2018 blog post on the Epic website that has since been deleted. We can read that Google contributed its expertise to make the game work.
When asked, Andrew Grant, Director of Engineering at Epic Games, simply stated that this support had been very useful. He was previously asked if Epic had paid Google for this. As The Verge writes, he claimed that “the Fortnite patches would lead to changes to the Unreal Engine that would deliver better performance for all mobile games using the Unreal Engine.” »
Google planned to buy Epic Games to have Fortnite all to itself
Other internal Google documents revealed that the company had considered buying all or part of Epic Games, with or without Tencent. Today Tencent represents 40% of the publisher’s capital. A few years ago, Google wanted to spend up to $2 billion to acquire around 20% of Epic Games. The goal was to make Fortnite a “commercial engine” for Google, be it in the Play Store, for its cloud servers or even on YouTube. Thanks to its popularity, the battle royale could even have saved Google Stadia if it had been included in the catalog.