July 11, 2024

Byte Class Technology

Byte Class Technology & Sports Update

Epic Games CEO Tim Sweeney thinks ‘every politician should fear’ Apple’s power

Epic Games CEO Tim Sweeney thinks ‘every politician should fear’ Apple’s power
Epic Games CEO Tim Sweeney thinks ‘every politician should fear’ Apple’s power

The clock is ticking for Tim Sweeney.

As the CEO of Epic Games, no one wants to see the Open App Markets Act become US law as much as he does. If passed by Congress before this ​​lame-duck session ends and Republicans take control of the House of Representatives in January, the legislation would force Apple and Google to let developers distribute apps outside of their respective stores and also use other in-app payment providers. It would be a seismic moment for app makers like Sweeney, who argues that the App Store of today is “strangling the digital economy.”

But the fate of the bill hangs in the balance. Even though its lead sponsors, Senators Amy Klobuchar, Richard Blumenthal, and Marsha Blackburn, have been saying for months that it has the votes it needs to pass, it’s unclear if Senate Majority Leader Chuck Schumer will hold a floor vote before the end of the year. Meanwhile, Apple and Google have ramped up their criticism of the proposed legislation. Tim Cook himself was recently in Washington, DC, meeting with key lawmakers.

Since Epic sued Apple and Google alleging antitrust violations in August 2020, Sweeney has regularly thrown darts at the two gatekeepers on his Twitter account. He leaves his most pointed attacks for Apple, which he recently tweeted was “a menace to freedom worldwide.”

After seeing a tweet of his on Wednesday on the subject, I messaged Sweeney to see if he’d be down to chat. A few hours later, we were on a Zoom call, the full transcript of which is below.

The first phase of Epic’s argument against the App Store was focused on the business implications, complaining about Apple’s market dominance at a time when antitrust was a hot topic among Democrats. Now, as Republicans rail against a perceived curtailing of free speech by Big Tech, Sweeney is joining the growing chorus that sees Apple’s control over iOS app distribution as a societal problem.

To Sweeney, Apple’s ability to reject apps like Twitter is something “every politician should fear,” no matter what side of the aisle they’re on. “I think it’s incredibly dangerous to allow the world’s most powerful corporation to decide who is allowed to say what,” he told me. Elon Musk recently personified this concern by dragging Apple into the culture wars for allegedly threatening to ban Twitter from the App Store — an insinuation he has since walked back on.

“I think it’s incredibly dangerous to allow the world’s most powerful corporation to decide who is allowed to say what.”

We covered a lot of ground in our conversation, including why Fortnite isn’t coming to VR anytime soon, why he thinks it’s a lost cause to build a new mobile platform, and the revelation that Epic last year submitted an iOS version of its games store for PCs and consoles that Apple never approved.

The submission to Apple App Review was made in late April 2021, right before Epic and Apple went to trial, according to Epic spokesperson Tera Randall. A spokesperson for Apple, Marni Goldberg, confirmed that the Epic Games Store developer account was shut off in December 2021 after the court ruled that Epic had breached its Apple developer contract.

Here is where I’ll do a self-plug and note that if you want to read more stuff like this, you should sign up for my upcoming newsletter:

Anyway, here is my full interview with Tim Sweeney, the transcript of which has been lightly edited for clarity:

I’d like to jump right in with what you tweeted today, what I DMed you about, the tweet saying that “Apple and Google astroturfers and lobbyists are out in full force” to oppose the Open App Markets Act from potentially being pushed through by Congress before the end of the year. Do you think they’re winning?

I think we’ll only know when there’s a Congress vote or a lack of one. They certainly brought vast resources to bear onto the problem with their army of lobbyists and trade groups that are opining and lobbying and constantly injecting really false statements of the tradeoffs in the platform into the public discourse.

What I don’t understand about the ‘App Store being better for security’ argument specifically is that the Mac is open.

Exactly. We know, everybody knows, and every programmer at Apple knows that it’s the operating system kernel that provides the security. It prevents apps from accessing data and services they aren’t allowed to access. And that’s why macOS and iOS are incredibly secure operating systems.

The app store layer on top of it doesn’t provide security. And we know from the Epic v. Apple trial that Apple reviewers spend an average of six minutes of human time looking at each app and that these are app enthusiasts who are not engineers or security analyst analysts. And so, it’s incredibly clear that app review and the monopoly App Store do nothing to improve platform security.

Apple’s argument that resonates with me the most as a longtime Apple user and watcher like yourself is that they built the platform, they invested billions of dollars into it, and they’re entitled to a return on their investment and their IP. Do you see any kind of logic to that argument? Can you sympathize with that at all, even to this day?

Yes. And I think we need to look at the argument in comparison to the other monopolies that were stopped by antitrust regulations, such as the railroad monopolies. Yes, Apple built the iPhone hardware and they designed iOS, and they deserve to earn a fantastic return by selling their devices with their operating system, as did the railroads deserve to earn a fantastic return by profiting from selling railroad tickets and transportation services.

But what they cannot do under the law, and under any principle of fair competition, is Apple cannot use its control over the hardware and operating system to impose trade restraints on related markets. Apple prevents other companies from establishing competing stores on iOS. That’s similar to the railroads blocking the oil refineries from shipping their products on the railroad in order to take over those related industries.

And it’s these ties, right? The antitrust law calls these situations ties, when a company uses its monopoly on one product or service to force you to use another product or service and to prevent other companies from competing to provide a better product or service. That’s the core problem. Not Apple profiting from selling their hardware. They utterly deserve every penny of hardware profits that they make.

How much time have you been spending lately talking to US lawmakers about passing the bill?

I’m not close to the lawmakers. I don’t think I’ve talked to a legislator in the United States in the past six months. Except for when I post on Twitter. [Laughs]

I was curious if you’d talked to Senator Chuck Schumer because, based on the reporting I’ve seen, it seems like he has been mostly responsible for stalling the bill. And I’m not quite sure why.

Well, perhaps it has something to do with the vast amount of lobbying that Apple and their associated lobbying and trade groups are doing to prevent the legislation.

Republicans, they take control of the house in January. If the bill isn’t passed before then, what do you think happens to it?

I think there’s something in antitrust enforcement for everybody, regardless of partisan political views. Apple’s monopoly, it truly is strangling the digital economy. They’re strangling the app market, they’re strangling the music market, they’re strangling the TV market. And this has implications in a lot of ways.

It’s inflating the prices of all digital goods that Americans purchase. Apple is using its control of these markets to restrain speech of different platforms, so free speech advocates are really concerned about that, about the world’s most powerful corporation controlling the means of communication in particular.

There are general fair competition are arguments all around. Consumers and developers in all 50 states are hurt by Apple’s policies. And the entire US economy would be a lot more efficient if Apple’s bad practices were stopped. And if Apple’s bad practices aren’t stopped, then the situation could get considerably worse.

If you look at Apple’s arguments made in Epic v. Apple in their defense, Apple holds that they can impose any terms and conditions on any app without any limits whatsoever. So, right now, they tax all digital goods transactions at 30 percent, at least in many categories of apps. They could decide next to tax all physical goods purchases at 30 percent or 15 percent or some percentage and, therefore, demand a percentage of all Amazon’s profits.

So far, they’ve only imposed these restrictions on apps and not blocked websites, but Apple, under its antitrust theory, could block websites. Apple could demand that to regain access to their web browser, these websites have to pay Apple a percentage of their revenue under Apple’s own stated theory and their own antitrust defense. So, they can do anything. And over time, they’re doing more and more, which suggests that they’ll stop at nothing that they think they can get away with.

You recently tweeted that monopoly “control over the digital economy and online discourse infringes the rights of all Americans.” What specific rights does it infringe on?

Well, two things. You really have to look at the enlightenment period, in which the basic foundations of modern democracy were established: the 1700s when European philosophers and American philosophers really wrote down the fundamental principles of rights. And one of these rights is the right to share our ideas with others and hear the ideas of others. And if one corporation decides what ideas people are allowed to share with each other, they’re not going to use it only for benign or altruistic purposes.

Every time you give any party that level of control, they quickly turn it to a profit maximization strategy. In countries where there are no protections on freedom of speech, politicians use their power to shut down all competing political parties. That’s been Russia’s playbook for the past 20 years.

And in a corporate environment, what does that mean? Apple having further political influence by deciding which politicians are allowed to speak through its control of the app distribution channel. And also, deciding what commercial speech is allowed in a platform. For example, through the App Store, Apple does not allow developers to tell their own consumers that they can save money by buying their items on the developer’s website.

I mean, it’s one thing for Apple to claim that it’s not allowing apps to spread misinformation, whatever that is and whoever’s opinion that might be based on, but here’s Apple preventing true statements from being made by developers to consumers. They’re greatly in the consumer’s interest. The district court shot that down as an illegal practice, and the issue is currently before the Ninth Circuit Court with the stay on the injunction that the court issued. But there are really fundamental rights that are key to the liberty of our society on the line here.

Ron DeSantis recently attacked Apple for Elon Musk’s claim that it threatened to ban Twitter from the App Store, and it’s unclear exactly what conversations Musk has had with Apple. To me, that seems like sentiment, especially on the right, is maybe shifting toward this argument you’re making that this is actually becoming also a speech issue. What’s your take on that situation and kind of what DeSantis was saying?

I think it’s incredibly dangerous to allow the world’s most powerful corporation to decide who is allowed to say what. And right now, this is seen as a Republican issue because the tech companies are Democrat-leaning, and so Republicans fear that this control over speech that Apple imposes will hurt their political prospects. But if the tech companies were right-leaning — and now we have an example of one that appears to be in Twitter — everybody’s going to be afraid of it for the politically opposite reasons.

“Every politician should fear the rise of corporate power that Apple is creating”

Liberals have every bit as much reason to be concerned about corporate control over speech as conservatives because if suddenly Apple found itself with a deeply conservative CEO who was on a power trip, it could just legislate that social media apps aren’t allowed to host speech by Democrats. Apple in its own claims of its rights under the antitrust law said it has the right to make those sorts of policy decisions. And so every politician should fear the rise of corporate power that Apple is creating. And the risk to America is far, far, far greater, five orders of magnitude greater than the amount of the political donations they’re making. They are really trying to buy off the American political system in a corrupt bargain to protect their marketing power and their ever-increasing profit stream earned at the expense of everybody who builds apps and content that’s consumed digitally.

I’m curious to hear if you think that maybe what could happen is that the market itself could actually regulate this. Where, yes, Apple has a stranglehold on its own platform’s distribution right now, but if it were to go that direction you said and do something drastic like what you said, do you not think that consumers are in a position to vote with their dollars? Elon has said he would make another phone, for example, if it came to it.

Consumers are in no position to vote with their dollars here because there are two monopolies. One hundred percent of all smartphone users that are either outside of China are either governed by Google, which is Android’s terms of service, or Apple’s terms of service. One hundred percent domination by two companies, and they’re largely operating in lockstep. They have some superficial policy differences but they are both doing the same illegal things in the same general illegal ways.

If you switch to an Android, you’ll just face the exact same lockstep policy enforcement by Google. And over time, Google’s and Apple’s rules have been converging closer and closer together. You have to look at that and say that there’s intention. Whether or not they’re holding secret meetings where they decide how to lock out competition and further their joint duopoly, they’re doing that in practice and that must be stopped.

Elon agrees with you that Apple and Google’s fees are too high. He’s tweeted about it. I’m curious, have you talked with him about this or Apple at all since he took over Twitter?

No. I talked to Elon Musk once a few years ago, but nothing about social media.

What do you make about his feud with Apple that kind of played out recently? Apparently the beef has been squashed after he met with Tim Cook. I don’t know exactly what happened, but observing it from a distance like I am, I’m curious what you’ve made of it.

There’s an old parable that ends with a wise man saying, “We’ll see.”

All right, your legal battle with Apple then. It’s been a long, messy battle. And so far, I think, it’s mostly been Apple winning. Your antitrust case is being examined now by the appeals court; after that, it will probably go to a lower court or even to the Supreme Court. The judges so far, they don’t seem very sympathetic to the argument that the App Store should be totally open, and the judges have seemed relatively in favor of Apple’s view that there’s a pro-consumer reason for maintaining the store the way it is.

And I think Apple has actually been emboldened by this. They have started taking a cut of boosted social media posts, basically taking a cut of advertising from apps like Meta’s for the first time. Do you think that they’ve been emboldened by this?

Personally, I can’t imagine what’s going through Apple’s mind. At a time when they’re under unanimous criticism by all of their ecosystem partners, software developers, and content makers and media companies and politicians and antitrust regulators, they’re rapidly increasing their control and revenue extraction and self-preferencing. It seems a little bit crazy to me.

The judges were clear that even if the store was opened and alternative payments were allowed, Apple could still charge a fee. They’re doing this in South Korea, for example, where they’re still taking commission of 26 percent. And with Xcode, they could literally just charge you to run code, to run binary on their phone, no matter what. So I’m curious what happens if Apple is forced to open up distribution but Epic and other developers, they still have to pay the potentially double-digit percentage for in-app payments somehow. Is that enough for Epic?

In the district court trial, Tim Cook said that if Apple couldn’t charge 30 percent by controlling payments, that they could just move their monopoly rent to license fees and continue on. And at one point, Judge Yvonne Gonzalez Rogers echoed that sentiment. But, I mean, Epic certainly doesn’t think that’s allowed under antitrust law. And again, if you go back to settled antitrust cases such as the railroads, they are prohibited not only from attaching restrictive monopoly conditions — horizontal restraint on competition, using their power in one market to foreclose on a current position in another market — but they are also barred from using their monopoly power to extract unlimited rents from other markets and to effectively smother them in a slightly different way. And whether Apple collects 30 percent of the payment processing fee, the largest in the history of the world, or they try to impose it as a software licensing fee, it’s the same thing.

It’s a monopoly rent imposed on a related market by a monopolist in a primary market. And to be more specific, they control the hardware market, and they’re using that to impose a rent on the payments market and an absolute monopoly on the independent app distribution market. And antitrust law says you can’t do that. And in particular, antitrust law says you cannot do that even if it’s pro-consumer. And in some restrictions of trade that monopoly is imposed, there’s a balancing test where you have to ask if the anti-competitive effects of the practice are outweighed by pro-consumer benefits. That does not apply here. And I’d refer you to the arguments before the Ninth Circuit Court, that what Apple is doing is simply outright illegal without any balancing test involved.

Do you plan to take the case to the Supreme Court if you have to?

Certainly, if Epic intends to take this as far as possible and necessary to achieve victory, and I believe Apple does, too.

And so we could reasonably expect that, whatever the ruling of the Ninth Circuit, that the decision would likely be appealed, and then it’s up to the Supreme Court to decide to hear or not. It’s the appellate court has to take an appeal so this sort of case from the District Court, but the Supreme Court does not so it would be up to them.

What would it take for you to settle with Apple? Is there any settlement they could possibly give you that you would accept at this point, that isn’t exactly what you’ve asked for?

It’s the same thing it was in 2015 when I asked for it and the same thing that we asked for in 2020. Epic would settle for, and only for, unfettered ability of developers — it’s not just Epic but all the developers — to compete in the app distribution market. And freedom of developers and consumers to engage in direct distribution where consumers can download apps from the developer’s website, and the unfettered competition in payments for in-app purchases. And all of that with no monopoly rents extracted from revenue generated by apps after they’re sold or downloaded for free from the App Store. In other words: eliminating all of the monopoly ties.

And what we’re asking for is how this should have been, how the iPhone should have been established when it was first released. That is how all platforms, all general computing platforms, should operate. It’s how Windows operates, it’s how macOS operates, and this should just be an established foundational piece. And so Epic is not conducting any sort of elaborate negotiation here. We are simply going to fight as long as it takes to get to what we’re asking for. And if Apple would settle for that, we would settle it today.

In the meantime, I’m curious, how has your iOS app review process been lately? Are you aware of any holdups?

You mean with respect to apps that we’re-

To Epic’s apps, yes. Because, for example, a common tactic Apple uses, as you know, is to hold apps up in review. How has your iOS, as far as you know, app review process been since this whole trial started?

Well, several things. On the developer-facing apps that we distribute on iOS, such as the RealityCapture tool, various Unreal Engine support pieces, and then the Bandcamp app distributed by Bandcamp. Apple has not departed from their ordinary processes in any way we’ve been able to observe. And so we don’t have any concern that we are treated unfairly with respect to those products.

So far undisclosed, Epic noticed that both Valve’s Steam PC game store and Sony’s PlayStation store distributed apps on iOS, which were able to sell games for those platforms, and because they’re selling games that don’t work on iOS but run on PC and PlayStation, that Apple allowed that and didn’t block those apps and didn’t block their ability to accept direct payment. And so Epic Games built the Epic Game Store app for iOS as a PC game store distributing our own PC game apps, and we submitted that to Apple for review. And they replied just outright rejecting it based on their unilateral ability to decide what apps are allowed on iOS and without reference to any actual App Store rules. They were not going to accept the Epic Games PC game store app as an iOS app.

It was the first half of 2021.

Interesting. I’m curious what you think about the metaverse as a platform these days. You seem ideologically aligned with Meta and how once its VR platform operates. Do you see yourself collaborating with them more, like bringing Fortnite to Quest?

We’re a very open company. We’ll partner with any company on metaverse collaborations and open metaverse efforts in any way that we can be productive with them. And that applies even if we’re not aligned with other parts of the business.

We work with any company in any way. Epic has no plans to build a VR version of Fortnite. Not out of any grand business strategy, but just because the thing that we do in Fortnite every day as gamers is run through an environment rapidly, and it’s the kind of experience that involves intense motion and doesn’t work as well in VR. And so if we were to ever do anything in VR, it would have to be something that’s really custom tailored for the experience. And it’s not that we have any negative view of that. We just have 101 things to do.

I’m glad you mentioned that because I was curious for you personally.. I don’t know when you made the mental leap to go, “I’m going to make this fight a priority with Apple, and I’m going to really go to the mat over this.” I’m curious, in hindsight now, do you regret it? Has there been a level of distraction that you wish you hadn’t had from all the other stuff you have to do on a daily basis? As a CEO and managing a large company, how do you balance this fight that you obviously feel very passionate about with everything else you have to do?

“It’s an incredibly painful and expensive process but also an absolutely necessary one”

No, it’s one of the things I’m most proud of in my whole 31 years in the gaming business is actually taking on this fight for the principles of open platforms to underline the industry. It’s an incredibly painful and expensive process but also an absolutely necessary one. If we didn’t fight this but we did succeed and achieved all of our wild dreams in building an open metaverse, then we’d end up with an open metaverse where Apple and Google extract all the profits for themselves and leave developers who are doing all of the creative work fighting for crumbs underneath the table.

So, no regrets. And we expected this was most likely to be a really protracted fight that would ultimately be decided either by the Ninth Circuit Court or by the Supreme Court and might have to be fought on multiple continents — as we are fighting on multiple continents — and might take many years.

You’re in it for the long game? There’s no amount of time that could pass where this fight doesn’t become worth it for you?

No, we will fight on to victory, whatever it costs. And I say whatever it costs, I truly mean whatever it costs. If Fortnite is forever denied access to iPhone, then Epic will lose the metaverse war because we just won’t be able to compete there at all for that billion users.

“If Fortnite is forever denied access to iPhone, then Epic will lose the metaverse war”

And Google’s policy also, while they don’t block all competing stores entirely, they disadvantage them so extensively that we don’t think that we have an opportunity to compete on Android fairly, either. And so that locks us out of the large majority of the world’s software-capable devices until there’s a victory on some front. And victory is… there are many paths to victory. I think prevailing in court it’s just one of them. Regulators prevailing is another, legislators prevailing is another. Third parties could prevail and change the conditions of the whole industry. There are many paths by which this could come about. Or Apple could wake up one day, and the CEO at Apple — whether it’s a current one or anyone — might decide, “We’re on the wrong side of history and we just need to change all of this.”

This has not caused you to look down the stack of tech like [Mark] Zuckerberg and decide you need to build your own platform from the ground up, has it?

I think if you want to build a competing smartphone platform, you’re not competing with the smartphone of 2006 when they first debuted. You’re competing with the smartphones of 2022 and beyond. You should expect to spend at least $20 billion building a new hardware and software platform and at least 10 years creating the thing. Such a long period of time that by the time you get to that, you might find that the world has changed to augmented reality or some other completely different paradigm and your investments all wasted. And then after this decade passes and it’s 2032, you’ll find 100 percent of the world’s smartphone users are still locked into Apple and Google. They’re locked in much harder because they’ll accumulate that much more purchases and iMessage contacts and other things, which are utterly locked into the platform. And you’ll find that without a $100 billion 10-year marketing budget, you won’t have a chance to compete in that industry, either.

“You have to look at that and say like, ‘They’re not building more railroads now’”

And so I think you’re going to be out the greater part of a trillion dollars just to have the chance of that. And furthermore, unless your end product isn’t so much better than Apple and Google products that people are willing to abandon all that and switch, you lose it all. And there’s not a single company in the world that’s willing nowadays to take on that level of investment. And even if Epic wants to do it, it couldn’t possibly raise enough money to do it. How do you raise a half trillion dollars? End up with investors owning 99 percent of the company and gaining what? So I think, you have to look at that and say like, “They’re not building more railroads now.” The economic system won’t make it possible to build new ones, and they’re not going into smartphone platforms anymore.

And I think we’re stuck in a world where the only way the economy isn’t completely taken over by these companies is if antitrust regulation prevents them from taking their honestly earned monopolies in the hardware market. And using the dishonesty seize control of the store market and the payments market and the music market and the film market and every other market that’s developed in contact with that device.

Zuckerberg thinks he can invent a new platform and that we’ll shift to eyewear and headsets. It sounds like you don’t agree, or you think that phones will still be dominant in a decade. Is there a world where Epic could invest in the hardware platform like Meta is and that could give you some leverage to potentially have your own destiny, so to speak?

Well, I think that augmented reality is the platform of the future. But it’s very clear from the efforts of Magic Leap and others that we need not just new technology but, to some extent, new science in order to build an augmented reality platform that’s a substitute for smartphones. And it’s not clear to me whether that’s coming in 10 years or in 30 years. I hope we’ll see it in my lifetime, but I’m actually not sure about that. Because augmented reality has to project images in your field of view, compellingly and realistically, and it has to somehow mix and mask them with your view of the real world. And it has to be acceptable as everyday, all-the-time eyewear. It has to be no bigger than the human glasses and no heavier than that.

And that requires solving problems of optics and manufacturing, which nobody knows how to solve yet. It’s like going back to the 1980s and saying, “Hey, why don’t we build a 30 billion transistor chip?” It’s like, “Well they were building 10,000 transistor chips, and you better sign up for 40 years of research work to get to that point.” And that’s augmented reality, right? Virtual reality is no substitute for a smartphone. It’s a helmet you put on your head to immerse yourself in the ether, and that’s not going to be a device for billions of users, and it’s not going to be something you’re going to carry around with you everywhere you go.

Correction, Thursday, December 8th, 7:15PM: An earlier version of this article incorrectly named Senator Chuck Grassley as a lead sponsor of the Open App Markets Act. The lead sponsors are Senators Amy Klobuchar, Richard Blumenthal, and Marsha Blackburn. We regret the error.