Game Theory - The Secret Fortnite Agenda NO ONE Is Talking About!

Episode Date: April 5, 2024

Join previous Game Theory Host MatPat as he EXPOSES Epic Games and their secret plan to take over all things gaming. Credits: Writers: Matthew Patrick and Justin Kuiper Editors:  Dan "Cybert" Seibert, Tyler Mascola and Shannon (Bomb0i) Assistant Editor: AlyssaBeCrazy Sound Editor: Yosi Berman

What is this? Some kind of old black and white film? Lame. You young whippersnappers, it's obviously a parody of the famous 1984 Apple commercial. It's actually a clever stroke of irony because now Apple, instead of being the scrappy underdog like they were in the 1980s, is now the big evil overlord that they were fighting against way back then. Oh. It's true. Big Tech has had near monopolistic control over the app ecosystem for nearly a decade. But isn't that the reality of being in a multinational corporation in the internet age?

They need to make a viable business spanning various global markets requiring a tight control over the product. Not that much control. What? I'm missing the point. George Orwell's novel 1984 is about manipulation of the masses by the government and big companies. But here we see one company using propaganda to manipulate its audience. Kids today, am I right? Oh, internet, welcome to game theory. The channel that could talk about the increasingly complex lore of Fortnite, but instead is opting to talk about the increasingly complex business of Fortnite. Let me tell you right now, no amount of lore analysis would touch how interesting and important what's going on right now is.

Oh, sure, to 99.9% of people out there talking about our topic for today, the hashtag free Fortnite campaign in which Epic Games is going ahead to head with Apple is just a battle for a video game company to make a bit more money off of V-bucks, while another company is defending their terms of service. But in reality, there's something much, much bigger at stake here. So, while most people think that the situation is epic breaking terms of service and then pulling a surprised Pikachu when they get banned, there's actually some three, four, and even five-dimensional chess that's going on,

something that you all need to understand before you start retweeting hashtags. Because while the headlines are focusing on Fortnite and that 30% Apple tax or Google tax on V-bucks, Epic's lawsuit is actually about something much bigger. Bigger than Fortnite, you might ask? Oh yeah. Epic, despite having what's arguably the biggest game on the planet right now, still has their eyes on a bigger prize. And no, this isn't just speculation on my part. This is me actually reading the 60-plus page legal document

that Epic filed against Apple and Google. Everything I'm about to tell you, you can go and verify for yourself, but I'm guessing that a lot of you don't want to wait through dozens of pages of legal documents, So let me break it down for you and explain why if you think this is just about epic wanting to keep a bigger piece of the Fortnite V-Bucks pie, you are completely missing the point. First, a quick explanation, so we're all on the same page. For those who don't know, basically anytime you make a purchase in an app-based game like Fortnite, the payment gets processed either by Apple or Google, depending on whether you own an iPhone or an Android. In exchange for this service, Apple or Google, takes a hefty 30% fee, which, you know, know, is pretty massive.

Most other payment processors, like Visa or MasterCard or PayPal, have what's known as a credit card fee. Those are usually around 3-to-5%. That's why certain stores you go to, especially smaller stores, have credit card minimums for their purchases. If you pay with a credit card for something small, like a pack of gum, the store can sometimes lose money on the purchase, or it's just not worth the extra fee for that, like, $1 total. So Apple and Google are basically taking that, except, you know, 10 times that amount for every emote and stolen dance move that you purchase, in a game. It's a pretty extreme. CEO of Epic Games, Tim Sweeney, pointed out on Twitter last month the problems with this sort of policy, saying, quote, Apple has gone crazy. If colleges

hold virtual classes through an iPhone app, Apple could demand 30% of the tuition. Truly, Apple has no right to take any percent of any company's revenue just because they made the phone people used to access the stuff. To get around this policy, Epic Games, the makers of Fortnite, decided to implement a new in-app purchase option for their in-game currency V-Box. Instead of paying using Apple or Google, you could provide your payment information directly to Epic games. In the process, you sidestep around Apple and Google. That allows Epic to not have to pay the 30% Apple tax. And so, Epic offered to pass a 20% savings onto the customer, keeping a little bit of extra profit for themselves. So now, that $10 V buck purchase, it's $8, provided you pay directly

to Epic rather than Apple. And as you can imagine, Apple wasn't too happy about getting cut out of the equation. So they whipped out the old banhammer. Removing four night from the App Store. And to be fair, it is a direct violation of Apple's guidelines, which state that, quote, if you want to unlock features or functionality within your app, you must use in-app purchases. Apps may not use their own mechanisms to unlock content or functionality. Uh, not so fun fact, by the way, and this is important if you're an Apple user. This Apple tax is part of the reason things cost more when you buy them through iOS systems. YouTube Premium, for instance, costs more when you buy through the Apple Store,

because Google is passing the cost onto you, the user. Thanks a lot, trillion dollar companies. Glad I could save you a couple extra bucks on your taxes. That you don't even really pay anyway. By the way, the solution is to just buy from a different computer or operating system. Have the premium service attached to your account and then just log in on the device that you want. It's gonna save you money each and every month. Who says that YouTube videos about Fortnite are wastes of time?

Anyway, Fortnite gets banned and Epic immediately turns around to produce not only the free Fortnite event, but also a 60-page lawsuit, claiming that things like the Apple App Store represent an unfair monopoly, stifling competition. The fact that Apple owns the device, owns the store that sells the apps for that device, and requires that purchases made through those apps go through Apple's payment services is, in Epic's opinion, a monopoly, total control over the market. And monopolies are against the law. So therefore, Apple is wrong and needs to change its policy. So that is the what of the situation on the face of it. And this is pretty much all the discussion so far has been about. But this is all just the surface level of what's really going on. It's all the what's really going on. It's all a distraction from Epic's true motivations in all of this.

So let's dig deeper into Epic's actual strategy here, because let's immediately recognize one thing. Epic knew that this was gonna happen. They knew what Apple was gonna do and they were ready. Getting banned from both Apple and Google stores wasn't an unexpected thing that they had to react to. It was all part of the plan. You don't just pull 60 plus page legal documents out of your butt. They had that 1980 Fortnite video prep to drop days before we ever saw it online.

This was a very intentional move on their part. They were locked and loaded. So the big question is, why start the fight? Is it really just all about V-Bucs? Spoiler alert, no, it's not. And perhaps more importantly, why are they choosing to strike now? Well, the why of it is actually the most complex part, so let's instead begin with why now.

Because remember, this isn't the first time that Epic's faced off against a tech giant. For a period of about 18 days, the only way to play Fortnite on your Android phone or tablet was by side-loading the APK, basically a way to run third-party apps without going through the Play Store. It wasn't until April of this year, 2020, that you could finally download Fortnite again through Google Play. In fact, while Epic is filing this lawsuit now, Epic was actually claiming back in December of 2019 that Google's 30% fee was illegal.

To quote them directly, we have asked that Google not enforce its publicly stated expectation that products distributed through Google Play use Google's payment service for in-app purchase. We believe this form of tying of a mandatory payment service with a 30% fee is illegal in the case of a distribution platform with over 50% market share. In layman's terms, you bought yourself the device square on the board, you bought yourself the app store on the board, and you bought yourself the payment service on the board, you done got yourself a monopoly! So Epic has been beaten this drum of big tech our monopolies for a while now, which makes the lawsuit against them the next logical step. But why in 2020? Well, right now, Google and Apple are looking a lot more vulnerable than they might have a year ago,

In May of 2019, the US Supreme Court upheld the ruling in the case of Apple versus Pepper. Basically, the ruling of this case allows Apple app buyers to sue the company for allegedly driving up their prices. The claim basically says that by requiring Apple users to buy app through its official app store and charging developers a 30% commission, Apple is adding a mandatory fee that developers then pass on to the customer. Remember that YouTube premium upcharge that I talked about a few minutes ago? Yeah, you can sue Apple to get that money back because of this way. ruling. To quote from one of the Supreme Court judges, a claim that a monopolistic retailer, here Apple, has used the monopoly to overcharge consumers is a classic

antitrust claim. But Apple asserts that the iOS users in this case may not sue Apple because they supposedly weren't direct purchasers. We disagree. And there's that key word again, monopoly. The court didn't necessarily say that it thought that Apple was a monopoly, but it didn't exactly not say it either. And remember, all of this is coming off those Court hearings from several years ago were representatives from the big tech giants like Apple and Google and Amazon and Facebook were all called to testify before Congress. I know it's easy to forget because we were all busy with the robot Mark Zuckerberg memes or old people are out of touch memes, but all of those were antitrust hearings. Looking to see if all of these companies are monopolies and require some sort of change in the industry. Epic's lawsuit also comes on the tales of another event from just a week before when Microsoft announced that it was being forced to pull its ex-cloud game streaming service,

off of iOS. XCloud's goal was to let Microsoft GamePass subscribers play GamePass games on any platform that they want. And now, well, they can unless that platform is an iPhone or an iPad. Apple blocked XCloud because it provided users with a way to play new games without those games being subjected to Apple's own vetting and approval process. Which is odd, considering that your iPhone can run Netflix, a service that allows you streaming access to thousands of movies and TV shows that also aren't subject to being individually vetted and approved. Heck, Netflix even has streaming games like Bander Snatch and Minecraft Story Mode, so why does Netflix get away with it when Microsoft doesn't? Obviously, I'm not the first one to call out this double standard.

Microsoft themselves called out Apple for their unfair discrimination. Quote, Apple stands alone as the only general purpose platform to deny consumers from cloud gaming and game subscription services like Xbox GamePass, and it consistently treats gaming apps differently, applying more lenient rules to non-gaming apps, even when they include interactive content. Now, why would Apple do something like that? Certainly, it wouldn't have anything to do with the fact that XCloud represents a competitor,

right when Apple is making a big push for their own gaming subscription service Apple Arcade, because that would be anti-competitive and monopolistic behavior. You're getting the point now, huh? If Epic is playing 4D chess here in its efforts to take down these two massive tech giants, they've spent a lot of time maneuvering all their chess pieces into place for it. From the Google stuff last year, to the push against Apple this year, to the timing alongside Apple versus Pepper. And while the timing of the thing with Microsoft X-Cloud might have just been dumb luck,

certainly ain't hurt in their case. Here's something that's definitely not luck. In June of this year, the EU began an antitrust investigation into, you guessed it, Apple, centered on the topic of the App Store and Apple's monopoly on payments, an investigation that they started specifically because of complaints from companies including Spotify and, oh yeah, Epic Games. So if you're Google and especially Apple right now, you are sweating nervously because Epic is attacking you on all sides all across the world trying to

shatter your business which brings us to the really interesting part of all this epic's lawsuit why go to such extreme lengths to bring down apple and google is it really just to capture a few extra bucks off of every micro transaction because even though that would be a substantial amount is it really worth going toe to toe with two of the world's biggest tech giants all of what we've discussed so far is based on events in the news and PR statements that allow us to speculate about why Epic is suing, but there's no need to speculate. Everything we need to know about the lawsuit is actually stated right there in the legal papers themselves. So it's time to put on my scholarly glasses, roll up my sleeves so as not to stain them with a fresh ink from the documents that just came off the printer.

Looking at the Apple lawsuit, a lot of this stuff is what we already know. This case concerns Apple's use of a series of anti-competitive restraints and monopolistic practices and all right, I can already hear you dozen off. So I'll just summarize. They feel like Apple has a monopoly over content on one billion iOS devices. We've already talked about that. Nothing surprising there. This monopoly stifles competition, hurts developers who have to pay an exorbitant tax, and hurts consumers who, quote, are likewise denied choice and innovation and app distribution channels and are forced to pay higher prices and suffer inferior service from Apple, the unwelcome

middleman. Who shots fired there epic! Inferior service? Unwelcome middleman. Tell us how you really feel there guys. But past all of this blah blah blah blah legalese, there's actually one key paragraph that I think everyone's overlooking. According to them, if it weren't for Apple's illegal restraints, quote, Epic would provide a competing app store on iOS devices, which would allow iOS users to download apps in an innovative, curated store that would provide users the choice to use Epic's or another third parties in-app payment processing tool. Ha ha ha ha.

There it is, my friends. There is the rub. While the headlines covering Epic's complaint focus on Fortnite, and the fact that they want more of those sweet, sweet micro-transaction payments, the much bigger claim and the much bigger dollars, is coming from the fact that they want to launch their own competing app store. And knowing Epic's history, it isn't that outlandish of a claim for Epic to make. After all, they've already created the Epic Games store in their efforts to challenge Steam,

who, for over a decade, dominated the PC games market without anyone even coming close to questioning their authority. The Epic Game Store isn't just there so Epic can let people down. download Fortnite without giving Valve a cut of their sales, Epic sells games from other developers in that store. And by the way, Epic thinking that the 30% tax on storeholders that Apple, Google, and yes, Steam Charge, is actually one place where they're willing to put their money where their mouth is. Epic's fee for their store is only 12%. Still seems higher than it needs to be, considering that the credit card processing only takes about 3% to 5%, but hey, taken baby steps here. It seems that in the same way that the Epic Game Store was designed to compete with the monolith that is Steam on PeaS, Epic wants to create the Epic App Store to compete directly with Apple's App Store on iPhone and the Google Play Store on Android.

Another two marketplaces that are completely uncontested right now. In fact, the idea of launching a competing app store for mobile phones isn't just a hypothetical, it's something that they've already done. If we look at the lawsuit that they filed against Google, we see on page 9 that they got as far as striking a deal with OnePlus. Currently the fifth largest smartphone maker in the US to get an Epic Games app. pre-installed on all Android phones, but Google forced One Plus to renege on the deal, citing Google's particular concern about Epic having the ability to install and update mobile games while bypassing the Google Play Store. By the way, this Epic Games app is very much a real thing that you can actually try right now on your Android phone if you're the kind of person who's okay with downloading APKs directly off the internet. Right now, it only has itself two games. Fortnite and the gotcha title battlebreakers, but still, it is a functional app store, an app that you use to download and install

all other games, including Fortnite, but also apps besides Fortnite. Epic's deal with One Plus, which got killed by Google, wasn't to have Fortnite installed on phones, but to have the Epic Games app installed on phones, an app that's effectively an app store that, in success, can take a big old chunk out of Apple and Google. And you see, that, my friends, is the big lesson here. While Fortnite might be one of the biggest games in the world right now, Epic has their eyes set on a much larger prize, and they're playing a game that's a few years down the line. In the same way that they wrote off the success of Fortnite to launch the Epic Game Store on PC, which now serves as the first real competitor to Steam,

it seems like they're now looking to ride the success of Fortnite to create a similar digital storefront on mobile, to serve as the first real competitors to both Apple and Google. And while that might seem really smart, well, it is, but they're also following a proven model here. In 2004, the thing that Valve was best known for was half, But they use the popularity of Half-Life to get everyone to start using Steam in order to play Half-Life 2 when it came out And now Steam is a massive empire that far far eclipses the success of the Half-Life franchise

Well, I'm sure Epic does want to keep a larger portion of V-buck sales the fact that they took the approach of discounting V-bucks by 20% for all non-app store Seems to indicate that they're less concerned about the short-term profit of Fortnite and are more concerned with building the next big mobile app store Oh and uh by the way this is Not the only brilliant move that Epic is doing. It's just the tip of the iceberg for these guys. While everyone else here is playing four-dimensional chess, Epic is playing in like six dimensions. And I don't think that many people see it coming. It feels like Epic is constantly getting brushed off as just being a company that makes Fortnite. And while Fortnite, his fun and all, the business of Epic is way more interesting.

I'd love to consider this video as the first chapter in a series where I expose the story behind the story. and cover the parts of Epic's game business that just aren't being discussed elsewhere. So please, let me know down in the comments section below if you enjoyed this video and if it's something that you'd be interested in. I honestly think that Epic is one of the smartest and most interesting companies in the world right now. And I'm not just talking about video game companies, but just companies, period. And if people are willing to tune in to hear me talk about it, well, I'd love to have the opportunity to break it all down for you. So comment to let me know if that's something that you'd like to see in the future, and also subscribe, so that way you can know when the next part of that stuff,

series comes out, if and when it comes out. And in the meantime, remember, it's all just a theory. A game theory. Thanks for watching.