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    The Epic v. Google lawsuit finally makes sense


    There was never any question what Epic Games wanted when it took Apple to court: the 48-second “Nineteen Eighty-Fortnite” made it clear App Store hypocrisy was the agenda. But the justification for a parallel case against Google wasn’t as clear-cut until today — it’s only now we’re learning about the most damning accusations against the Android giant.

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    On Thursday, Judge James Donato unsealed a fully unredacted version of Epic’s original complaint against Google (via Leah Nylen), and it alleges the company was so worried about Epic setting a precedent by abandoning the Play Store that it unleashed a broad effort to keep developers from following the company’s lead. That included straight-up paying top game developers, including Activision Blizzard to stick around, and sharing additional chunks of its revenue with phone makers if they agreed not to preinstall any other app stores.

    Remember when Google allegedly forced OnePlus to break off a deal that would have seen the Fortnite Launcher preinstalled on phones? LG and Motorola reportedly struck a deal where they got 12 percent of the search revenue from their customers, and up to 6 percent of the money they spent in the Play Store, to be exclusive to Google. OnePlus sister brands Oppo and Vivo were also onboard, with owner BBK committing the vast majority of its phones to the exclusive program. Nokia phone maker HMD Global signed up too, as did Sony, Sharp, Xiaomi, and another unnamed brand.

    If those tactics sound familiar, it might be because 36 state attorneys general alleged that Google used the exact same hush-hush deals against Samsung’s Galaxy Store, in the antitrust lawsuit they filed against Google in July. Google called it “Project Agave,” according to Epic.

    Apparently, Google viewed the so-called “Premier Device Program” as a huge success:

    In a presentation prepared by and presented to senior Google Play executives, Google noted that in the short time since the beginning of the program, over 200 million new devices were covered. The same presentation shows that Google believed that the new RSAs successfully eliminated the “risk of app developer contagion”; noting that there was “no risk” under the “Current Premier tier”.

    Google even suggested the idea of buying Epic to remove the threat — going behind Epic’s back and approaching minority owner Tencent, the Chinese tech giant that currently has a 40 percent stake in Epic. The suggestions were “to either (a) buy Epic shares from Tencent to get more control over Epic”, or “(b) join up with Tencent to buy 100% of Epic,” the unredacted complaint reads.

    And that’s on top of the dealings Google had with Epic directly in July 2018, when Alphabet’s CFO and other senior Google executives reportedly offered up to $208 million in “special benefits” over three years to bring Fortnite to Google Play — in what would effectively be Google taking 25 percent of the game’s revenue instead of the standard 30 percent. Google allegedly tried to convince Epic to take the deal by pointing out the “frankly abysmal” 15+ step process gamers would have to endure to sideload Fortnite on Android.

    Intriguingly, that would have been the month before Epic announced it would ditch the Play Store. That suggests Google had early access to Epic’s sideloading plans, despite CEO Tim Sweeney’s February 2018 instructions to his team to “SAY NOTHING TILL IT SHIPS”:

    It also suggests Google, not Epic, might have been the one originally offering special deals. A year later, Epic had to defend the idea that it was the one asking for a “special billing exception,” a sequence of events that appears to have thwarted Epic’s original plans — if you read item #38 in my big story about the best emails from the Epic v. Apple trial, you’ll see Epic was planning to spring a legal trap for Google long before Apple became the primary target.

    Why was Google running so scared that it allegedly resorted to these tactics? Apparently, it believed billions of dollars were at stake. According to Epic’s assessment, Google thought Epic had created a “contagion risk” that would spread to other game developers too:

    In particular, documents that Google’s Finance Director for Platforms and Ecosystems prepared for the CFO of Alphabet around the time of Fortnite’s launch on Android showed that Google feared what it termed a “contagion risk” resulting from more and more app developers forgoing Google Play. Google feared that the “contagion” would spread in this way: first, inspired by Epic’s example, “[p]owerful developers” such as “Blizzard, Valve, Sony, Nintendo”—creators of some of the most popular and profitable entertainment—would be “able to go on their own”, bypassing Play by directly distributing their own apps.

    Then, other “[m]ajor developers”, including Electronic Arts, King, Supercell and Ubisoft, will choose to “colaunch off Play”, collaborating to forego Google’s distribution services as well. And finally, Google even identified a risk that “[a]ll remaining titles [will] co-launch off Play”. Google calculated the total at-risk revenue from the threatened loss of market share in Android app distribution to be $3.6B, with the probability-weighted loss “conservative[ly]” estimated at $550M through 2021. Google also recognized that the “[r]ecent Fortnite + Samsung partnership further amplifies risk & urgency of problem” facing its monopoly position in Android app distribution. Google was determined not to let this happen.

    “Epic’s partnership with Samsung and determination to bypass Google Play for distribution of Fortnite struck fear into senior Google executives,” Epic wrote, adding that Google saw it stood to lose up to $6B in revenue by 2022 alone, if Samsung, Amazon and other app stores were able to peel off game developers from Google Play.

    A Google presentation looking back at 2018 mentions “Hug” incentives for game developers to keep them from “going it alone”.

    A Google presentation looking back at 2018 mentions “Hug” incentives for game developers to keep them from “going it alone”.

    Epic’s unredacted complaint might also explain some of the other tidbits we spotted in filings too, like Epic CEO Tim Sweeney’s cryptic assurance to Samsung’s DJ Koh that “You have my assurance Epic will support Samsung 100% in any battle with Google” (#32), or the reason Epic included an entire presentation in evidence about how Google felt it might be struggling in gaming. You can see a very relevant slide from that above.

    It’s not clear Epic was ever going to succeed with Fortnite on phones the way it succeeded with Fortnite on consoles: as I discuss in the final section of the Epic v. Apple emails story, mobile is a tiny fraction of the company’s business and likely not the preferred place to play — more of a gateway drug than anything else.

    But it sounds like Google certainly didn’t help Epic’s chances there, and it’s impossible to say how much more popular Fortnite Mobile might have been if Epic never challenged the standard app store toll or had an easier time establishing its own store. The documents show Fortnite was exceptionally anemic on Android, even while competitors like PUBG Mobile and Call of Duty were blowing up around the world.

    Page 35 of 2020-march-fortnite-mobile-biz-update-vs-consoles-w-exact-numbers-huawei-restrictions-damn-android-numbers-are-low

    It also shows Google trying to quietly build the kind of walled garden that Apple has explicitly aimed for from the beginning. The company was allegedly locking down phone manufacturers with elaborate contracts, directly appealing to software developers to keep them on the Play store, and treating any alternative software channel as an existential threat — all of which makes an antitrust lawsuit against the more open of the two major mobile operating systems much more plausible.





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    The Epic v. Google lawsuit finally makes sense


    There was never any question what Epic Games wanted when it took Apple to court: the 48-second “Nineteen Eighty-Fortnite” made it clear App Store hypocrisy was the agenda. But the justification for a parallel case against Google wasn’t as clear-cut until today — it’s only now we’re learning about the most damning accusations against the Android giant.

    On Thursday, Judge James Donato unsealed a fully unredacted version of Epic’s original complaint against Google (via Leah Nylen), and it alleges the company was so worried about Epic setting a precedent by abandoning the Play Store that it unleashed a broad effort to keep developers from following the company’s lead. That included straight-up paying top game developers, including Activision Blizzard to stick around, and sharing additional chunks of its revenue with phone makers if they agreed not to preinstall any other app stores.

    Remember when Google allegedly forced OnePlus to break off a deal that would have seen the Fortnite Launcher preinstalled on phones? LG and Motorola reportedly struck a deal where they got 12 percent of the search revenue from their customers, and up to 6 percent of the money they spent in the Play Store, to be exclusive to Google. OnePlus sister brands Oppo and Vivo were also onboard, with owner BBK committing the vast majority of its phones to the exclusive program. Nokia phone maker HMD Global signed up too, as did Sony, Sharp, Xiaomi, and another unnamed brand.

    If those tactics sound familiar, it might be because 36 state attorneys general alleged that Google used the exact same hush-hush deals against Samsung’s Galaxy Store, in the antitrust lawsuit they filed against Google in July. Google called it “Project Agave,” according to Epic.

    Apparently, Google viewed the so-called “Premier Device Program” as a huge success:

    In a presentation prepared by and presented to senior Google Play executives, Google noted that in the short time since the beginning of the program, over 200 million new devices were covered. The same presentation shows that Google believed that the new RSAs successfully eliminated the “risk of app developer contagion”; noting that there was “no risk” under the “Current Premier tier”.

    Google even suggested the idea of buying Epic to remove the threat — going behind Epic’s back and approaching minority owner Tencent, the Chinese tech giant that currently has a 40 percent stake in Epic. The suggestions were “to either (a) buy Epic shares from Tencent to get more control over Epic”, or “(b) join up with Tencent to buy 100% of Epic,” the unredacted complaint reads.

    And that’s on top of the dealings Google had with Epic directly in July 2018, when Alphabet’s CFO and other senior Google executives reportedly offered up to $208 million in “special benefits” over three years to bring Fortnite to Google Play — in what would effectively be Google taking 25 percent of the game’s revenue instead of the standard 30 percent. Google allegedly tried to convince Epic to take the deal by pointing out the “frankly abysmal” 15+ step process gamers would have to endure to sideload Fortnite on Android.

    Intriguingly, that would have been the month before Epic announced it would ditch the Play Store. That suggests Google had early access to Epic’s sideloading plans, despite CEO Tim Sweeney’s February 2018 instructions to his team to “SAY NOTHING TILL IT SHIPS”:

    It also suggests Google, not Epic, might have been the one originally offering special deals. A year later, Epic had to defend the idea that it was the one asking for a “special billing exception,” a sequence of events that appears to have thwarted Epic’s original plans — if you read item #38 in my big story about the best emails from the Epic v. Apple trial, you’ll see Epic was planning to spring a legal trap for Google long before Apple became the primary target.

    Why was Google running so scared that it allegedly resorted to these tactics? Apparently, it believed billions of dollars were at stake. According to Epic’s assessment, Google thought Epic had created a “contagion risk” that would spread to other game developers too:

    In particular, documents that Google’s Finance Director for Platforms and Ecosystems prepared for the CFO of Alphabet around the time of Fortnite’s launch on Android showed that Google feared what it termed a “contagion risk” resulting from more and more app developers forgoing Google Play. Google feared that the “contagion” would spread in this way: first, inspired by Epic’s example, “[p]owerful developers” such as “Blizzard, Valve, Sony, Nintendo”—creators of some of the most popular and profitable entertainment—would be “able to go on their own”, bypassing Play by directly distributing their own apps.

    Then, other “[m]ajor developers”, including Electronic Arts, King, Supercell and Ubisoft, will choose to “colaunch off Play”, collaborating to forego Google’s distribution services as well. And finally, Google even identified a risk that “[a]ll remaining titles [will] co-launch off Play”. Google calculated the total at-risk revenue from the threatened loss of market share in Android app distribution to be $3.6B, with the probability-weighted loss “conservative[ly]” estimated at $550M through 2021. Google also recognized that the “[r]ecent Fortnite + Samsung partnership further amplifies risk & urgency of problem” facing its monopoly position in Android app distribution. Google was determined not to let this happen.

    “Epic’s partnership with Samsung and determination to bypass Google Play for distribution of Fortnite struck fear into senior Google executives,” Epic wrote, adding that Google saw it stood to lose up to $6B in revenue by 2022 alone, if Samsung, Amazon and other app stores were able to peel off game developers from Google Play.

    A Google presentation looking back at 2018 mentions “Hug” incentives for game developers to keep them from “going it alone”.

    A Google presentation looking back at 2018 mentions “Hug” incentives for game developers to keep them from “going it alone”.

    Epic’s unredacted complaint might also explain some of the other tidbits we spotted in filings too, like Epic CEO Tim Sweeney’s cryptic assurance to Samsung’s DJ Koh that “You have my assurance Epic will support Samsung 100% in any battle with Google” (#32), or the reason Epic included an entire presentation in evidence about how Google felt it might be struggling in gaming. You can see a very relevant slide from that above.

    It’s not clear Epic was ever going to succeed with Fortnite on phones the way it succeeded with Fortnite on consoles: as I discuss in the final section of the Epic v. Apple emails story, mobile is a tiny fraction of the company’s business and likely not the preferred place to play — more of a gateway drug than anything else.

    But it sounds like Google certainly didn’t help Epic’s chances there, and it’s impossible to say how much more popular Fortnite Mobile might have been if Epic never challenged the standard app store toll or had an easier time establishing its own store. The documents show Fortnite was exceptionally anemic on Android, even while competitors like PUBG Mobile and Call of Duty were blowing up around the world.

    Page 35 of 2020-march-fortnite-mobile-biz-update-vs-consoles-w-exact-numbers-huawei-restrictions-damn-android-numbers-are-low

    It also shows Google trying to quietly build the kind of walled garden that Apple has explicitly aimed for from the beginning. The company was allegedly locking down phone manufacturers with elaborate contracts, directly appealing to software developers to keep them on the Play store, and treating any alternative software channel as an existential threat — all of which makes an antitrust lawsuit against the more open of the two major mobile operating systems much more plausible.





    Source link

    Latest Posts

    Don't Miss