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Apple and Epic Games Spar Over Returning Fortnite to the App Store

SAN FRANCISCO — Apple and Epic Games, the maker of Fortnite, sparred in federal court on Monday over whether to reinstate the popular game in Apple’s App Store, raising antitrust arguments that may reshape a key part of the internet economy and the way people use smartphones.

In a three-hour videoconference hearing in the Northern District of California, Epic laid out its allegations that Apple had abused its power. Their fight began last month when Epic tried collecting its own payments for Fortnite without going through the App Store, breaking Apple’s rules. Apple then booted Fortnite from the App Store; Epic responded by suing Apple, accusing it of violating antitrust laws.

On Monday, Epic said Apple’s unwillingness to let it use its own payment system was anticompetitive and monopolistic. Apple countered that Epic had created a “self-inflicted wound” by not complying with its payment policy. Apple also said Epic had plenty of alternative ways to distribute its games.

Judge Yvonne Gonzalez Rogers concluded the hearing by recommending a jury trial in the case in July. In the coming days, she is expected to rule on whether Apple must allow Fortnite back into its App Store and support Unreal Engine, Epic’s software development tools, in the interim.

The battle is playing out as scrutiny of the power of the tech giants ramps up. Lawmakers, regulators, academics and activists are increasingly taking issue with the reach of Apple, Amazon, Facebook and Google in people’s lives. For months, the Department of Justice, the Federal Trade Commission, state attorneys general and House lawmakers have investigated the clout of the companies and whether they stifle competition and harm consumers.

Those inquiries are set to come to a head soon. The Justice Department is poised to sue Google on claims of anticompetitive search practices, while Congress is expected to release a report of a yearlong antitrust investigation into the big technology platforms.

Much of the scrutiny of Apple has centered on the power it holds over developers in its App Store. Apple and Google control access to apps on virtually all of the world’s smartphones through their iOS and Android operating systems. The companies charge a 30 percent fee for purchases made inside apps in their app stores. And they make their own apps that compete with those of independent developers.

Apple has long said that all app developers are subject to the same rules, and that its commission is fair. But Epic has said Apple’s power creates an unlevel playing field and is unfair. Apple’s 30 percent cut of fees, for instance, is too high a tax on commerce, the games maker has said. It is seeking the option to use its own payment method and publish its own app store within Apple’s and Google’s systems.

Last week, Epic joined with Spotify, Match Group and other independent developers to form a nonprofit coalition to push for changes in the app stores and to “protect the app economy.”

But by taking on Apple so directly and publicly, Epic — a 29-year-old privately held company worth $17.3 billion and based in Cary, N.C. — may be in for the fight of its life. Apple has a market capitalization of nearly $2 trillion and almost unlimited resources. Last month, it cut off its support for Epic’s Unreal Engine, a software development tool that thousands of developers use. That took the smaller company by surprise.

“We recognized the theoretical possibility in advance, but thought it would be so foolish of” Apple to cut off Unreal Engine, Tim Sweeney, Epic’s founder and chief executive, said in an interview last week.

In court on Monday, Judge Gonzalez Rogers sharply criticized Epic’s decision last month to break with Apple’s payment rules. “There are plenty of people in the public who consider you guys heroes for what you did, but it’s still not honest,” she said.

Epic argued that Fortnite’s removal from the App Store had caused it irreparable harm. But Judge Gonzales Rogers noted that Epic’s publicity campaign around the fight, including a parody video of Apple’s famous “1984” ad and a hashtag, #FreeFortnite, had probably increased good will toward the company.

Epic’s attorney, Katherine B. Forrest, a partner at Cravath, Swaine & Moore, defended the publicity campaign.

“When you are taking on the biggest company in the world and you know it’s going to retaliate, you don’t lie down in the street and die,” she said. “You plan very carefully.”

Apple said it would reinstate Fortnite to its App Store only if Epic complied with its rules.

“They don’t need this court’s emergency help — they have the keys to free Fortnite right there in their pocket,” said Apple’s attorney, Theodore J. Boutrous Jr., a partner at Gibson Dunn.

Apple also repeated a longstanding argument that it maintains tight control over its App Store to keep customers’ data secure and private.

Judge Gonzalez Rogers encouraged both companies to consider a jury trial. “It is important enough to understand what real people think,” she said. “Do these security issues concern people or not?”

The battle over the power of app stores has sharpened recently. Even Facebook, which is also under antitrust scrutiny, has piled on. On Friday, the social media giant said Apple had temporarily waived its 30 percent fee on apps that provide virtual events for three months. Facebook lamented that starting next year, it would have to “yet again pay Apple the full 30 percent App Store tax.”

On Monday, Google also said it would no longer allow companies to circumvent its app store fees, as companies like Spotify and Netflix have done in recent years.

In the interview last week, Mr. Sweeney said Epic was “all in” on the fight against Apple. “We’re staking our business on a battle in which we feel is right,” he said.

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Google Demands Its 30% Cut From App Developers in Play Store

OAKLAND, Calif. — Google said it would no longer allow some apps to circumvent its payment system within the Google Play store that provides the company a cut of in-app purchases.

Google said in a blog post on Monday that it was providing “clarity” on billing policies because there was confusion among some developers about what types of transactions require use of its app store’s billing system.

Google has had a policy of taking a 30 percent cut of payments made within apps offered by the Google Play store, but some developers including Netflix and Spotify have bypassed the requirement by prompting users for a credit card to pay them directly. Google said companies had until Sept. 30, 2021, to integrate its billing systems.

The fees collected by Google and Apple’s app stores has become an especially contentious issue in recent months after Epic Games, maker of the popular game Fortnite, sued Apple and Google, claiming they violated antitrust rules with the commissions they charge.

Developers have bristled at the 30 percent cut demanded by Google and Apple, saying it is an inflated digital tax that hobbles their ability to compete. And because the two companies control almost all of the world’s smartphones, many developers gripe that they have no option but to adhere to their policies and pay the commissions.

Google has argued that it allows other companies to operate app stores within its Android software. On Monday, the company said it would make changes in next year’s version of Android to make it easier to use other app stores on its devices without compromising safety.

This is a developing story. It will be updated.

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To Fight Apple and Google, Smaller App Rivals Organize a Coalition

SAN FRANCISCO — For months, complaints from tech companies against Apple’s and Google’s power have grown louder.

Spotify, the music streaming app, criticized Apple for the rules it imposed in the App Store. A founder of the software company Basecamp attacked Apple’s “highway robbery rates” on apps. And last month, Epic Games, maker of the popular game Fortnite, sued Apple and Google, claiming they violated antitrust rules.

Now these app makers are uniting in an unusual show of opposition against Apple and Google and the power they have over their app stores. On Thursday, the smaller companies said they had formed the Coalition for App Fairness, a nonprofit group that plans to push for changes in the app stores and “protect the app economy.” The 13 initial members include Spotify, Basecamp, Epic and Match Group, which has apps like Tinder and Hinge.

“They’ve collectively decided, ‘We’re not alone in this, and maybe what we should do is advocate on behalf of everybody,’” said Sarah Maxwell, a spokeswoman for the group. She added that the new nonprofit would be “a voice for many.”

Scrutiny of the largest tech companies has reached a new intensity. The Department of Justice is expected to file an antitrust case against Google as soon as next week, focused on the company’s dominance in internet search. In July, Congress grilled the chief executives of Google, Apple, Amazon and Facebook about their practices in a high-profile antitrust hearing. And in Europe, regulators have opened a formal antitrust investigation into Apple’s App Store tactics and are preparing to bring antitrust charges against Amazon for abusing its dominance in internet commerce.

For years, smaller rivals were loath to speak up against the mammoth companies for fear of retaliation. But the growing backlash has emboldened them to take action.

Spotify and others have become more vocal. And on Monday, Epic and Apple are set to meet in a virtual courtroom in the Northern District of California to present their cases for whether Fortnite should stay on the App Store, before a trial over the antitrust complaint next year.

At the heart of the new alliance’s effort is opposition to Apple’s and Google’s tight grip on their app stores and the fortunes of the apps in them. The two companies control virtually all of the world’s smartphones through their software and the distribution of apps via their stores. Both also charge a 30 percent fee for payments made inside apps in their systems.

App makers have increasingly taken issue with the payment rules, arguing that a 30 percent fee is a tax that hobbles their ability to compete. In some cases, they have said, they are competing with Apple’s and Google’s own apps and their unfair advantages.

Apple has argued that its fee is standard across online marketplaces.

On Thursday, the coalition published a list of 10 principles, outlined on its website, for what it said were fairer app practices. They include a more transparent process for getting apps approved and the right to communicate directly with their users. The top principle states that developers should not be forced to exclusively use the payments systems of the app store publishers.

Each of the alliance’s members has agreed to contribute an undisclosed membership fee to the effort.

“Apple leverages its platform to give its own services an unfair advantage over competitors,” said Kirsten Daru, vice president and general counsel of Tile, a start-up that makes Bluetooth tracking devices and is part of the new nonprofit. “That’s bad for consumers, competition and innovation.”

Ms. Daru testified to lawmakers this year that Apple had begun making the permissions around Tile’s app more difficult for people to use after it developed a competing feature.

Apple did not immediately have a comment on the coalition; Google didn’t respond to a request for comment.

The coalition came together in recent months after discussions among executives at Tile, Epic, Spotify and Match Group, the four companies that have been most vocal in their opposition to the big tech companies, Ms. Maxwell said.

Some of the conversations took place after Apple and Google booted Fortnite from their app stores last month for violating their payment rules. As Epic’s fight with Apple and Google escalated, Spotify and Match Group spoke out in support of the video game company.

Apple has argued that Epic’s situation “is entirely of Epic’s own making.”

The new coalition could spur more companies to publicly voice longstanding complaints, its members said. Peter Smith, chief executive of, said his cryptocurrency finance company had joined the group partly because it offered strength in numbers.

“Can they ban us all?” he said. “I doubt it.”

Apple has blocked Blockchain’s apps several times, Mr. Smith said. Some customers were so frustrated by the blockages that they posted videos of themselves destroying iPhones with machetes.

“These app stores have gotten so big that they are effectively deciding what customers get access to,” Mr. Smith said.

Tim Sweeney, Epic’s chief executive, said his company had received “vast, vast amounts of communication” from app developers who supported it after it sued. But many are afraid to speak up publicly, he said.

“Apple and Google have infinite ways of retaliating without it being obvious to the outside world” by slowing down apps, reinterpreting rules in negative ways or saying no to new features, Mr. Sweeney said in an interview this week.

He said Epic had a history of standing up for what it thought was right. “But of course,” he added, “it is very stressful to go through, you know, a fight with two companies that are over 200 times our size.”

Adam Satariano contributed reporting from London.

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‘It’s So Essential’: WeChat Ban Makes U.S.-China Standoff Personal

Every day for nearly five years, Juliet Shen’s 94-year-old grandmother in Shanghai has begun her day with a WeChat message to her 40 children and grandchildren scattered across the globe.

“Good morning, everyone!” she writes.

And each time, the diaspora of family members across China, the United States and Central America respond with a cascade of warm replies. Ms. Shen, 27, who lives in Brooklyn, also chats with her parents in China and her brother in Nicaragua in a separate WeChat group, where they share thoughts about their daily meals and other quotidian routines.

On Friday, Ms. Shen called her own meeting with her parents and brother to discuss the U.S. government’s plan to hobble WeChat, the hugely popular messaging service that is a lifeline for many Americans to stay in touch with family and friends in China. When she heard the news about WeChat, Ms. Shen said, “I felt like the wind got knocked out of me. It is the only and easiest way I’ve stayed connected to my family.”

The escalating tensions between the United States and China have long been a largely esoteric issue for many people, something that seemed to be made up of officials bickering with each other over measures like tariffs and items like semiconductors. But the U.S. government’s action to cut off the Chinese-owned WeChat and another app, TikTok, from American app stores at midnight on Sunday has now made the battle intensely personal for millions of people.

The feud is jeopardizing an essential means of communication when Americans are already restricted from traveling to China because of the coronavirus and travel rules. The Commerce Department’s action on Friday focused on new downloads of WeChat and the ability to transfer payments through the app, but those who already have the messaging service are likely to see its service degrade over time because they will be unable to update it with software improvements and security fixes.

Credit…Thomas Peter/Reuters

The Trump administration’s action further decouples the digital systems of China and the United States, creating an increasingly fragmented internet. The United States is imposing the type of exclusionary restrictions that China has long placed on foreign tech companies that tried to operate there. Facebook and Google dominate in most of the world, but they do not offer their services in China. Twitter is also blocked in China.

WeChat, a do-everything social network that is owned by China’s Tencent, was one of the last major bridges connecting the two digital worlds.

“This move is a page ripped straight out of China’s playbook,” said Lan Xuezhao, founding partner of Basis Set Ventures, a venture capital firm in San Francisco.

Ms. Lan, who was born in China and travels there once a year, said that the internet experiences in the two countries had diverged for years, but that this latest escalation was “a new level.” She herself has lots of family in China, including older relatives who all use WeChat and are not prepared to move to a new service, she said.

“There’s no way that people like me don’t use WeChat,” she said. “It’s so essential.”

She added that she planned to use a virtual private network, a service that can disguise the true location of a user, to continue using WeChat in the United States. It’s a common tactic employed by people in China to gain access to Google, YouTube and Facebook.


Credit…Yan Cong for The New York Times

Much has been made of the Trump administration’s moves against TikTok, the viral video app owned by China’s ByteDance, but the Commerce Department said a full ban of TikTok would not take effect till Nov. 12. TikTok is in deal talks with the American software maker Oracle and others, which may give it a reprieve from being blocked.

That means the fallout is more severe for WeChat users. Lindsey Luper, 17, who lives in central New Jersey and has both TikTok and WeChat, said her family used WeChat to send money and canned goods to relatives in China who needed financial support and food. Losing access to the app is “very scary,” she said.

She enjoys TikTok, but she said what was happening with WeChat was much more distressing.

“It’s like comparing a game on your phone to the messages app,” she said. “If both were getting banned, clearly one you need for communication with pretty much everyone in your life. And the other one, it’s unfortunate, but it’s not a necessity in the slightest.”

To prevent a WeChat ban, a group calling itself the U.S. WeChat Users Alliance has filed a motion in a federal court in San Francisco asking for a temporary injunction against the block.

Other people said they were scrambling to find alternatives to WeChat. Sirui Hua, 29, a resident of Jersey City, N.J., told family and friends in China to sign up for QQ, a messaging app also owned by Tencent. He is also planning to use Apple’s FaceTime to video chat with his parents in China. But it is hard to replicate the experience of WeChat, where he has more than 2,000 contacts, he said.

Every Saturday evening, Mr. Hua’s parents, who live in Jiangsu Province near Shanghai, message him — their only child — on WeChat for a one-hour video chat. Lately, they have warned him to stay home and to always wear his mask as coronavirus rates increase in the United States. It’s a reversal from early this year, he said, when he warned his parents to stay home in China because of soaring infection rates there.

During the pandemic, WeChat has been a particularly important line of connection, he said. Mr. Hua has his WeChat desktop app open during the day, getting messages from dozens of friends in China. His phone app is where he sees the app’s scrolling Moments feed, similar to a Facebook Timeline, which keeps him updated on how they are doing.

Other WeChat users in the United States rely on the service to keep in touch with customers or maintain important cultural traditions.

Hong Allen, 53, works for Usana Health Sciences, a nutritional and dietary supplement company that is based in Salt Lake City and has operations in China. Most of her clients and customers are in China, and she uses WeChat to communicate with them. Now, she is afraid she will lose all her contacts.

“I really don’t know what to do,” said Ms. Allen, a resident of Vancouver, Wash. “How do I live?”

Huajin Wang, 43, of Pittsburgh, uses WeChat to send a virtual red envelope of money — a Chinese tradition of giving a cash gift in red packets for special occasions or holidays — to friends and family. The U.S. restrictions would prevent that small but meaningful gesture, she said.

“It’s just a small amount, like 50 cents a person, but it is a tradition and sending it make me feel connected to these traditions,” Ms. Wang said.

Ms. Shen said she and her family decided to fall back on email and Skype for communication, the tools they used before WeChat became a daily fixture for them. She added that the feud between China and the United States had slowly pulled her family apart.

Her father, a U.S. permanent resident, was held by Transportation Security Administration officials while traveling to China six months ago, and his laptop was confiscated, she said. Her parents, who have lived in the United States since the 1980s, were on their way to take care of their aging parents in Beijing and Shanghai. Now they are afraid they will face difficulties returning.

“It’s an impossible choice,” Ms. Shen said. “They feel pressure to declare loyalty. It feels like no matter what we do, we will be punished.”

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Explaining Trump Ban on TikTok, WeChat

The Trump administration is pushing forward with its plan to ban the Chinese social media apps TikTok and WeChat from American app stores.

The Commerce Department on Friday announced that beginning on Sunday, it would prohibit downloads of WeChat and TikTok in U.S. app stores, and ban transactions made through WeChat. The Commerce Department said the move would protect Americans for national security reasons.

So what does that mean for you?

The details of the prohibition are set to have a significant impact on people who use TikTok and WeChat. TikTok, which has more than 50 million active users in the United States, according to the research firm App Annie, is mostly popular here among teenagers who post short dance videos; WeChat, which has about 3.5 million active users here, is a messaging app with a host of features including a mobile wallet service.

Here’s what you need to know.

The immediate effects of the action: As of Sunday, Americans will no longer be able to download TikTok or WeChat from the Apple and Google Play app stores. WeChat users in the United States will not be able to use the messaging app for sending payments, among other features.

Credit…Thomas Peter/Reuters

If you have TikTok downloaded on your phone, you are fine — for now. The Commerce Department will wait until Nov. 12 — after the election — to pursue a full ban on TikTok.

However, if you have deleted the TikTok app from your phone, beginning on Sunday you won’t be able to download it again, even if you have a TikTok account. You also won’t be able to receive any software updates that fix bugs and add features.

The prohibition is more immediate for WeChat users. Starting on Sunday, not only will you not be able to download the WeChat app or software updates from the App Store or Google Play, you also won’t be able to send payments to family members or businesses that use WeChat as a payment method.

The Commerce Department also forbade some business transactions between WeChat and American entities, including companies that provide internet hosting services for WeChat — in other words, the infrastructure that makes WeChat work well in the United States.

Yes. Apps like WeChat and TikTok are not static. They are live internet services that require maintenance, which include security and bug fixes, and if you stop receiving updates, they may eventually cease to work properly. So even if you are grandfathered in, so to speak, this type of prohibition could effectively ban you from using the apps alongside other TikTok and WeChat users around the globe. (Best-case scenario, the apps will continue to work, but poorly.)

The situation may be even more dire for WeChat users. Because of the ban on transactions between American businesses and WeChat, the service may begin to degrade on Sunday. Messages may begin sending slowly or even time out.

For TikTok users, that service degradation won’t happen unless a full ban is implemented on Nov. 12.

Nothing practical. TikTok is attempting to reach a deal with Oracle, an American tech company, and others before November to avoid a ban.

Google Android users may try to “sideload” future versions of the WeChat and TikTok apps on to their devices, a process that involves changing some security settings to download apps from outside Google’s official app store.

Apple phones also have methods to install unauthorized applications. But sideloading and installing apps through unofficial channels is impractical, because it can compromise device security, and it is not simple for many people to do.

Apple and Google users could also try to download the apps from foreign app stores by traveling to other countries. Or they could use a virtual private network, a service that creates a virtual tunnel to shield your browsing information from your internet service provider, to manipulate their device location. Again, this is impractical.

Ana Swanson contributed reporting from Washington.

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Ant Group, the Alibaba Payment Affiliate, Files to Go Public

Ant Group, the payment- and finance-focused sister company of the Chinese e-commerce titan Alibaba, filed paperwork on Tuesday to list shares in Hong Kong and Shanghai, the first steps toward what could be a blockbuster initial public offering.

Online finance has exploded in China in recent years, and Ant’s flagship service, Alipay, has been a key driver. Relatively few people in China had credit cards when e-retail and other internet services began taking off in the country. That has helped app-based payments become far more ubiquitous in China than they are in the West.

In China, $67 trillion in transactions were conducted on mobile devices in 2018, according to estimates by the research firm Bernstein. Many of those took place through Alipay and WeChat, a rival digital wallet and messaging app owned by another Chinese internet giant, Tencent.

Once people were using Alipay to stash their cash and pay for online purchases, Ant could begin offering them other kinds of services through the app, including personal loans and insurance policies. Alipay says it has 900 million users in China.

“That super-app approach — where you create an ecosystem that’s enabled by payments, and then you layer on the other products and services both financial and nonfinancial — is something that no other company around the world has successfully done,” said Zennon Kapron, the director of Kapronasia, a research firm focused on the financial technology industry.

Ant’s share sale is likely to be big. The company raised funding two years ago at a valuation of $150 billion, which made it one of the most richly valued private businesses in the world.

The company’s filings on Tuesday did not indicate how much it hoped to raise through the share sales. Investors did, however, get their first detailed look at key company financials.

Ant said it generated $17 billion in revenue last year, a jump of more than 40 percent from 2018. More than half of its 2019 revenue came from financial services such as lending, wealth management and insurance that were offered through Alipay. The fees it earned from processing payments and serving merchants accounted for almost all of the rest.

The company said that transactions worth $16 trillion took place on Alipay last year, a one-fifth increase from the year before. It also noted that the platform had enabled $290 billion in credit to individuals and small businesses, as well as $500 billion in investments.

Unlike some other fast-growing tech companies that have listed shares in recent years, Ant is not losing money. It said its profit last year was around $2.5 billion.

Ant’s offering signals confidence in Hong Kong’s status as a financial hub at a time of upheaval. The central authorities in Beijing have used a new national security law to clamp down on antigovernment protests in Hong Kong, a Chinese territory, and in the process have cast doubt on its status as freethinking and laissez-faire. The city has also been strained by waves of coronavirus infections.

Ant’s choice of Chinese exchanges over American ones is meant to capitalize on the interest of local investors, for whom Alipay is a household name. Alibaba held a giant share sale in New York in 2014 and a second listing in Hong Kong last year.

But it also reflects the uneasy state of affairs for Chinese technology companies in the United States. President Trump has vowed to restrict apps including WeChat and TikTok in the name of safeguarding Americans from data gathering by the Chinese Communist Party.

Last week, Alibaba’s chief executive, Daniel Zhang, referred to the situation between Chinese companies and the Trump administration as “fluid.”

“We are closely monitoring the latest shift in U.S. government policies,” Mr. Zhang said during a conference call with analysts.

Alibaba created Alipay in 2004 as a tool for building trust between buyers and sellers on its online bazaars. At the time, internet retail was nascent in China. By holding payments in escrow, Alipay helped assure customers that they would not lose money if merchants turned out to be scammers.

Over time, Alipay evolved into an all-purpose payment tool, and Alibaba spun it out as a separate entity, which was rebranded as Ant Financial in 2014. The two companies had a profit-sharing deal until Alibaba acquired a one-third stake in Ant last year.

Recently, the company has begun dropping the “financial” from its English name, saying it wants to emphasize its technology.

Ant has sought to broaden its global reach by partnering with payment companies in India, Southeast Asia and Britain. But its ambitions in one giant market have been thwarted by politics. In 2018, it broke off talks to buy the American money transfer company MoneyGram after the deal failed to win the blessing of a Washington committee that scrutinizes investment transactions for national security risks.

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How Apple’s 30% App Store Cut Became a Boon and a Headache

OAKLAND, Calif. — Twelve years ago, Apple introduced the App Store, a peculiar online marketplace for the year-old iPhone. It had 500 offerings. Apple told app makers it would take a 30 percent cut of their sales, and few complained.

Today, the App Store is one of the world’s largest centers of commerce, facilitating half a trillion dollars in sales last year alone. And Apple still takes 30 percent of many apps’ sales.

That commission has proved hugely consequential for Apple. It has been the primary driver of growth in recent years for a company that has nearly $275 billion in annual sales. And it has created some of Apple’s biggest headaches, drawing antitrust scrutiny, fury from app makers and lawsuits from consumers and partners.

The headaches intensified this week when Epic Games, the maker of Fortnite, arguably the world’s most popular video game, sued both Apple and Google, accusing the companies of breaking antitrust laws by forcing app makers to pay their 30 percent fees. The lawsuits followed Apple and Google’s removal of Fortnite from their app stores because Epic encouraged users to pay it directly, rather than through Apple or Google, to avoid their fees.

“I think we’re realizing that 30 percent is way too much,” said Phillip Shoemaker, a former senior App Store executive, who left Apple in 2016. Credit card companies charge roughly 3 percent to process payments. “It should be closer to that,” he said.

That is the rising sentiment among app developers, consumers and regulators. Apple and Google, which together are worth more than $3 trillion, make the software that backs virtually all of the world’s smartphones. That dominance has allowed them to keep their commissions high.

But now that the tech giants’ smartphones have become the only way other businesses reach millions of people, those businesses are increasingly pleading: Do you really need a third of my sales?

“There are very few companies out there that have a 30 percent profit margin,” said Andy Yen, the chief executive of ProtonMail, an email service. “The only way we can support this fee is by passing that cost on to customers.” ProtonMail charges 30 percent less for subscriptions purchased on its website, but when the company advertised that to its iPhone users, Apple restricted its app.

Likewise, Spotify increased its monthly subscription to $13 from $10 in 2014 to account for Apple’s fee. A year later, Apple introduced a competing music service — priced at $10. To compete, Spotify opted out of Apple’s payment system, enabling it to avoid the commission. Now customers can still use Spotify’s app, but they must subscribe on Spotify’s website. Yet Apple bars Spotify from saying that in its iPhone app.

“Either we lose because we have to pay them a 30 percent tax just to operate and raise our prices for consumers as a result, or we lose because it becomes much more expensive to convert users from free to premium,” Horacio Gutierrez, Spotify’s chief legal officer, told reporters in June after European regulators opened an antitrust investigation into Apple based on Spotify’s complaint.

Even consumers have spoken up. An enormous class-action lawsuit accuses Apple of breaking antitrust laws to enforce its commission, inflating app prices for iPhone users. The Supreme Court ruled last year the lawsuit could proceed.

On Friday, Facebook chimed in, complaining that Apple is collecting 30 percent of sales on its new live-events service, where people can sell expert talks, fitness classes and cooking tutorials on Facebook’s app. Facebook said it wanted to process the payments itself so it could pass on 100 percent of the sales to the small businesses selling the talks and classes, but Apple declined.

Apple argues that it has actually cut software developers a break. Tim Cook, Apple’s chief executive, suggested to Congress last month that when software was still sold in brick-and-mortar stores, 50 percent to 70 percent of the retail price went to middlemen.

“In the more than a decade since the App Store debuted, we have never raised the commission or added a single fee,” he told lawmakers. “The App Store evolves with the times, and every change we have made has been in the direction of providing a better experience for our users and a compelling business opportunity for developers.”

For Google, the stakes are lower. It allows people to download apps from outside of its Android app store, meaning app makers like Epic have ample ways to still reach consumers using Android devices. And Google’s vast online advertising business makes its app store a much smaller portion of its overall business.

Over the past year, Apple has collected $19 billion of the $63.4 billion in sales of digital goods and services on iPhone and iPad apps, according to Sensor Tower, an app analytics firm. Google collected $10 billion of the $33.8 billion in similar spending on its app store, Sensor Tower said.

Before Mr. Cook’s testimony to Congress, at a House hearing focused on the power of Big Tech, Apple commissioned a study that showed its cut was in line with what many other platforms charged for similar distribution, including the app stores from Google, Microsoft and Samsung, and the game stores from Nintendo, Sony’s PlayStation and Microsoft’s Xbox.

Amazon’s Twitch gaming platform collects 50 percent, according to the study. By comparison, Amazon, eBay and Walmart charge 6 percent to 17 percent for sales of goods on their websites, the study said.

What the study didn’t note: Apple popularized the 30 percent cut.

It applied that rate on any purchases of an app in 2008, and then a year later on any transactions inside of apps for digital goods and services, such as a virtual currency in a game or a subscription to a music, TV or dating app. Apple does not take a cut of apps’ sales of advertising or physicals goods, and thus most apps don’t pay a fee.

So how did Apple arrive at 30 percent?

There was some precedent; Apple had been charging roughly the same commission on music sales on its iTunes software. For each 99 cent song it sold, Apple passed on 72 cents to major music labels and 62 cents to independent labels, according to The Wall Street Journal in 2007.

When Apple began setting rules for the App Store, “30 percent was just kind of a no-brainer,” said Mr. Shoemaker, who joined the company in early 2009. “It was, ‘Of course that’s what we’re going to use.’ Nobody questioned it.”

In 2008, when Apple introduced the App Store, the company’s late co-founder Steve Jobs told The New York Times: “We are not trying to be business partners” with app developers. Rather, he added, Apple wanted to “sell more iPhones.”

At the time, there was far less pushback from app developers, in part because the App Store was so nascent and the digital transactions were complicated without Apple’s help.

With Apple, “it was pretty much one click and that was revolutionary,” Mr. Shoemaker said. “So people were willing to bite that 30 percent. But now, those kinds of tools are a dime a dozen.”

Indeed, many companies now protesting Apple’s fee seem willing to pay something, just not 30 percent.

Epic made $1.8 billion on Fortnite last year, in large part by selling digital currency that players need to buy new features inside the game. The game itself is free.

On Thursday, Epic started its confrontation with the tech giants by allowing Fortnite users to pay it directly in its iPhone and Android apps, rather than via Apple or Google’s payment systems.

Epic also offered a 20 percent discount on all purchases that used its payment system. That meant that if Apple and Google charged a 10 percent commission, their price would be about the same as the one Epic was offering its customers.

Epic has also shown that running a profitable app store is possible with a lower commission. It runs its own online marketplace for other developers to distribute their games on desktop computers. In that store, it takes 12 percent of sales — and still makes a profit of 5 percent to 7 percent, the company said.

Yet at Apple, the discussion has long been about how to maximize profits. In 2011, Apple executives were discussing how much to charge content providers like Hulu and the NBA for new customers who signed up via Apple TV, according to internal emails provided to House lawmakers investigating Apple.

Jai Chulani, one Apple executive, said in an email to colleagues that he worried that if Apple charged 30 percent of the first year of a subscription “we may be leaving money on the table.”

Eddy Cue, one of Apple’s most senior executives, responded with a better idea: “For recurring subscriptions, we should ask for 40%.”

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Fortnite Creator Sues Apple and Google After Ban From App Stores

Apple’s and Google’s spats with app developers over their cut of revenues exploded into a high-stakes clash on Thursday when the tech giants kicked the wildly popular game Fortnite out of their app stores and the game’s maker hit back with lawsuits.

The fight began on Thursday morning with a clear provocation. Epic Games, the maker of Fortnite, started encouraging Fortnite’s mobile-app users to pay it directly, rather than through Apple or Google. The companies require that they handle all such app payments, so they can collect a 30 percent commission, a policy that has been at the center of antitrust complaints against the companies.

Hours later, Apple responded, removing the Fortnite app from its App Store.

“Epic enabled a feature in its app which was not reviewed or approved by Apple, and they did so with the express intent of violating the App Store guidelines,” Apple said in a statement. “We will make every effort to work with Epic to resolve these violations so they can return Fortnite to the App Store.”

Within an hour, Epic opened a multifront war against Apple that appeared months in the making.

First, it sued Apple in federal court, accusing the company of violating antitrust laws by forcing developers to use its payment systems.

“Apple’s removal of Fortnite is yet another example of Apple flexing its enormous power in order to impose unreasonable restraints and unlawfully maintain its 100% monopoly over the” market for in-app payments on iPhones, Epic said in its 62-page lawsuit.

Then Epic rolled out a sophisticated public-relations campaign that depicted Apple, one of the industry’s most image-conscious companies, as the stodgy old guard trying to stifle the upstart. To do so, it used Apple’s own imagery against it, mimicking Apple’s iconic “1984” ad from its own fight against IBM 36 years ago. This time, Fortnite characters were defying Apple’s totalitarian regime. Within hours, #FreeFortnite was the top trend on Twitter.

Later on Thursday, Google also removed the Fortnite app from its official Android app store, the Google Play Store, saying the app violated Google’s policies. Epic replied with a similar lawsuit.

Apple’s confrontation with Epic has much higher stakes than Google’s because Fortnite remains available for Android devices. Google’s Android software allows people to download apps outside Google’s app store, unlike Apple’s approach with iPhones, and Epic had added Fortnite to the Play store only in April.

In Epic, Apple has met arguably its toughest adversary in years. The game maker has calculated exactly how to hit Apple where it hurts: by making iPhones less attractive and Apple less cool.

Epic, a North Carolina company that is valued at roughly $17 billion and is partly owned by the Chinese internet giant Tencent, now appears poised to sacrifice millions of dollars in revenue in a fight that will keep Fortnite off iPhones. That immediately makes Apple’s flagship devices far less attractive to millions of people across the world — just ahead of Apple’s most prominent iPhone introduction in years.

Apple, on the verge of a $2 trillion valuation as its stock has soared in recent weeks, now faces a battle with one of its most lucrative partners over a crucial issue for antitrust regulators investigating the power of Big Tech.

How Apple polices the App Store has drawn intense scrutiny over the past year. App developers have complained that Apple is taking an unfair cut of their business while, in many cases, also competing with their apps with its own offerings.

European regulators, Justice Department officials and state attorneys general are all investigating Apple’s control over the App Store, and House lawmakers interrogated Apple’s chief executive, Tim Cook, on the issue in a hearing last month. Google has faced more scrutiny for other issues, in large part because of its more liberal app policy on Android.

For Apple, the world’s most valuable company, there are few easy options. Apple has largely staked its future on its services business, which has become its second-largest source of revenue after sales of the iPhone, at $51.7 billion over the past year. But that business is mostly built on its cut of other apps’ sales, so enforcing its 30 percent commission is crucial to keeping its business growing.

As a result, backing down to Epic would set a dangerous precedent for Apple, while standing up to the gaming company would prolong a fight that risks shrinking its iPhone sales and damaging its carefully crafted image.

In practical terms, kicking Fortnite out of the App Store means that new users will not be able to download the app, but it will continue to work on iPhones that already have the app installed. Yet Epic now cannot update the Fortnite app, meaning it will eventually become obsolete as Apple updates the iPhone software.

For Android users, there will be much less of an impact; they can still download Fortnite from Epic’s website. As a result, hordes of Fortnite fans could now favor Google’s devices over Apple’s.

Suing Apple, in particular, serves two goals for Epic: winning in legal court and winning in the court of public opinion, said Rebecca Haw Allensworth, a professor of antitrust at Vanderbilt Law School. Epic is more likely to succeed in the latter, she said. “There is growing business pressure against Apple,” she said, noting an antitrust case would be more complicated and difficult to win.

Fortnite has become an enormous enterprise, and announced in May that it had more than 350 million registered players. The game generated $1.8 billion in revenue last year, according to analysis firm SuperData.

Since March 2018, Fortnite’s app has been downloaded more than 133 million times on iPhones and iPads and brought in roughly $1.2 billion, according to Sensor Tower, an app analytics firm. Apple has taken $360 million of that revenue as part of its commission, Sensor Tower said.

On Android devices, people have been much more likely to download Fortnite from outside Google’s Play Store. Since April, Fortnite’s app has been downloaded 11 million times on the Play Store and generated about $10 million in sales, according to Sensor Tower. Google took about $3 million of that.

“Epic could likely have worked out a privileged deal with Apple — as other big tech companies have,” said Matthew Ball, the managing partner at Epyllion Industries, which operates a venture capital fund. “Instead, it is fighting for the marketplace.”

Apple has had a series of recent spats with app makers. The music service Spotify has complained to regulators in Europe and the United States. Blix, which makes an email app that competes with Apple’s service, also sued Apple on antitrust grounds last year. And last week, Microsoft ended a pilot of its mobile gaming app and Facebook watered down its gaming app on iPhones because of Apple’s rules.

Apple has said that all app developers are subject to the same rules, and that its commission is fair. Apple has argued that it spends billions of dollars on the App Store and iPhone technology, creating business opportunities for companies like Epic.

“Epic has had apps on the App Store for a decade, and have benefited from the App Store ecosystem, including its tools, testing, and distribution that Apple provides to all developers,” Apple said in a statement on Thursday. “The fact that their business interests now lead them to push for a special arrangement does not change the fact that these guidelines create a level playing field for all developers and make the store safe for all users.”

In past disputes that led to bad publicity, Apple tweaked its rules to let complaining app developers back into the App Store. But Epic’s fights appears to be about more than just its app.

In 2018, Epic released its own app store, and began charging developers 12 percent. Tim Sweeney, the chief executive and founder of Epic, said in an interview last month that the Epic Games Store had processed more than $1 billion in transactions. Even with the lower fee, he said, Epic still makes a profit of 5 to 7 percent.

Mr. Sweeney said that he felt obligated to “make this industry a better and fairer place.”

“It’s critical to the future of humanity,” he said. “Otherwise you have these corporations who control all commerce and all speech.”

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Trump’s Orders on WeChat and TikTok Are Uncertain. That May Be the Point.

WASHINGTON — President Trump’s sudden decision late Thursday to restrict two popular Chinese social media services from the United States has created confusion about how broad the bans on doing business with China could ultimately be.

That confusion may be part of the point.

Citing national security concerns, the Trump administration announced that it would bar people and property within U.S. jurisdictions from carrying out “transactions” with WeChat and TikTok, the two Chinese-owned apps, after 45 days. But the White House did not define what those transactions included, leaving companies bewildered about whether they may be forced to fundamentally change their business within a matter of weeks.

Stoking this kind of uncertainty is something that the Trump administration has not been apologetic about in the past. Some White House advisers see it as a feature rather than a bug of their policy process, arguing that the risk of further crackdowns will dissuade American companies from operating in China.

That, they said, is a good thing because Chinese policies like “civil-military fusion” have undermined the ability of both Chinese and American companies to operate independently in China.

“Mobile apps like TikTok and WeChat that collect your personal or business information and that can track, surveil or monitor your movements put you and your family in the cross hairs of an Orwellian regime,” Peter Navarro, the White House director of trade and manufacturing policy, said in an interview. He posed a question to the mothers of America, “It’s 10 p.m. Does the Chinese Communist Party know where your children are at?”

Mr. Navarro acknowledged that some multinationals might oppose the measures, but said that “the American public is tired of the corporate greed that, before the Age of Trump, sent our jobs overseas and now endangers our national security and privacy.”

Critics countered that the Trump administration’s unpredictable actions threaten to compromise the secure business environment that the United States is known for, in which rule of law prevails and the government rarely interferes in the market.

“The government inserting this much uncertainty into the business landscape and into the user landscape is deeply problematic,” said Matt Perault, a professor of Duke University’s Center for Science & Technology Policy.

On Friday, TikTok, which is owned by Chinese internet conglomerate ByteDance, said in a statement that it was “shocked by the recent executive order, which was issued without any due process.” It said it had sought to work with the U.S. government for nearly a year but instead found the White House “paid no attention to facts, dictated terms of an agreement without going through standard legal processes, and tried to insert itself into negotiations between private businesses.”

A spokesman for Tencent, the parent company of WeChat, which is widely used in China and around the world as a messaging and payments app, said it was “reviewing the executive order to get a full understanding.”

The Trump administration has steadily ramped up its actions in a broader economic and geopolitical fight with China, starting with a trade war that put tariffs on hundreds of billions of dollars of Chinese products in 2018 and 2019. It also introduced restrictions on other kinds of Chinese technology, including clamping down on exports to the Chinese telecom giant Huawei.

The sudden, vaguely worded order from the White House on Thursday night, which came without further explanation or a media briefing, followed a familiar model for some of the other policy announcements on China from the Trump administration. Many have left multinational companies in suspense for days or weeks about the specifics.

With policy moves like tariffs and export controls, the Trump administration wielded uncertainty as a source of leverage, using it to frighten companies into compliance and leaving themselves room to back down or escalate the situation.

The executive orders on WeChat and TikTok leave the determination of what constitutes a “transaction” up to the secretary of commerce, Wilbur Ross. According to the language of the orders, Mr. Ross will make that determination in 45 days, meaning it would not be clear to businesses what will be included in the ban until it actually goes into effect.

“It may be that it’s won’t be nearly as bad as people might fear,” said Jason M. Waite, a partner at the law firm Alston & Bird, adding that the administration might discover legal or practical concerns with putting the order in place in the interim. “It is a 45-day surprise.”

People familiar with the deliberations said administration officials clearly intended to target the presence of WeChat and TikTok on the Google and Apple app stores, cutting off downloads and updates for the Chinese apps. It is unclear if the restrictions could affect other parts of the Chinese companies’ sprawling portfolios and business dealings, particularly for Tencent.

The order appears to bar transactions with Tencent or its subsidiaries that are specifically related to WeChat. That suggests it would not affect Tencent’s sprawling investment relationships and business dealings with companies like Tesla; the Snapchat owner Snap; the National Basketball Association; Activision Blizzard, the maker of video game World of Warcraft; and Epic Games, the maker of Fortnite.

But many American companies, including Visa, Mastercard and Starbucks, have more direct partnerships with WeChat in China to use its payment platform and e-commerce functions. Whether those kinds of activities would be barred in China or around the world, or whether phone makers like Apple would be allowed to sell mobile phones installed with WeChat, remain up in the air.

“The Trump administration has left itself a lot of wiggle room in terms of what is covered, how quickly prohibitions will be carried out, and how the order will be enforced,” said Scott Kennedy, a China expert at the Center for Strategic and International Relations.

Other Chinese tech companies could find themselves as the next target of the Trump administration. U.S. officials viewed the executive orders on TikTok and WeChat as a template that could be applied to other Chinese companies, and some have discussed whether services like Alibaba’s Alipay pose a similar national security concern, according to people with knowledge of the matter.

“There’s definitely a chilling effect,” said Samm Sacks, a fellow in cybersecurity policy and China’s digital economy fellow at New America, a think tank. But she said that companies like Alibaba and Tencent had long understood the risks of operating in the United States.

“This latest move may have come as a surprise, but their real growth strategies have never focused in the U.S.,” she said. “They’ve always known it was a hostile environment.”

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Enlisted Late, Online Lenders Still Must Wait to Help Speed Up Stimulus

WASHINGTON — When the federal government opened its $349 billion small-business lending program last Friday, start-ups that specialize in giving such loans were eager to accept applications and send money to the restaurants, gyms and hair salons hit hard by the coronavirus shutdown.Yet these online lenders were locked out of the …

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