Lex Fridman: belief

Transcript context

…And it’s very hard for the fund-based games to actually succeed there. And the cost of operating these online games now are enormously high. So you have a game that’s based on fun. It’s not loot-box- heavy. You have to pay 30% of your revenue to Apple in order to just get access to the platform. And 30% is way, way, way more than most game companies make in profits right now. And so, if they… that fee is more than the profit from a natural company, then they can only stay in business by raising prices. So these 30% fees are raising prices of all digital goods. It’s just inflationary is a force in the economy. That’s just the first drag tax. But then to reach users, when a user searches for… Before Apple blocked Fortnite on iOS, when a user searched for Fortnite, the first result was always some competing game that’s utterly anti-user. Like you search for Steam for a game, and if that game’s on Steam, it’s the first result always because Steam’s not getting inshittified with advertising. Apple is, and they do that so they can make even more than 30%. So, if you want to be the search… the first search result for your game, you’re probably paying more like 45%. If you want to reach users on social media, you’re paying another 20%. So, literally, something like 70% of the revenue for your game is just going into junk fees to acquire users and get them in your game. And the money that’s left over is only enough to fund these games with rather abusive practices that do not look to normal gamers like games for the most part. Now, there are some exceptions. There are some great games on iOS, and there’s some games with good practices, but the engine has been really corrupted in a way that competition would fix. If you unleashed lots of competing stores on iOS, then you’d have lots of awesome options, and you’d have much better deals and much better prices. I had a quick chat with Matthew. He asked me to ask you this question of why don’t more companies fight Apple in the way openly and totally as Epic has been? What makes you Epic so unique in this regard? And I should say, I think everything you said I agree with fully. I think what Apple is doing is just wrong. I think Apple, in many dimensions, is an incredible company. They have brought so much good for the world. In this regard, I just think it’s straight-up wrong what they’re doing that they’re not providing the value of 30%. And even if they were the monopolization, the centralized control without competition is wrong. Anyway, why are you fearlessly Apple on this and other companies don’t seem to want to step up? All companies are terrified of Apple because Apple can destroy their business. Epic was in a unique position with Fortnite, first of all, having the biggest game in the world at the time we started the fight with Apple. And second of all, having a majority of our users playing on PC and console meant that if we lost access to iOS during a fight, then we would still be able to survive. That set Epic apart. Spotify, Facebook, you name the top 10 mobile apps, I think none of them would be able to survive without Apple. Literally, their business would be destroyed if Apple blocked access to them. And Apple is incredibly clear with developers that they’re willing to deprive all users of access to any app if they get in a fight. And if you look at how they dealt with Epic, they were not just legally maneuvering with the intent of winning the court case against us. They were also sending a message to all developers in the world. “We will destroy your business, or we will try our best if you fight us.” And a very small number of vocal developers have been willing to speak up, and Apple was actually refrained from crushing their businesses when they weren’t violating any Apple policies. And that took a bit of discipline, which I think is also amount of calculation by Apple. They couldn’t survive being seen as the company killer, that, “If you criticize this will crush your company.” But the other thing Apple has that they can and will readily deploy against every developer is soft power. When they take 30%, and advertising is so expensive, soft power by Apple like approving your updates faster or slowing down all of your updates by a couple of weeks can also have a dramatic effect on your ability to compete successfully. And Apple, it’s a very long history of playing cat-and-mouse games with developers. It’s like, what, a developer isn’t in Apple’s good graces, so just slow down the updates. So they’ve been slowing down updates for several major tech companies, sometimes for weeks, sometimes for months, without all going under the radar because everybody’s afraid to challenge them publicly. And so, Apple’s wielding a soft power can change a company’s economics for the worse enough to deter almost any public company. And Epic is in the fight because I firmly believe that something like the metaverse will only arise. It’s something like a billion-plus user real-time 3D social ecosystem that grows to encompass potentially all or most major games by all major developers tied together into an open economy where they all participate as peers, and they all compete to give users the best deals, and they grow and do business with their customers directly. That thing can only exist if the and Google gatekeeping monopolies are lifted.…

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