Epic’s lawsuit against Apple was already monumental when it solely focused on the iOS App Store, a walled garden that has grown to an intercontinental size with 1.5 billion supported devices. Yesterday, the battle between the Fortnite creator and platform holder leveled up after Apple explicitly threatened the future of Epic’s Mac and Unreal Engine businesses — a move with direct consequences for virtual reality, augmented reality, TV, and film developers beyond Epic and Apple themselves.
That threat was nestled in a letter from Apple, currently labeled Exhibit B in Epic’s request for a temporary restraining order to protect its business. On pages 52 and 53 of the 197-page filing, Apple says that it plans to terminate Epic’s developer license over the addition of an alternate payment mechanism to the iOS version of Fortnite, and spells out the consequences.
You will also lose access to the following programs, technologies, and capabilities:
– All Apple software, SDKs, APIs, and developer tools
– Pre-release versions of iOS, iPad OS, macOS, tvOS, watchOS
– Pre-release versions of beta tools such as Reality Composer, Create ML, Apple Configurator, etc…
– Engineering efforts to improve hardware and software performance of Unreal Engine on Mac and iOS hardware; optimize Unreal Engine on the Mac for creative workflows, virtual sets and their CI/Build Systems; and adoption and support of ARKit features and future VR features into Unreal Engine by their XR team
Make sure you read the last part in detail. Apple is threatening not just to keep Fortnite out of the iOS App Store, but also to impede Unreal Engine’s performance on Macs and iOS devices. Even if you want to interpret that language most generously to Apple, it’s saying it won’t try to make Unreal Engine perform well on its devices — notably right in the middle of the Mac’s transition to ARM/Apple chips — or enable Unreal Engine to support Apple’s future AR and VR initiatives.
This letter might be Exhibit B now, but I wouldn’t be surprised to see it re-emerge as Exhibit A in a massive antitrust case against Apple. Challenge Apple on iOS payments and it will explicitly threaten to delete your company from not just iOS devices, but also Macs, iPads, Apple TVs, and Apple Watches. That’s not just a bad look for Apple, given that Tim Cook testified under oath to Congress last month that “we do not retaliate or bully people; it’s strongly against our company culture.” The letter is also strong evidence of antitrust practices: Follow all the rules in the walled garden, or we’ll prevent you and everything you make from being used both inside and outside the garden.
It’s impossible to overstate Unreal Engine’s importance to the next generation of immersive devices. Epic’s software is now being used to generate photorealistic content for holographic 3D displays, giant 3D windows, AR headsets, VR headsets, game consoles, films, serialized TV shows, and even Weather Channel broadcasts. The company’s latest real-time ray-tracing demos look practically indistinguishable from reality, setting the stage for home computers to deliver cinema-quality 3D visuals. As of yesterday, Epic said that “millions of developers rely on the Unreal Engine to develop software, and hundreds of millions of consumers use that software.”
The threat is significant — perhaps greater than Apple’s App Store team realized when it sent that letter. Telling all of these Unreal Engine developers to walk away from the Mac means pushing them to adopt Windows PCs, where Epic’s tools and apps will continue to both work and grow in power. I’d be surprised if there were actually a million (or millions of) Unreal Engine developers, but it’s possible that an Epic-inspired Mac-to-PC development switch could eclipse the exodus Apple caused by stripping down Final Cut Pro X and the Mac Pro, alienating the professional video editors who relied on earlier versions.
To be clear, I don’t believe that Apple losing Unreal Engine developers precludes those developers from continuing and expanding their efforts on other platforms; in other words, they’ll still make immersive content, TV shows, and movies — the content just won’t be created on Apple devices, and AR/VR experiences won’t be playable on them, either. While it would be easy to write that off as Apple’s loss, and consequently a loss for its customers, the reality is that Apple’s iOS devices have enough U.S. and foreign market share to influence the course of content creation. Some developers will therefore opt for lowest common denominator solutions that work across all platforms, Apple and otherwise.
Looking forward, I’m most concerned by Apple’s explicit reference to withholding “support of ARKit features and future VR features into Unreal Engine by their XR team.” It’s an open secret that Apple is working on AR/VR glasses, and Exhibit B suggests that Unreal Engine was going to power at least some of the glasses’ visuals. Killing a relationship that could enable Apple devices to display photorealistic AR/VR content in favor of a second-tier content development solution isn’t smart business. It’s even worse when everything pivots on whether Apple can take a cut of a fraction of Fortnite’s in-app purchases.
Apple ends its letter on a pleasant enough note, telling Epic that it wants to see the company continue to participate in its developer programs — all Epic needs to do, Apple suggests, is remove Fortnite’s alternate in-app payment system. Epic clearly wasn’t interested in doing that before Apple threatened its entire business, and now that Apple has shown its cards, the stakes are higher for both companies than ever before. Just as was the case with Qualcomm, where Apple belatedly backed down and made a deal that kept its iPhones viable, the combination of antitrust investigations and widespread developer anger should be clear signs to Apple’s executives that they’re headed in the wrong direction here. An abrupt reversal of course would go a long way toward improving everyone’s fortunes, and turning the heat down on a situation that will only get worse for Apple over time.
