Apple Threatens Unreal Engine

Apple Experiences Fee Pressure and Threatens Unreal Engine Ban

To follow up on our note last week on Apple vs Fortnite, below are two quick updates:  

1) Media industry pressures Apple on fees: in the wake of Apple’s feud over app store fees with Fortnite, other media companies (WSJ, NYT, Washington Post, etc) are now asking for Apple to cut their fees to 15% (from the 30%). Epic Games has put on the pressure and other industries are following suit. (BBC)

2) Threatening to ban Unreal Engine entirely: Apple retaliated to Epic’s lawsuit with a threat to ban Epic’s inclusion in the Apple Developer Program. This would effectively ban (from macOS and iOS) anything that leverages the Unreal Engine (owned by Epic Games). This would apply far beyond just Fortnite but also to any external game that uses Unreal Engine. It would also affect medical imaging companies and car designers that use the Unreal Engine software. Epic Games has asked the courts to step in and block this from happening.

Takeaway: this feud is far from over and its resolution (however it shakes out) will have widespread implications across many industries.

Video Games Were Optimized for Mobile Before it was Necessary

Consumer spending in mobile apps and games surpassed $50 billion in H1 2020 (App Annie report), up 10% from H2 2019. Consumers also spent 1.6 trillion hours in mobile apps in H1 2020. As the chart above shows, video gaming continues to dominate >70% of the revenue for both the iOS and Google Play mobile app stores.  

As consumers continue to leverage their mobile devices for everything from news to entertainment, almost every industry will need to increase focus on their mobile app strategy. This is where gaming thrives.  

Gaming was taking advantage of mobile games before anyone had even heard of an “App Store.” The Gameboy was released 19 years before the Apple App Store and  PlayStation’s PSP preceded the App Store by 3 years. The first generation Gameboy was even released with multiplayer capabilities through the Game Link Cable.  

It is no surprise that more than 71% of the app stores’ revenue is from games. Video games were optimized for mobile gaming before it was necessary.  

Here are some other interesting consumer trends from the App Annie report from H1 2020:

• E-commerce boomed in H1 2020, achieving growth that normally would have taken between 4 and 6 years — and mobile was central to this growth.
• A major ad network saw its volume of US iPhone ad placements grow by 70% from Jan 2020 to June 2020 — driven by interstitial ads.
• Consumers set new records for global app store consumer spend in May 2020 at $9.6 billion.
  

Microsoft Flight Simulator 2020  

Microsoft just released a brand new Flight Simulator (FS) this week. FS was first released in 1982 when the company was still in its founding years and the last release was in 2006. FS is actually one of Microsoft’s oldest software products, predating Windows. Fans have been eagerly awaiting this update after the 14 year hiatus.  

What is interesting about this latest release is the all encompassing nature of Flight Simulator 2020 (FS2020); you can fly anywhere in the world and it looks very realistic. Microsoft used the latest capabilities in modern technology to make this happen. They pulled in Bing map data for photogrammetry data, used the internal Photosynth tool to generate 3D from 2D images, and similar to how Google drove the world for Street View on Google Maps, they contracted companies to fly planes around the world with LIDAR and other surveling tech.  

All of this data, which is the core offering of the simulator, couldn’t be delivered via disk or download to consumers, so Microsoft put it on their Azure cloud computing platform and streams the game data to players. In our view, FS2020 is a cloud gaming title on Azure.

FS2020 is truly something that only a major tech company, like Microsoft, could achieve. It highlights the unique position these large cloud computing companies are in and why they are so interested in gaming today. Microsoft had the foresight decades ago with Xbox and are now well positioned in not only console gaming but also the video gaming market at large. Google and AWS have had to go out and build their gaming practices from scratch. If you’re interested in reading more about FS2020, this is a great piece worth a read.