Epic v. Google: everything we’re learning live in Fortnite court

In a September 2022 deposition, he’s talking about how his company uses Google’s Android emulator and analytics features, among others, to help his clients, without Google directly charging him for those tools. He passes along the analytics to his clients, he says, so they can see how their apps are performing.

He said earlier that OCV primarily builds website for clients in the law enforcement and public safety sectors — police, fire, public health, clerk of courts.

One of OCV’s apps is HCPH Overdose Rescue, we just saw — it’s an app that explains how to administer Narcan.

Epic is countering by asking Beaty whether OCV could have decided just to make apps for Android users instead of also building them for iOS (presumably to show Android and iOS don’t compete for the same users).

It “wasn’t really a consideration for us because we wanted the widest reach possible,” he says.

We saw that Epic isn’t even trying to suggest it didn’t breach its contract with Google, appears to be formally conceding that as well, and now Judge Donato just suggested that it may not be contesting the damages either.

During a jury recess, the judge noted that Epic didn’t seem to be challenging the amount of damages Google’s expert calculated, beyond the payment processing fee. Perhaps the jury won’t need to decide an amount because Epic will simply concede a few hundred thousand dollars to Google.

That’s likely peanuts for Epic, at least compared to Epic’s legal fees for this trial.

There was also a suggestion we might wrap up early today.

“Obviously we see it as a package and part of the 30 percent platform fee on IAP. I think Google sees it the same, and it’s part of the expectations of a partnership,” says Burak, the Tilting Point head of business.

Tilting Point suggests its revenues skyrocketed after adopting a strategy of helping developers publish on the Play Store, quadrupling from under $50M in 2019 to over $200M two years later.

But Epic is pouncing on that, in a line of questioning designed to make Burak look biased — Epic gets Burak to agree that the revenue stream from Google is critical to his business, and points out how Tilting Point is in the business of brokering developer relationships with Google and how Tilting Point needs to maintain a strong relationship with Google itself to do so.

Burak says “correct” in response to each of Epic’s questions and agrees that Google asked him to testify today. I would think the jury knows by now that every witness has been called by one side or the other, but hey.

One thing Google hadn’t quite driven home yet is how its free-to-use Google Play developer tools help developers, and Tilting Point chief business officer Asi Burak is here (in a taped deposition from 2022) to explain.

He says that in general, the lifetime value of a user (LTV) on the Google Play Store is much higher than on, say, a Samsung store, but is implying that it’s not just because of Google’s market share.

Google “provides tools for me to understand how effectively I’m doing it and how effectively they convert to install the apps, the games, and how effectively I can convert them after on to be payers,” he says.

The tools help him help developers compare performance to the leading apps (anonymously) in each game genre on the store and “fine-tune” the “stream of players.”

While the jury gets to award damages for Epic’s breach of contract, Dr. Gregory Leonard was (briefly) here to argue how much they should be. And yes, he was compensated for this, he says.

(Basically, when Epic launched its game on the Google Play Store and bypassed Google’s payment system, it breached its contract, and anybody who bought V-Bucks from Epic using Epic’s Direct Pay system didn’t pay Google’s fee.)

Leonard has a doctorate from MIT in economics but says the calculation is pretty simple:

Epic received $1,329,770 in revenue through Direct Pay (during the short period that the hotfix was live)

Google had a 30 percent service fee

So Google lost $398,931, he concludes.

The only thing Epic asked him to clarify was whether he subtracted the transaction fees from that amount — and if he was aware Epic paid Google $3.3 million during the same period. It’s not clear where the $3.3 million number came from.

Epic’s CFO admits he’s not aware of any.

Has Epic even considered paying for preinstallation?

“I couldn’t answer the question.”

And yet, he agrees that Epic paid developers hundreds of millions of dollars to make their games exclusive to the Epic Games Store on PC.

“Is there anything wrong in your view with Epic paying hundreds of millions of dollars to developers to get them to launch exclusively in the Epic Games Store?”

He says no.

We’re now hearing a taped deposition of Epic CFO Randy Gelber from September 2022, and we’re hearing an interesting question indeed — one that cuts both ways if you’ve been following each party’s narrative so far.

Gelber replies:

We believe those to be competitive markets and we believe that the fee, their cost structure, is entirely different than a mobile app store.

How is the cost structure different?

Well, they subsidize hardware, so they sell their hardware, as far as I can tell from widely published reports, at a loss, and so the fee needs to cover that. Mobile apps are typically low in size and so their costs are higher, and I think their customer service costs are higher because people don’t call Google about apps, they call the developer generally...

There are “multiple competitors on console,” he says.

In 2017, Apple’s Carson Oliver forwarded an email about this Google Play feature as described in this Verge story: “Google now lets apps display sale prices in the Play Store”.

“We should have done this two years ago,” said Oliver.

“Even today, 7 years later, Apple still has not implemented this feature int he Apple App Store, has it?” asks Epic’s attorney. Oliver starts to say no, because it has to do with paid apps (and presumably is no longer needed to compete with Google as free-to-play apps are the norm), but gets cut off. He says no, Apple has not.

In 2018, Apple also internally forwarded this Android Police story about how “Google Play Store shows you the streaming apps that have the movie or show you’re searching for.”

Apple’s Matt Fischer, head of the App Store, wrote, “I’ve always wanted the ability to search for content within apps (specific movies, music, etc. ) and show the relevant search results.”

“Apple has not adopted a flat 15 percent fee for all subscriptions across the board starting in year one, yes?” asks Epic’s attorney, pointing out how Apple didn’t quite join Google in doing so.

“Google was going to charge 15 percent for subscription transactions starting in year one of the subscription... Apple still has not adopted that policy itself, has it?”

Apple’s Oliver had to agree. He also agreed it sounded correct that Google didn’t implement a subscription discount policy until a year and a half after Apple, a point that Epic has continually attempted to drive home during this trial, as evidence the companies didn’t feel competitive pressure from each other.

“Yes, I believe we do,” says Apple’s Oliver.

He agrees that Apple and Google’s stores compete for “the highest quality apps,” as Google put it, and on “the safety and security of the user experience.“

Apple nominally charges game developers the same 30 percent as Google, but Oliver says “the vast majority of game developers are eligible for the small business program... they would be able to pay 15 percent.” It applies to developers that earn less than $1M in annual revenue — so we’re talking about the long tail, not game companies at the scale of Epic.

I’m half an hour late to court, I’m afraid, due to a BART train delay (and me missing BART’s make-up transfer point by one stop), but I’m here, listening to Apple’s Carson Oliver, a senior director of business management for the App Store on iOS.

He’s Google’s witness, and Google’s wrapping up questioning with him. The part I caught when I came in was mostly background on the fees Apple charges and why, but... see my next QP:

Epic’s attorney Bornstein says he’s now only pursuing per se on the Project Hug deal for Activision Blizzard King, dropping Riot and Supercell. He’s justifying it because ABK could have had a compelling store and Google seemingly nipped it in the bud knowingly.

But Judge Donato is still inclined not to do per se, bringing up an analogy about an “entrenched medical supplier that has a monopoly share of pulse oximeters,” which, he revealed to laughs, was not a theoretical example but a real case he was involved in.

As I wrote earlier, Epic wasn’t even trying to argue it didn’t breach its contract, and it appears that Epic is formally conceding to its breach as well — Judge Donato says we’re going to eliminate the breach of contract jury instructions and have the jury decide “how much, if anything, that breach is worth.”

Google is trying hard to argue that Judge Donato should consider an aftermarket theory, but he says it’s “completely inconsistent with the evidence that’s been presented in this case” and doesn’t agree it should apply at all. I will admit I do not know what aftermarket theories are or how they work, but Google’s lead attorney tried to argue that Google has been arguing from the beginning that people buy their phones for apps — so that gives me a clue.

We’ll be back tomorrow — yes, we do have court on a Friday for once, since day 8 got partially canceled. Tomorrow will be the close of evidence in this trial, and then we’ll be off for a week. Closing arguments and the verdict should come the week after that.

Each party will get an hour for closing arguments, says Judge Donato, and we should expect to be here until 5PM or later each day on the last week of trial.

Stolfus just gave the jury the most compelling description of the uphill battle a consumer would have trying to install Fortnite on a phone yet in this trial — and spoke a little faster than I could type, unfortunately.

He says the majority of Android owners will go search for Fortnite within Google’s ecosystem, but there’ll be no mention of it in the Play Store, and it might not appear in the first or even second page of search results — so Epic would have to advertise in Google Search to change that, paying Google more money. Should they indeed find the app, consumers don’t understand the process because they’re familiar with downloading games through Google Play.

“Then they’re hit with the first prompt, which is that this APK can damage your phone... the unknowing consumer is always on the back foot, they’re scared up front... then they’re put through an install flow that’s prohibitive to downloading the app,” he said.

We just saw the email where OnePlus’ Eric Gass blames Google, but... it sounds like what Google was blocking was a hacky workaround?

Gass wrote: “Apparently at the final stage-gate of software testing before MP release, Google is blocking our Game Space silent install solution bypass of the stop trusting unknown sources.”

Neither Epic nor Google has suggested it was a workaround yet, nor have we seen OnePlus’ subsequent explanation for why Google might have blocked it.

Stolfus tells Epic’s attorney that Google “didn’t want the ability for a store ultimately to be preinstalled and bypass the installation restrictions that exist if you sideload an app.”

LG, too, blamed Google. “They let us know that Google was preventing them from moving forward with the installation of an app that could install other apps,” says Stolfus.

Verizon, too. “We were led to believe by their partner Digital Turbine that it was related to Google,” he says.

“The ultimate goal with OnePlus... would allow OEMs to not only preinstall the Epic Games app with an optimized one-touch install flow, but also make that same install flow available on all legacy devices as well,” says Stolfus.

But that didn’t happen because OnePlus decided not to go all in outside India, and Stolfus says Epic couldn’t dedicate the same “significant” engineering resources to other OEMs, save Samsung.

“That’s insane, we should reject the Fortnite-only proposal,” said Sweeney, according to Stolfus.

He rejected it because the larger goal was to get the Epic Games app on phones, not just Fortnite.

“I just told him I’m not really comfortable being the Face of this on Android with zero leadership support,” he told his colleague Alec Shobin at the time.

We’re now hearing what he meant:

At this time, I didn’t feel like anyone had approached me personally and said this is a potential path that we’re really considering. It wasn’t just speculation or meetings to determine what could be, couldn’t be. No one came to me from a leadership perspective and say we know we just did this, we had you establish a relationship, this is a potential path we’re going down and this is what the outcome could potentially be, and therefore I felt I didn’t have support internally or was being involved in what I could potentially be involved in.

He says that after the plan was set in motion, he needed to continue to maintain a relationship with Google — but no one else from Epic would join him in meetings and calls. He asked: “are we just pawns in Tim’s game?”

It looks like Stolfus was not happy with his employer’s Project Liberty trap. “Sweet Jesus,” he wrote privately, referring to Epic CEO Tim Sweeney’s email describing that plan.

“I just spent a significant amount of my time and my energy helping launch our game product on Google Play,” he testifies under oath. “I had hoped that we could pursue that option... and this email led to that not being possible.”

Tim Sweeney is watching his testimony with an open mouth. He seems surprised or amused. That’s new: I haven’t seen Tim with an expression on his face any time I’ve checked for a reaction so far during several weeks of trial.

“I understood what Tim was ultimately trying to accomplish,” Stolfus says.

Ah yes, I forgot we already knew Stolfus was internally skeptical about the plan. We’ve just been reminded about (and the jury has just seen for the first time) what he wrote internally: “I mean, everything we’re attempting is technically in violation of Google’s policies.”

I believe I saw that same email in Epic’s complaint filed in 2020, or perhaps when I was sifting through docs in the Epic v. Apple trial.

“Google was unaware that we were going to do this,” Stolfus admits, about the Project Liberty trap.

But, he seems to be saying, Epic didn’t lie when it said it would submit a build of Android that “fully complies with Google’s policies and restrictions.”

“Did Epic in fact do so?” he was asked.

“Yeah, we submitted it, and it went live on April 1st,” he said.

Huawei put it on Honor phones — “until we were no longer able to communicate with Huawei from a technical perspective and because of government restrictions with Huawei,” Stolfus says.

Epic had a deal with LG for a gaming-targeted phone. It still had a deal with Samsung as of 2022, four years running, to put it in the Galaxy Store. It talked to Razer and Lenovo and more.

And it had a deal with OnePlus, as we’ve repeatedly heard — Stolfus says his contacts at OnePlus promised to preinstall the app globally but “ended up only having preinstallation in India.”

Why? “Because Google blocked the proposal to preinstall our app on their devices outside of India,” he claims his OnePlus contacts told him. Google says OnePlus made its own choice.

The Samsung deal was the big one. In 2018, Epic estimated, 56 percent of devices that could run Fortnite, outside of China, were Samsung devices.

Nobody had more questions for Epic Games engineering director Andrew Grant, so we’ve moved onto a February 2022 taped deposition of Hans Stolfus, a strategic partnerships director at Epic.

He says his job was to maintain and grow partnerships with OEMs in the Android space and work on the direct carrier billing business with carriers globally. He worked at Samsung as a manager of partnerships before that.

He was listed as a team lead for OEMs and partnerships in a “Fortnite Mobile Business Update / Deep Dive” document that just briefly flashed onto the screen.

Andrew Grant is still here, but Google has passed the witness — and Epic is now asking him about the website warning screens.

Grant says that on the web, websites are identified to cause harm before those warning screens show up (as opposed to Google’s Unknown Sources flow, where the assumption is that everything unknown is a risk.)

He’s also explaining that streaming games are highly reliant on a good internet connection because they can’t buffer for a couple of seconds like a Netflix video and latency is so important for responsiveness.

(I’ve personally covered cloud gaming for over a decade, so I can confirm that’s true; they also depend on the distance between you and the cloud gaming server, your Wi-Fi, etc. There’s a lot of potential friction.)

Ah, it was actually simpler than I expected — I should have guessed when he asked whether Grant’s in-laws had a good internet connection.

“The bottom line is, there are many ways to play Fortnite on mobile devices, right?”

“You can play Fortnite on cloud gaming with no download, right? Just launch it and play.” Mach suggests there’s the Galaxy Store, Xbox Cloud Gaming, GeForce Now, and Amazon, as well as downloads.

Grant keeps trying to suggest there aren’t “many” but rather “several” or “a couple.” But Epic’s own website fortnite.com/mobile says, “There are many ways to play Fortnite on mobile devices!” and the jury just got to see that for themselves.

We’re going on a short break now.

I’m sure this will become relevant soon, as Google’s attorney Kyle Mach is winding up a whole line of questioning around cloud gaming. We’re not there yet, but Grant got a laugh when he said he made sure his in-laws don’t have a terrible internet connection. “I’m a good son-in-law,” he says.

If I had to guess, we’ll come back to how Epic tipped off Microsoft gaming boss Phil Spencer about Project Liberty, but not others, because it seems self-serving? We’ll see.