Though Match settled its antitrust case with Google over Play Store fees for north of $300 million, Fortnite maker Epic Games proceeded to take its case to trial this week. The game maker argues that Google’s commissions on in-app purchases are anti-competitive and that Google has exerted its power in the marketplace to unfairly compete by negotiating special deals with developers and manufacturers running their own app stores.
We already knew about Epic’s allegations against Google, but now they’ve been presented to the court, alongside witness testimony. Epic pushed to present this case in front of a jury instead of running a bench trial — a key difference from its battle with Apple over the same matter, which Apple largely won. (Epic is now asking the Supreme Court to weigh in on that one.) With a jury trial, this case could turn out differently than others, as regular people — mobile app consumers, themselves — may interpret Epic’s claims about competition differently than a judge weighing the precedents set by contract law or antitrust regulations.
As opening arguments and witness testimony kicked off this week, we learned a few things about Google’s Play Store business. Among the highlights were:
Google paid Activision Blizzard $360 million to launch its games on the Play Store
Epic Games lawyers presented details about Google’s “Project Hug,” which encouraged app developers to launch their games on the Play Store — or, as Epic puts it, Google “bribed” them. One significant example was trotted out to the court, where Google offered “Call of Duty” maker Activision Blizzard $360 million in incentives in 2020 to bring its games to Google Play at the same time as they appeared on rival platforms. Epic’s argument is that Google used these payments to prevent developers from releasing games independently, like through their own app stores. These deals also included an $18 million agreement with Tencent’s Riot Games in 2020.
Google, however, pushed back saying that Project Hug was how Google competed with other app stores, including Apple’s App Store, Samsung’s Galaxy Store and the Amazon Appstore. It also told jurors that game developers weren’t prevented from launching their own app stores as a part of these agreements, which would include things like ad credits and marketing opportunities, Bloomberg reported. But Google’s arguments may have been undermined by documents that showed how Activision Blizzard’s King unit and Riot Games were frustrated with the 30% cut that Google takes, and were considering launching “off-Play” distribution platforms.
Google offered Epic Games $147 million to launch Fortnite on the Play Store
In addition to its deals 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 paid out over a three-year period ending in 2021, but Epic rejected the offer. Documents shown to the court indicated Google feared a “contagion risk” if other large game developers were to follow Epic’s lead of launching its game outside Google Play, which would cost Google billions in lost revenue. Documents revealed that Google projected a loss of $130 to $250 million in revenue from losing Fortnite and if other major game developers like Blizzard, Valve, Sony and Nintendo also left the Play Store, the loss could grow to $3.6 billion.
Google rejected apps for “steering” — or pointing to other ways to pay outside the Play Store
Testimony from Benjamin Simon, whose company Yoga Buddhi makes an app called Down Dog, confirmed that Google rejected his app for “steering” — a term that can refer to either linking to or even just telling an app’s customers about other ways they can pay for the app’s services outside of 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 his own website ($40/yr or $8/mo) because he doesn’t have to pay Google’s commissions. That has clear consumer benefits, but “steering” is something both Google and Apple prevent in their app store developer agreements. This was the one area where Apple lost in its court battle with Epic Games, in fact. The court had ruled that Apple was not a monopolist, but it deemed anti-steering clauses illegal under California’s Unfair Competition Law.
The Play Store makes more than $12 billion per year for Google, but Epic’s Games Store isn’t profitable
Epic’s attorneys showcased the dominance of the Play Store, noting that 90% of all Android apps in the U.S. are downloaded from this marketplace. It also said that the Play Store generated more than $12 billion per year in operating profits and carried a 70% profit margin, up from 24% in 2014, VentureBeat reported. Google countered these arguments by pointing out that other major apps, like OpenAI’s ChatGPT, would launch on iOS first. This competition from Apple means it cannot be a monopolist, Google’s attorneys said. Meanwhile, testimony from Epic’s Steve Allison indicated that Epic’s Games Store, which takes only a 12% cut of developer revenue and developers keep 88%, still isn’t profitable.
Google offered Netflix a special deal, & maybe Spotify got one too
Google negotiated a special deal with Netflix to keep its payment processing on the Play Store. Documents shown in the trial indicated that Google offered Netflix a discounted rate of 10% in 2017, allowing Netflix to keep 90% of its earnings from in-app purchases, The Verge reported. But Netflix didn’t take the deal. It requires users to sign up through its website before streaming through its Android app. Google also asked the court to seal documents related 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 provides the developer with a 4% discount, so Google’s request to hide the terms of the Spotify deal seems suspicious. Google’s attorney said that doing so would be “detrimental” to conversations it was having with other parties. Epic had also been offered the chance to adopt User Choice Billing, but rejected it.
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