Court rules against Google in Epic antitrust case

https://slate.com/technology/2023/12/google-epic-games-antitrust-fortnite-app-store-monopoly.html

This is going to get appealed all the way to the supreme court, of course. But I'm curious if those 30% surcharges might get reduced in the meantime?!

Comments

Gamer

Didn’t understand half of all that’s

ahmynuts

I think what it's talking about is how they get 30% of the profits and not that the prices are marked up by 30% its the whole reason why the summoners market exists

jdschw

Yeah. Kabam isn't marking their prices up by 30%, but they have to give 30% of the revenue on everything players buy through the app to Google or Apple.

Which means, effectively, they need to charge us more in order to hit a revenue target.

So if Google and Apple do in fact lose this case in the long run, in-app prices might go down for us. (Or perhaps just not go up for a while.)

jdschw

But also, to be clear, this post is discussing the industry in general, not anything specific about Kabam. I just thought this case would be an interesting read for this community. (Given the disagrees on my OP, perhaps I was wrong.)

Doctorwho13

People get disagrees for saying snow is cold. A “disagree” in and of itself should never be a cause for concern alone. Say your piece.

ahmynuts

Im so confused because you agreed with me and said the correct thing in the first sentence and then you immediately switched up and said the exact wrong thing in the sentence after that lol

BringPopcorn

It won't change a thing, developers will charge the same and keep a larger profit.
The summoner store open, they give u EXTRA PIXELS, for their larger margin.

jdschw

Maybe I can clarify what I meant: Since an app company needs to give 30% of their revenue to Google or Apple, if they need to make a certain net revenue for themselves, then their prices to the consumer need to account for *both* their own revenue target *and* the 30% additional revenue that they need to pay Google/Apple.

So, at least hypothetically, if Google/Apple lose these cases, they would not be able to charge these monopolistic 30% fees, which means companies wouldn't need to account for that 30% when they are figuring out the price points they need to charge in order to make their own sales targets.

@BringPopcorn makes a fair point that existing apps would likely just take the additional profit rather than reducing their prices. But, in the long run, as new apps enter the market that set their prices based on revenue targets without having to account for that extra 30% margin, the prices charged across all apps might go down.

DNA3000

The web store probably takes something on the order of 8% or thereabouts. If you want to know what prices would look like if the Apple and Google surcharges were lowered, look there.

Doctorwho13

I could be missing something or there’s a nuance I’m unaware of ; but are not the web store prices and in app prices the same ?

I.E $100 for an Odin in either location ?

BringPopcorn

Price yes, quantity of units no (therefore my remark on the pixel thing)

DNA3000

No, you are not missing anything.

Prices in general don't change in that manner. Kabam is unlikely to change the price of an Odin from 99.99 USD to 75.59 USD.

There's a couple things going on here. Game economies aren't run like ordinary economies because game economies are balanced around considerations most real world economies aren't. And there's the fact that most of the time prices aren't set continuously: prices are often aligned to "nice" numbers. 99.99 is way more common than 86.47. And finally, prices tend to have a lot of friction behind them. The price of potatoes might fluctuate, but the price of McDonald's french fries doesn't.

I would guess most people would infer that the reason why the web store offers more units for the same price is because the web store cut is lower, so Kabam can "afford" to put more units in there to compensate. But that's almost certainly not the case. Rather, the web store prices are set to be the same as the in-game pricing levels to make them comparable, and then the web store offers more stuff to encourage people to use the web store because Kabam makes more profit from the web store.

SummonerNR

Without reading thru that long article, didn’t an earlier court case (or at least an earlier ruling on part of this case ?) deal with whether or not an App can setup an alternate payment system (ie, via website, not only via native Google/Apple App Store) ?
And isn’t that why we now have the Xsolla Web Store for MCOC ?
So that is NOT new.

And isn’t this NEW ruling just about the device manufacturers having ability to offer alternate App Stores from other vendors instead, as a means for then (A) downloading apps via that alternate App Store, and thus (B) to then process purchases via that alternate App Store as well ?

So the ruling itself does not prohibit Google/Apple from charging such high rates.
Guess you could *hope* that they will reduce that % as a way to keep Apps dedicated to Google/Apple.
And that you could also *hope* that then the Apps themselves, since they could keep a higher portion of sales, would “out of the goodness of their heart” reduce said purchase costs then.

And also, it said 30% in the article and here at top. But isn’t it 15% for higher volume Apps, and only 30% for other “not so large” apps ?

Demonzfyre

They aren't charging you more to make up the 30%. Kabam doesn't set the prices, Kabam picks a tier and Google and Apple set the prices for those.

DNA3000

The short answer is: no. Its more complicated than that.

Epic sued both Apple and Google. Without getting into the weeds on the legal details, Epic accused both Apple and Google of being illegal monopolies, and abusing that monopoly power in various ways. Both Apple and Epic agreed to have a judge rule in that case, while the Epic v Google case went to a jury.

In the Epic v Apple case, the judged ruled that the case revolved around whether Apple wielded monopoly power in the business market of mobile video games, and ruled that it did not. Because it wasn't a monopoly, it could not, as a matter of law, abuse monopoly power. The sole remaining contention was Epic's assertion that Apple violated a specific anticompetitive law in California by prohibiting app vendors from using third party payment systems and steering customers to them, which is still in dispute although Apple has made changes to their policies in that regard.

In the Epic v Google case, Epic argued that the market in question was the Android app market and convinced the jury of this. This then opened the door to Epic arguing that their business tactics were leveraging illegal monopoly power influence. Furthermore, while Apple is essentially a soup to nuts company, manufacturing hardware, software, and infrastructure services, Google works with a large constellation of partners for everything. As a result, Google makes a lot of deals with a lot of other companies, and that means there are a lot of opportunities to do shady things that simply don't exist for Apple. Apple cannot be accused of arm twisting phone manufacturers to put certain software on their phones, because of course not. But Epic was able to show that in many cases Google did just that, which became evidence that Google's treatment of Epic was part of a pattern of unfair competitive actions.

In isolation, the Apple case, however the appeals get resolved, is ultimately going to be about changing small policies. But the Google case has people looking much more closely, because the ruling means it is no longer about Google's app store cut or Epic's ability to sell games on the Play Store. Google has been ruled to be an illegal monopoly. That has potentially dramatic ramifications if the ruling holds up under appeal (which there are people who think it won't actually, when extrapolating from the Apple ruling).

It seems contradictory that the Epic v Apple and Epic v Google cases could resolve so differently, but in my opinion that's because those two cases diverged from the start and became two completely different lawsuits about two completely different things. Epic could not make the case that Apple was a monopoly for anything except the Apple marketplace itself, and that was an unconvincing argument because Apple could counter that Epic was a monopoly force in the Epic market, an obvious perversity. But Google could not easily make the same counter argument, and they had to make it to a jury of twelve lay people, not one judge who would study the issue from a legal perspective, not a lay person's perspective.

laserjohn26

Was goli the lead plaintiff?

jdschw

Perhaps, but even if true, that's a distinction without a difference.

The company needs to hit its sales targets to be profitable. In order to do that, they can calculate how much money *they* need to make for each item they sell. If they set a price or just pick a "tier" and google sets those prices, the end result is the same: they need a price point that works for them, and we have to pay more than that price point because of google/apple's surcharge.

DNA3000

The difference between a game company selling in-game materials and, say, Amazon, is that Amazon has the stuff first and sets the price for that stuff second. But game companies creating in-game purchases set both sides simultaneously. Suppose Kabam sells ten bundles for a hundred bucks. The gross revenue would be a thousand dollars, but Kabam itself would only make 700 USD total. Let’s say the app stores reduced their cut from 30% to 10%. That means they would now be making 900 USD. They could reduce the price of the item from 100 USD to about 78 USD and still make the same amount. But they could also reduce the amount of stuff in that bundle and keep the price the same, and sell eight of them instead of ten of them. In both cases, they end up making (about) the same amount of net revenue.

Generally, the point to selling stuff is to sell as much stuff as possible, but F2P games don’t have an inventory to move. In fact there are strong incentives to sell fewer things for more money than sell many things for less money when it comes to economy balance and F2P accessibility. So the great irony is that if app stores lower their commission, the net result could be lower prices for the same stuff, or it could cause us to get *less* stuff for the same price, as counter-intuitive as that might sound.

Demonzfyre

The commissions the App stores hasn't changed in 9 years. Kabam as far as I'm aware, has always made profit whether they were a standalone studio or after the were bought by Netmarble.

This is a F2P game at its heart. Do they want to make money? Of course. $99 is the most any ever cost in this game. At least until the Webstore came around. Now it's $199. So it's not like they haven't been able to make profit off of those purchases.

If pure sales were the main goal for Kabam, you wouldn't see limits on things like Cyber Weekend. One small change Kabam did make a few years ago was to change the limit from 3 to 5. On the $99 bundles.

The other thing to keep in mind is that when Kabam started, they had a lot more to pay for as a standalone studio. They many games under their umbrella and larger staff. They also had revenue coming from those other games too. MCOC price points haven't changed since the games launch for in-game purchases. That should tell you right there that they're able to make the profit they need.

Warlockjr

what-

jdschw

Yes! That's an excellent point @DNA3000 , and it also raises a fascinating question.

If the F2P company decides to maintain its revenue by selling fewer items at a higher cost, it's reasonable to infer that it would effectively reduce the fraction of spending players in its game. (Fewer players would spend the same price for the less desirable items).

So the question is: in a F2P model, if we assume the same revenue in either case, is it better to have a higher percentage of spending players that spend less per player? Or a smaller percentage of spending players that spend more per player?

My instinct is to assume that having a higher spender percentage is better, because it means your customer base is larger. But maybe I'm wrong about that. Maybe a smaller, richer spender base is more reliable.

Very interesting!

DNA3000

That's a good question, and there are two completely opposite answers to it that make life for economy designers all kinds of interesting.

The *goal* is to improve conversion rate, in other words the percentage of players who spend. Because of course it is. In a localized sense, getting more people to spend equates to having more revenue, it suggests more engagement and interest in the game, etc. But more spenders is in effect a less F2P friendly game, for this reason. If you're a free player and 98% of all the players in the game are also free players, then most of the time you'll be surrounded by free players. You'll be comparing yourself to free players. You'll be competing with free players. But if the game is, say, 50% spender, then you'll be constantly surrounded by spenders. You'll be constantly competing against spenders. You will be reminded of what spending gets non-stop, and it will be impossible to escape the advantages that spending grants. You may find that the game feels hostile to free players as a result, which means the game might attract fewer free players, which could cause long term damage to the longevity to your game.

This is why when people say that Kabam is just out to make as much money as possible, as all companies are, that's a very oversimplistic viewpoint, and on its face it is completely false. What they want, which is also what most companies want, is long term sustainable success. And for a game like MCOC, long term sustainable success means making as much money as possible today *while* balancing the requirements necessary to maintain a sustainable game and playerbase for the future, and those two goals are mutually contradictory.

This is also why people often complain about "inconsistency" when it comes to things like monetization and balance. These decisions *are* inconsistent on the surface, because no one kind of decision is always appropriate. It is really about balancing the need to make revenue with the need to not place too much pressure on players to spend and the desire for the economic balance between spending returns and gameplay returns to incentivize spending enough while not creating too large of a perceived gap with those incentives. The apparent inconsistency comes from trying to keep multiple sides of the scales balanced.

The direct answer to your question is: we don't know. Kabam has numbers and metrics, and based on those metrics they have specific targets they believe would be best for the game. Given those targets, that would determine if they decided to sell more stuff to more people for less money or less stuff to fewer people for the same costs, in this particular situation. But that answer could change for different situations.

Crcrcrc

If you were a company and found out that a 30% loss in profits was about to change to 10%, would you lower prices to keep profits the same or take the 20% increase for basically free? There’s no way anything is getting cheaper

DNA3000

It isn't that simple, because if it were that simple then I would just raise prices to make more money every year. The prices any company charges, including games as a service companies, depends on a lot of factors. For one thing, they depend on the price sheets that the app stores provide. Kabam can charge 99.99 USD and they can charge 94.99 USD, but they cannot charge 97.25 USD under any circumstances.

Second, your prices have to at least appear reasonable compared to your competition, even if there is no apples to apples way to compare two different games as a service microtransactions. If everyone else holds prices, so can you. But if some start to lower prices because they can, that will force everyone else to consider whether that lowering forces them to follow suit.

In point of fact, I am a company, or rather an owner/officer of one. So I can answer this question directly: when my costs go down, sometimes I lower prices and sometimes I do not. It depends on the circumstances.