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Microsoft Takes A Swing At Rival Apple Over Gaming Dispute

In the not-quite-so David versus Goliath battle between Epic Games and Apple (NASDAQ: AAPL) — Epic isn’t exactly a pauper — twists and turns appear to be the norm. Having previously received praise from the likes of SpotifyMatch.com, and even Facebook, Epic Games now has an ally almost as powerful as Apple itself: 

Microsoft (NASDAQ: MSFT)!

This article was originally published on MyWallSt Investing for Everyone.

 

The story so far

Before we get into this, let’s recap. This is a bumpy ride, so buckle up buckaroo: 

  • On August 13, Apple and Google removed Epic-owned ‘Fortnite’ from their respective app stores over alleged “violation of guidelines” surrounding in-app payments.
  • That same day, Epic released their “Nineteen Eighty Fornite” trailer parodying Apple’s own famous ‘1984’ ad campaign. 
  • On Monday, August 17, Epic filed a lawsuit against the iPhone-maker, citing anti-competitive practices, specifically Apple’s 30% cut it takes from all in-app purchases. 
  • Epic proceeded to try to form a coalition with sympathetic companies in a bid to launch a smear campaign against Apple. 
  • Apple, of course, has no intention of backing down and has since threatened to remove all of Epic’s features from the App Store, including its Unreal Engine, and remove its developer license. 
  • Since then it has been one big ‘he said – she said’ with the likely outcome being a courtroom brawl. However, this will likely drag out for months. 

 

Why is Microsoft getting involved?

Good question! Microsoft is jumping to Epic’s defense as it relies heavily on the company’s Unreal Engine gaming software for its Xbox series — of which a new generation will be released later this year. 

Specifically referencing the removal of Epic as a developer, Xbox head Phil Spencer tweeted: “Ensuring that Epic has access to the latest Apple technology is the right thing for game developers and gamers.”

The full statement went on to state that “Apple’s discontinuation of Epic’s ability to develop and support Unreal Engine for iOS or macOS will harm game creators and gamers.”

Microsoft is no stranger to Apple’s strict App Store policies, having previously criticized the company for not allowing Xbox game streaming on iPhones, remarking that it was the only major platform to “deny consumers from cloud gaming and game subscription services”. This latest development with Epic gives Microsoft a clear shot at targeting its rivals’ policies that have prevented its own gaming expansion in recent years. 

Interestingly though, Microsoft also takes between a 15%-30% cut of all software sales on its Windows and Xbox stores, but they probably won’t bring that up. 

Is Apple in trouble?

Being the world’s most valuable company has its perks, but it doesn’t make you invincible as Apple could soon find out. Ironically enough, it looks to be heading down the same path that Microsoft took in the late ‘90s when it killed off Netscape. 

This resulted in a dragged-out antitrust hearing and although Microsoft was not forced to break up, it did pay a lot of money and lost a lot of power in the browser industry, effectively giving up its monopoly. Microsoft’s stock remained flat for almost 15 years following this event. 

 

Apple could be abusing its shared duopoly over in-app purchases — shared with Google — and tends to bundle all of its own products, Mail, Safari, Calendar, etc. in its phones, much like Microsoft did with Internet Explorer in the ‘90s, leading to its antitrust lawsuit. Now, its App Store is coming under significant attack, having been sued by Spotify last year over these very policies. 

The below image from Forbes sums up its App Store stranglehold nicely:

 

There is still a long road ahead for this story, but Apple may well give into growing developer demands for three reasons.

  • It is fresh off the back of an antitrust investigation into its anti-competitive behavior. 
  • Its next update, iOS 14, will give its users the ability to replace Apple’s default apps, such as Safari and Apple Music.
  • It is becoming ever more reliant on its services segment which brought in over $20 billion in revenue for the first half of 2020. It can’t afford an attack on this growing revenue stream.

 

 

 

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