Fortnite creator sues Apple, Google over ban

Epic Games, the video game company behind the popular game Fortnite is taking on Apple and Google for removing its game from their app stores because Epic Games used its own in-app payment system. Yahoo Finance's Emily McCormick joins The First Trade with Alexis Christoforous and Brian Sozzi to discuss.

Video Transcript

ALEXIS CHRISTOFOROUS: Epic Games, that's the independent video game company behind the very popular game Fortnite is taking on two tech giants. It is suing Apple and Google for removing its game from their app stores because Epic Games used its own in-app payment system, which the two companies say violates their rules. Now, Epic Games quickly released this commercial. It's a Fortnite spoof of the very popular Apple "1984" Super Bowl commercial-- going back into the archives-- promising it will not go down without a fight.

Emily McCormick has been tracking this one for us all morning. She joins us now. Emily, to me, it seems like there's a lot at stake here. I mean, last year, Fortnite generated $1.8 billion in revenue. So what's at stake, exactly?

EMILY MCCORMICK: Well, Alexis, you're absolutely right. There is a lot at stake here, especially if we think about Fortnite's global gaming community. That's about 350 million players globally. Now, if we think about it, Fortnite isn't just available from the Google Play store, not just available from the Apple App Store, but those are two major distribution centers for the company and for gamers to actually be able to access these games. The data that you cited, the game pulling in nearly $2 billion in 2019, that's according to an earlier analysis from Nielsen's SuperData tracking unit, really speaks to just the size and the breadth of this company and the popularity of the Fortnite franchise as a whole.

Now, if we take a look at Epic Games' argument, the company really framing Apple in particular and Google's practices as being anti-competitive and bad for the consumer as well. Now, Epic Games actually called Apple specifically the, quote, "unwelcome middleman" in the text of that lawsuit that came out yesterday for coming in and taking that 30% commission on these in-app purchases. It also argued that consumers are then forced to pay higher prices, as the developers pass on these costs to the gamers themselves.

But if you also think about what's at stake here for Apple, App Store purchases are an important recurring revenue stream for that company. You know, the company might sell one iPhone to a consumer that last several years. They won't actually need to do an upgrade in the interim. But in that time frame, the consumer might download a number of different apps, including ones like Fortnite, and make these in-app purchases, from which Apple actually takes this cut as a commission. So that is an important revenue stream here for Apple. And because of that, there is a lot at stake here for both companies involved in this lawsuit, Alexis.

BRIAN SOZZI: Emily, if I can't upgrade Fortnite on my phone, does that provide a boost to some of the console makers?

EMILY MCCORMICK: I think that's an interesting theory, but I also think it remains to be seen. And it does require figuring out how long exactly Fortnite is going to be removed from the App Store and the Google Play store. So for a little bit of context, Fortnite isn't just available on these sites. If the user wants to forget it on the Xbox console, they can actually go to the Xbox Marketplace. They can go to the PlayStation Store for Playstation or that Nintendo eShop for the Nintendo Switch. And users are actually able to take in account that they have from their iOS device or from their Android and actually transfer that to any of these other hardware devices.

But at the same time, there is a certain barrier to entry, if you will, just because the consumer would actually need to have that hardware. So it does remain to be seen whether consumers might go out, go to GameStop, maybe make these purchases just in order to continue playing Fortnite. But again, these gamers aren't going to be able to get their upgrades actually through the app store anymore because of that removal, Brian and Alexis.

ALEXIS CHRISTOFOROUS: You know, Epic CEO Tim Sweeney, Emily, was recently giving an interview, and he accused both Apple and Google of being a duopoly. We know that both of those companies have their own form of a cloud gaming platform. Do you think that's part of the reason why they're picking this dispute with Epic Games? It's hard to believe that would be able to go up against something like a Fortnite, but do you think that's part of it?

EMILY MCCORMICK: I think that could be part of it. If we think about Apple, of course, now coming out with the Apple Arcade, if we think about Microsoft coming out with xCloud and Xbox, we know that Apple, in particular, has been historically pretty unfriendly with allowing other cloud gaming platforms and subscription services from coming onto the app store. They've essentially said that those violate their terms of service, that they need to actually be an iOS system so that they can actually approve those games on an individual basis. And of course, a cloud or streaming service wouldn't actually follow those requirements.

So there is quite a bit of siloing that we're seeing among these big tech giants. That's something that's now impacting Epic Games and Fortnite, which to this point, had been complying with iOS's standards. So I think that's certainly something to keep in mind here.

But just pulling back and thinking about this broader lawsuit as a whole, I think it's important to think about the likelihood of who actually ends up winning this suit if it gets settled. And to that point, we had Dan Ives of Wedbush putting out a note last night saying that he believed Apple would win this lawsuit. He wrote, quote, while Epic will play into Fortnite's massive installed base, which is unrivaled, and drum up support through social media, legally, Apple has successfully depended-- defended its app store moat again and again with this time being no different in our opinion. So it's something to watch here as we watch those lawsuits, both for Apple and for Google. Brian and Alexis?

ALEXIS CHRISTOFOROUS: All right, thanks for the breakdown-- messy situation there for fans of Fortnite, All right, Emily McCormick, thank you.