More from Epic v. Google: everything we learned in Fortnite court
Sweeney reiterates that Epic is not seeking any money from Google — he just wants to expand the business. He says that while Epic has been damaged by Google because it can’t meaningfully distribute Fortnite on phones, Epic isn’t seeking any damages — it just wants the court to make Google stop enforcing its policies.
Now, it’s Google’s turn to question him.
Tim Sweeney himself doesn’t seem to have lied under oath, but the question from Epic’s lawyer was remarkable: “Did you ever let Google know you were going down this road?”
Sweeney says that about 15 minutes after Epic released the hotfix that injected its own payments platform into the Fortnite app on Android, he sent an email to Google senior executives and “asked them to reconsider their payment policies.”
After, not before.
Here’s part of a longer email that Tim Sweeney sent to Google top brass on June 30th, 2020:
Dear Sundar, Hiroshi, Jamie, Don:
We would like to offer consumers the following features:
1) Competing payment processing options other than google play payments, without Google’s fees, in Fortnite and other epic games software distributed through Google Play;
2) A competing Epic Games Store app available through Google Play and/or through direct installation that has equal access to underlying operating system features for software installation and update as Google Play itself has, including the ability to install and update software without Google warning screens which discourage users from using third-party stores.
Sweeney says the whole challenge to Google and Apple was his idea and claims he was asking on behalf of the entire Android developer ecosystem.
Should Google agree to Epic’s demands, he says, “We didn’t want a special deal for ourselves... we wanted everyone to have the option of distributing through Android as we had distributing through Android.”
What demands, you ask? Check my very next update to this StoryStream and you’ll see.
Epic’s lawyers have already suggested it was an act of standing up to a bully, and now Sweeney’s explaining it pretty matter-of-factly. “We were about to challenge two of the most powerful companies in history.”
Sweeney says he hired his legal team — the one representing Epic today — right from the beginning of Project Liberty.
Epic CEO Tim Sweeney on why Epic gave up and decided to submit Fortnite to Google Play again after initially skipping Google’s app store.
He says Epic realized that “most users were severely deterred from installing Fortnite” by Google.
But when Epic submitted Fortnite to the Play Store, it contained Epic’s own payment system — and was repeatedly rejected for doing so. Google has shown that Epic agreed to add Play Billing afterward.
It’s known as a man-in-the-disk vulnerability, it’s complicated, but the idea is if a user downloaded Fortnite from the Samsung Galaxy Store, then went somewhere else and installed malware from a webpage, that malware could modify some of the files Fortnite had installed and use that to escalate its privileges to become more malware-y.
He says the bug was only ever on the Samsung Galaxy version of Fortnite, was fixed within two days, and says he’s unaware if anyone was ever harmed by the vulnerability.
We knew this — it’s #95 here — but Sweeney says Samsung offered Epic a special deal. “Samsung agreed to waive its normal 30 percent fee... and charge us just 12 percent of revenue for every transaction it processed,” he says.
Sweeney also says the two-step download process (Fortnite Launcher, then Fortnite) was all about updates. Every week when Epic offered a new version of Fortnite, users would have to download the game all over again if not for the launcher, Sweeney says.
“Epic isn’t seeking to negotiate better Google Play terms; this is driven by the principle and opportunity of open platforms,” he wrote on June 22nd, 2018, explaining why Epic originally decided to skip the Google Play Store when it launched Fortnite on Android.
Epic is setting up Sweeney to reveal how betrayed Epic felt to learn Android wasn’t as open as he thought. Google did something similar the other day.
He’s now telling us why that didn’t happen — including a desire to build a direct relationship with Epic’s customers and to do so without Google taking a 30 percent cut.
(We moved on fairly quickly from the Sony cross-play fight; Sweeney suggested that Sony and Epic actually became closer afterward, with Sony Pictures using the Unreal Engine, Sony Music partnering on Fortnite, and Sony Corp becoming a shareholder in Epic.)
I wonder what Google’s lawyers will do with the “direct relationship with customers” assertion. Document dumps from the Epic v. Apple trial suggest Epic was hugely reliant on Sony; seemingly happy to let PlayStation have that relationship and pay Sony’s fee.
“We were willing to fight them in court if necessary,” says Epic CEO Tim Sweeney.
He’s explaining a June 2018 email he sent to Sony’s Phil Rosenberg, threatening that Fortnite cross-play would happen one way or another.
“Please inform Kodera-san, and please be clear, that Epic will enable full interoperability between all platforms in Fortnite at a timely point in the future ... we are prepared to pursue this course with all available resources, wherever it leads us, and for however long.”
We’re getting to the first point Epic wants to make — that Epic has a reason (that’s not greed) to bring this case to court.
Sweeney says no, you couldn’t play Fortnite across Sony PlayStation and Microsoft Xbox when it first arrived, but Epic “went to battle” to change that. That’s a fight Epic won, I might add — though not all by itself.
Tim Sweeney is speaking hurriedly but seems to be comfortable on the stand — then again, he’s being questioned by Epic’s lawyer, not Google’s lawyer yet. Epic has grilled most of the witnesses it has called since most of them have been current or former Google employees.
“I built the very first version of the Unreal Engine myself between 1995 and 1998,” he says. Everything he’s said so far has been background about what his company does and a rough idea of which companies Epic competes with.
Now, we’re watching a brief intro video to what the Unreal Engine is and what it can do. (Many game developers and some Hollywood studios use it to generate all kinds of 3D graphics; The Mandalorian famously used it for entire digital sets.)
We’re going to break for lunch before questioning begins in earnest, but he says, “I’m responsible for everything the company does.”
He says he co-founded the company at the age of 20 and had been programming since the age of 12.
Google partnerships boss Don Harrison just spilled the beans. Spotify doesn’t pay 15 percent of its revenue to Google on Play. It doesn’t pay 11 percent. It doesn’t even pay 10 percent or 6 percent. It pays zero percent when users decide to use Spotify’s payment system, and just 4 percent if users choose Google Play Billing.
“Zero percent if they process their transaction and 4 percent if Google processes their transaction,” we just heard in court.
There’s no other new fee. Both Google and Spotify agreed to each commit $50 million to a “success fund” as part of the sweetheart deal, though.
“Do you plan to share your findings on Google leaking the contents of our private discussion to Abner Li,” Sweeney asked Google partnerships boss Don Harrison in an April 2020 email.
The story was this one, and I’ve long been curious if it was the seed that grew into this entire Google lawsuit.
Here’s the other story Epic accused Google of planting.
Harrison, attempting to explain that Google’s interest in Epic wasn’t just about influence but rather synergies — that Epic CEO Tim Sweeney himself expressed interest in licensing out the Unreal Engine to more mobile game developers on an early 2020 phone call.
Sweeney was also “critical of Play’s business model” on the call, though. “He didn’t agree with it,” says Harrison.
“He felt we’d drawn the line in the wrong place, that we had large companies subsidizing small companies, and that wasn’t the right way to have developed the model.” That definitely cuts at Epic’s David v. Goliath narrative if true.
Note: Google’s Project Elektra idea of buying a controlling stake in Epic was from 2018. it’s not clear if Elektra was still in play in 2020.
First, Don Harrison tried to defuse any suggestion that Apple’s and Google’s CEOs were coordinating regularly behind the scenes, painting the meeting as a one-time thing. “We realized we hadn’t met in a number of years... we’d had a difficult relationship for a number of years,” he said,
Then, Google’s lawyer pointed out one phrase that doesn’t appear anywhere in the notes of that meeting: Google Play.
Google’s suggestion is that despite the controversial notion that Google and Apple might “work as if we are one company,” and their codependency on search revenue, all of that shouldn’t be relevant to today’s Google Play antitrust case.
Google also went through some internal documents about “Apple Partnership Strategy” that apparently don’t suggest any partnerships between the companies around Google Play. I wonder if Epic’s lawyers will find one that Google omitted, though.
That’s Google’s partnerships boss Don Harrison live in court, attempting to explain the Spotify sweetheart deal as a bit of a forced choice. Here’s a passage from his old email as well:
“The reason we are proposing this bespoke deal with Spotify is because of its unprecedented position and bargaining power in the market and we had to offer a creative solution to bring their full value to the Play ecosystem.”
“Listening to music is one of [the phone’s] core purposes... if we don’t have Spotify working properly across play services and core services, people will not buy Android phones,” Harrison said in court.
We also got more insight into what the 6 percent and 10 percent numbers meant in that deal:
One portion of that fee that is tied to processing (10% of Google processes payment, 0% if Spotify processes)
One portion of fee that is processing to capture value that Play adds (6% regardless of who processes)
If I’m reading this right, Google would collect 0 percent when users chose Spotify payments alongside Google payments and 10 percent when the users chose Google. In situations where users didn’t get a choice, Google would collect 6 percent, regardless of who processes the transaction. I’m genuinely not sure, though.
Google is explaining that it didn’t spend $360M, let alone billions, just to avoid the risk of ABK building its own Android app store. “At its core, this deal is about a large cloud” partnership, read part of the “Strategic Rationale” email from Don Harrison. He now says Google wanted Activision Blizzard to spend big on Google Cloud and put its games on its (now-shuttered) Stadia cloud gaming service as well.
Here’s “What Google gets” from the deal, according to an internal Google doc:
-Continued Play partnership for ABK titles at current rev share: Standard Hug developer obligations (sim-ship, title parity, quality)
-$200M cloud committment over 3-4 years (TK has approved)
-Increased UAC ads spend, plus $115M/yr DVIP
-Exclusive ESports distribution license for YouTube
-Commitment to partner on Stadia (deal terms TBD)
Here’s what Activision got:
GCP credits equal to 2% of play consumer spend (no cap)
UAC matching credits: $1 UAC ads credit for every $3 ABK spends in UAC ($35M/year cap)
co-marketing funds: $1 in co-marketing funding for every $3 of ABK marketing spend ($20M/year cap)
Esports licensing: $45M for exclusive Esports distribution license for YouTube
Correction: I missed copying over a line about GCP credits. It’s in there now.
We just saw Google’s notes from a two-hour meeting in 2018 between Tim Cook and Sundar Pichai with other top execs in attendance. Here are some of the passages I copied down; I couldn’t type fast enough to get the whole thing!
Tim’s overall message to Google was “I imagine us as being able to be deep deep partners; deeply connected where our services end and yours begin and sees no natural impediment to us doing more together. Knows there is a past but doesn’t feel encumbered by it and wants to figure out how we work more deeply together. (and share information better - he stressed this a few times)” Very positive and I felt genuine on his part — but we can take this slowly and no regrets over how we have handled things to date (from Sundar)
Another:
Sundar: we would love to see the iPhone numbers grow and will work in good faith to answer the queries you send us ...
Another:
Our vision is that we work as if we are one company. There is reluctance on both parts about sharing things. It would be great to hurdle over that. We’ve been back in a good stead for awhile; build a Google app that really builds a great experience (Sundar). We could extend the terms of the deal.
This was Google’s proposed counterproposal to Spotify — it’s not clear whether they’re the final sweetheart deal:
Google will charge a service fee of 6% on all transactions to reflect the value realized of operating the platform, distributing, publishing updating, loyalty, and investing in the user experience for Spotify users. In addition, we will also charge a 10% fee where and if Google enables new subscribers to transact via Play.
We saw a 2x2 matrix where Spotify had a 0 percent processing fee and 6 percent service fee and Google had a 10 percent processing fee and 6 percent service fee.
“It’s a much larger deal than” $360 million, says Google’s partnerships boss Don Harrison.
He took a stab at estimating how much money Apple gets from Google in the gigantic Google default search deal, too: greater than $15 billion, less than $20 billion per year.
Harrison says he did indeed believe it was a risk that ABK would launch its own mobile distribution platform. “I identified that risk and it did not happen.”