Epic v. Google: a battle over Fortnite fees goes to court

After Google attempted to point out that Down Dog does at least explicitly have the ability to contact its customers via email about alternative ways to pay (would that make a difference if they bounced off the higher pricetag or already signed up for a year via Google Play?), the court has dismissed Simon as a witness and wrapped up early for the day.

See you tomorrow!

If I were sitting in the jury box, I’d be very skeptical of Google’s anti-steering rules right now: Simon testified that 28 percent fewer incoming potential users decided to pay for his app at all, after Google forced him to remove an in-app button advertising a way to pay 33 percent less at his website.

“At first we just had to remove the 33 percent button […] they later made us remove some links from our website because we had some links in our app to a FAQ page,” he says.

“As a former Google employee it was shocking to me […] Maybe it was a Google app review team employee who was making a mistake.”

Google is currently trying to destroy his credibility on cross-examination.

Benjamin Simon, co-founder, CEO and president of Yoga Buddhi, is our second witness. He’s behind the app Down Dog, and he was also called as a witness in the Epic v. Apple trial. There, he testified that Apple repeatedly rejected his app for steering — mentioning you could get a discount by signing up outside the app store.

The judge in that case rejected Apple’s so-called anti-steering rule, though that court’s decision is currently on hold.

On Google Play, he charges $60 a year or $10 a month; on his website it’s $40 a year or $8 a month.

Apparently Epic Games Store head Steve Allison said under oath, years ago, that he believes Epic’s fee for its store is for access to Epic’s audience, not just for payment processing.

Google pounced on that. Steam charges a higher revshare for its larger audience and larger collection of games, doesn’t it? Google Play has a larger audience, and more games, so shouldn’t it deserve a higher revshare? Shouldn’t Google deserve money for more than payment processing?

Allison found a way through it, but Google may have made its point.

Google’s lawyer keeps asking Epic Games Store VP if he remembers things he said two years ago, and he keeps saying he doesn’t or it’s more complicated than that, at which point Google shows the whole courtroom that he said something vaguely similar if you really squint.

One attempt that did land: Epic apparently used to warn people away from downloading its game launcher from other sources, saying that Epic’s own website was the only safe place to get it. I wonder if that’ll come up again.

Google objected to Epic Games Store boss Steve Allison telling the jury that the reason it never launched a game store on Android was because “all the warnings that come from the Android platform when you do a direct download were off-putting.”

It sounded like the objection was successful — I couldn’t quite hear what the judge said, but the Google lawyer sat down with a smile.

Also, it’s Google’s turn to question him now.

Allison testifies that after the Epic Game Store launched with an 88/12 split (meaning developers keep 88 percent of the revenue), Valve’s Steam, Microsoft’s Windows Store, and Discord all reacted by giving more money to developers, too.

“In the PC space, is 70/30 still the standard?”

No, says Allison.

1) In their opening statements, both Epic and Google tried to address the scariest-sounding arguments against them. (Epic knew it was the bad guy when it sprung this trap! Google paid off all those developers and deleted evidence!)

2) Epic claims there’s no real Android alternative to the Play Store; Google says there is, but it’s not about Android; Google has to compete with the iPhone.

3) We’re now hearing from the head of Epic’s PC games store, but it kind of makes sense.

Read the rest of our StoryStream below for the details!

Back in 30 or so, I think? That’s what I heard earlier.

“When did Steam first introduce these 30 percent fees?”

“Do you understand where the 70/30 split structure came from?”

“Why did you believe that Steam’s 30 percent share was very high if it simply replicated Walmart’s share?” Epic’s attorney asks.

Allison says Valve simply mimic’d the physical retail split, where retailers bought games at wholesale prices and marked them up 30 percent.

But he helped Telltale relatively easily build its own digital store to keep 95 percent of revenue, he claims. He suggested Epic let developers keep 80 percent (or more) of revenue.

Epic is leading the questioning here, so he’s not on the defense — so far, he’s just explaining how he joined Epic in 2018 to help it launch its PC games store after the rise of Fortnite.

Epic is highlighting a few passages from an email from him to former Epic prez Paul Meegan about his eagerness to join: “Fortnite is blowing up pop culture” and “Fortnite blowing up definitely has created that potential Valve-Counterstrike moment at a scale that is much bigger than when that gave birth to what is now Steam.”

The email later suggests that “Steam is pretty ripe for disruption — if you wanted to take 20-30% paid digital PC market share you could like nobody else can.” Clearly, Epic agreed.

Google’s opening statement is done, but first, it introduced these snippets of internal emails from Epic employees who apparently thought its “Project Liberty” legal trap wasn’t exactly on the level:

“Just planting the nefarious seed now.”

“How do we not look like the bad guys?

“I mean everything we’re attempting is technically a violation of google’s policy, right?” writes one employee. “Yes, but that’s not the question” answers another.

“Nothing prohibited Riot from opening up a competing app store if that’s what they wanted to do.”

Project Banyan, the Samsung deal: “That deal never happened. He’s asking you to hold Google responsible for something it did not do.”

“Is Epic using the chats to distract me from all the evidence I do see?”

“It’s true that Google could have automatically saved all chats for all relevant employees, but just because Google didn’t save some chats didn’t mean it violated antitrust laws.”

“The service fee you see here is exactly the same fee that Epic pays in the Nintendo store, the Xbox store, the Steam store,” says Pomerantz. “All these stores charge a mega developer like Epic the same 30 percent fee.”

He also argues the Play Store and Android provide more value than the simple payment processing fees charged by PayPal or Stripe.

In the Epic v. Apple case, the judge agreed Apple deserved something for the platform — but not necessarily 30 percent. (Nobody can tell the jury that, though.)

“You’re going to hear directly from the person who manages the Apple App Store,” promises Google attorney Glenn Pomerantz.

He says Apple will explain that Google’s Play Store is its primary competitor for apps. Which sounds obvious, but hey, market definition.

Google is continuing to pump the gas on its “Google Play competes with the iPhone, not other Android app stores” argument, pointing out how apps like Clubhouse and ChatGPT launched on the iPhone first.

“Epic’s going to ask you to believe the App Store and the Play Store don’t compete. They’re going to try to break the phone apart as if the app store and the phone don’t relate to each other,” says Pomerantz.

That’s the title of Google’s slide attempting to explain that the 16 steps it takes to sideload Fortnite is a reasonable number.

“A billion people have done it after getting notified of the potential risks,” says Pomerantz about sideloading apps. “That’s because Android users have a real choice.”

Also: “Security is really important to competition — we need to protect users because it’s a critical point of competition between Apple and Android,” he says.

Epic plans to bring up Google’s Anti-Fragmentation Agreements (AFA) during trial, but Google is getting there first with the jury:

“All the AFA did was set up some basic standards so Android phones have things in common — so Android developers could just build one version of the app, saving time and money, so it could run on a Motorola phone or a Nokia phone or an LG phone or any other phone.”

Epic will likely argue that these agreements were a kingmaker for Google’s app store.

But even if the relevant market were Android app stores, Google argues, many developers and consumers have choice that’s just one tap away.

“When they show these charts that show all these downloads from Play and not from the Galaxy Store, that’s what the Samsung phone users are choosing. They’re touching Play. Nothing’s keeping them from touching the Galaxy Store; it’s just what works for them,” argues Google.

“You cannot separate the quality of a phone from the quality of the apps in its app store, and that means Google and Apple compete against each other,” argues Google attorney Glenn Pomerantz.

That’s a shot at the heart of Epic’s case, which is that Google is preventing competition in Android app stores, not mobile phones or app stores in general.

Follow along with our live updates from the trial:

Epic says many of Google’s alleged anticompetitive behavior (like Project Hug) didn’t begin until 2019, so Google didn’t need to do these things to compete — only to protect its alleged monopoly.

Bornstein also says the evidence will show there are “a lot of other ways” to protect against malicious apps than Google’s current practices. (Google will argue that Epic is demanding it remove the security protections that keep you safe.)

(Judge Donato told Epic it was at its time limit, and Epic wrapped up quickly.)

Judge Donato allowed Epic to proactively tell the jury that Google may have something to hide — since Google employees all the way up to CEO Sundar Pichai set some of their chats to auto-delete to avoid them falling into lawyers’ hands.

“All we know is whatever is in the destroyed chats, as bad as the documents are, is worse. Or at least it was worse, before they were destroyed,” Epic attorney Gary Bornstein told the jury.

Epic is now trying to head off Google’s counterclaims before Google gets a chance to present them — by addressing the Project Liberty elephant in the room.

You see, Epic planned the whole legal trap for Google, calling it Project Liberty, where it tried to bypass Google’s (and Apple’s) fees with its own payment system buried in the code.

Epic is admitting this but says the code isn’t as scary as Google will claim: “You will not see any evidence that anyone was harmed by this or even could have been harmed by this.”