Epic, which 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.
For 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.