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Episode 30: Becoming the Villain Edition ft. Michael Arin and Billy Studholme

Imad Khan August 17, 2020 7


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Last week Apple dropped Fortnite off the App Store after Epic Games tried to bypass the 30% fee imposed on all developers. Google did the same on the Android marketplace. This prompted Epic to immediately sue Apple and Google. While Fortnite isn’t competitively played on Mobile, there are plenty of mobile titles that are insanely popular esports in countries like India and China. This could have major implications if Apple and Google’s control over its app ecosystems are overturned.

Michael Arin, editor in chief of the Esports Bar Association Journal, jumps on the show to break this all down from a legal perspective.

Also, Call of Duty League is set to come back this Wednesday with its inaugural playoffs. But the new franchised esports league hasn’t been pulling impressive numbers. Freelance journalist Billy Studholme comes on the show to discuss his latest column on Dot Esports. In it, he questions the success of the league and points to failings from Activision Blizzard.

Transcript:

SPEAKERS: Imad Khan, Billy Studholme, Michael Arin, Farah Collette

Imad Khan  00:02

What’s up everybody, this is FTW with Imad Khan. I’m your host Imad Khan. And joining me today on this becoming the villain edition is Michael Arin, editor in chief of the esports Bar Association journal. And later on, we’ll have freelance journalists Billy Studholme to talk Call of Duty League, plus a fan of the week question. But first Fortnite versus Apple. Last Thursday, Apple delisted the Fortnite app off its App Store after Epic Games tried to bypass the 30% fee imposed to all developers. This comes two weeks after tech CEOs have to stay in front of Congress in highly televised antitrust hearings. Representative Hank Johnson from Georgia grilled Apple CEO Tim Cook on its pricing policies and if the company was taking advantage of developers, Cook replied that the 30% fee has never increased, nor would it ever and that some companies have special arrangements like Amazon, which only has to pay a 15% fee on digital goods and not physical goods. Shortly after, they’d be listing Google to remove Fortnite off the Android store. This prompted Epic Games to sue both Apple and Google immediately. Epic argues that Apple more specifically has monopolistic control in its app micro economy. users cannot go outside of the App Store to install applications on Apple devices like Android. Cook argued during the congressional hearings that Apple doesn’t have dominant market share anywhere in the world. And this is true. Apple’s products are premium. So it’s not looking to be the number one smartphone in any country. So Michael, given all this, it seems that Epic was ready to throw down, this will likely be a prolonged battle with millions of dollars being thrown out lawyers, do you think Epic has a chance to win the suit?

Michael Arin  01:27

I think that it’s not a new suit. This has been an ongoing debate for at least the past, I would say two years or so. Back in 2019 Spotify complaints, somewhat similarly of Apple’s pricing, in fact, when it was forced to charge Spotify users on Apple devices $13 rather than $10 because of this 30% fee, then Apple came out with its own music streaming service and charge only $10. Spotify complained of this actually to European antitrust investigation. And there’s been investigation in Europe ever since. However, the United States story comes more from the private side of litigation against Apple. Recently in 2019, there was a case about whether or not consumers could sue Apple alleging that they are being charged super competitive prices because of this same 30% fee. This is just another iteration of that same dispute going on before Congress before the European antitrust investigators and before the courts today. Fortnite and Epic are trying to show that Apple really does have monopolistic power over the iOS devices. The question underlying the suit is really whether or not that’s the proper market, and it’s a complicated analysis, and it’s difficult to decide whether or not there is some merit to it. A monopolistic company that charges super competitive prices doesn’t really violate the law. They’re allowed to reap those benefits, but where they unlawfully maintain that monopoly power over the market, that is where there might be some merit in this suit.

Imad Khan  03:03

I mean to the current laws, at least in the US, can they even be cross applied to these micro app economies that exist on like their own unique little platforms, with I guess they’re using US currency? I don’t know. Can these laws really apply?

Michael Arin  03:16

That’s the big question before Congress right now, I was here two weeks ago to break down the big tech antitrust hearings, where senators and congresspeople truly questioned whether or not the antitrust laws could be used to stop this monopolistic behavior or any of these harms to the market. On the Republican side, we actually heard many cries that the laws were sufficient. And in fact, I think that the recent suits against Apple are trying to prove this. They are saying that the Sherman Antitrust Act and other state laws like the Cartwright Act, which Epic is using to allege harm in its suit against Apple and against Google, they are sufficient, they’re able to stop Apple from charging the super competitive prices. On the other hand, as I mentioned, there are some potential detrimental serious flaws to the argument mainly around how the courts have construed markets, how the courts have construed injury to consumers and the focus on the consumer welfare standard. It’s a tough call to say whether or not the laws are sufficient. But this lawsuit is definitely challenging that. So

Imad Khan  04:28

let’s go into kind of the suit against Google. In this one, I guess I’m having more trouble wrapping my head around. I mean, I understand that Google is also charging a 30% fee, not only on app purchases, but in app purchases, but it’s also possible to essentially install an app outside of the Google Play Store. So what are the merits behind the suit against Google?

Michael Arin  04:48

So we see a lot of the same claims between the two suits Apple and Google. We see monopolization claims and time claims, essentially alleging that Apple controls the iOS market And Google controls the Android Market. But as you mentioned, those two markets are very, very different. If you have an Apple device, you have to use the Apple Store, there’s no getting around it, there’s no way to sideload or direct download any applications onto your phone, at least not within the terms of service that Apple requires you to follow. However, Google has taken a different approach, at least with their devices in the Android Market, you can in fact, sideload and direct download certain applications. And in addition, Android or the Google Play Store is on devices not made by Google, such as Samsung, where there’s a competing Samsung app market, and those two stores might be charging different fees. So it’s difficult to see the similarities between the two markets besides the 30% fee, because there is more competition in the Android market because there’s the ability to sideload because consumers can be reached, even if Google says no, right.

Imad Khan  06:05

And I think the best way to kind of relate this is like imagine if on your Windows computer or even on your MacBook, it was impossible to like to download and install a program in that you had to go through like a Windows marketplace. And that idea just sounds so absurd on like a computer standpoint, just because I guess the way we’ve been using computers for so long, like the ability to just go onto the internet, find an application or a program, install it. But then you know, I guess here, it’s we’ve all just kind of accepted that using App Stores is kind of the way it goes for touchscreen devices, because it’s a bit more cumbersome to kind of go on Google and find a program and install it. But you know, the suit also pushes the fact that these devices are more than just communicators. They’re essentially mini computers at this point, right? And then to have such stringent control over how applications are installed, essentially Apple is trying to have it both ways is do you think that my interpretation of things is fair?

06:59

Actually, there’s court cases that really support your intuition. There were antitrust suits against Microsoft and how it used its control over the Windows operating system to assert its dominance over the computer market. And we’re seeing kind of an extension of that argument to smartphones. Essentially, the courts have recognized that computers are an everyday thing, and that you have to use a computer today in the modern economy. And I think it makes sense to extend that to phones that we have in our pocket at all times. And that it becomes so complex that they may as well just be small computers, like you say, when you prevent competition on these devices, using your power over the device itself. It really can bring some harm to consumers by raising prices and the like.

Imad Khan  07:48

I guess trying to relate this back to esports. Fortnite competitively is not really played on mobile devices to begin with. It’s generally play it on PC or console, the mean for the esports scene, do you think this has some significant merit if Epic Games does win?

Michael Arin  08:02

I think that the esports scene has a lot of different people invested in the outcome of this suit, we’re going to see actually, at the developer level the most change should this suit be successful? Because esports Well, they depend on the video game at the outset. And many of these developers choose not to monetize their esports through high fees for the initial base game, but instead charge fees in app for microtransactions, or cosmetic purchases in order to essentially subsidize in many cases, their esports scene. Even Riot Games has said that the esports scene wasn’t very profitable, and was only being subsidized by the in game purchases. So I think that if Epic is successful against apple and against Google app developers, and that means esports game developers will be able to get more money on the front end. And perhaps be able to support the costs of investing in nascent esports scenes.

Imad Khan  09:06

You know, I do wonder so I mean, look, the mobile esports that are more popular around the world. So at the moment, any kind of in app purchases on PUBG Mobile, or you know, money is being funneled to Apple and Google, if epic wins his suit, would that make a PUBG Mobile a more powerful force in the mobile, mobile esports economy because they’re just making more money? Or is this really just a case of billion dollar companies just wanting more money?

Michael Arin  09:31

So I think there there is some merit to say that mobile esports companies in general, or at least those game developers that are looking to invest in their esports companies will be able to do so more easily. However, Epic can and has been criticized for well, just being a large company attacking another large company, and really just trying to get a slice of the pie. Epic’s complaint against Apple explicitly recognizes That if another app store would be allowed on iOS devices, Epic game store would essentially come to the iOS device market. That means that they will be charging the fee and they will be getting the money. Some app developers may be benefiting from a injunction against Apple preventing them from maintaining that monopoly. And by permitting other app stores or by permitting direct purchases in game without using Apple Pay. It really is Epic’s opportunity to access the iOS market. And in Google’s instance, the Android Market,

Imad Khan  10:37

Apple argues that it’s charging this fee because it helps uphold the security because they have to go and thoroughly check all the apps to make sure that there isn’t a vulnerability that can harm you know, its user base. Do you think there’s some kind of compromise in the middle here? I mean, could that fee be reduced to $10 and exclude in app purchases, things like that, or would this just mean that if Epic wins fees are illegal and Apple just has to eat the cost of maintaining security.

Michael Arin  11:03

Right? So that’s it’s a pretty complicated question you ask the first part of it goes to whether or not there will actually be some significant change to Apple’s structure on the App Store. And the second one is Apple’s reason for having that structure in the first place. So if Epic wins, it doesn’t mean that the court will say you can’t charge 30%. That’s illegal. Again, the the court is not interested in mandating prices for competitors. The court, on the other hand, can say Apple, you’re using your gatekeeper privileges to gatekeepe in defense of your own monopoly. You have to remove those prohibitions that prevent direct in app purchases, and prevent other app stores from existing on your iOS devices. Then it’s the markets turn to react. The market will then allow in app purchases and app stores on iOS devices like Epic who will charge lower fees for both on the app store as commission or in game purchases through direct payment. And so the market would effectively force Apple to reduce the commission that it charges and to reduce that fee and in app purchases. But as you mentioned, Apple has a good reason to be charging that 30% fee, or at least it thinks so it provides a lot of value to app developers providing different software packages and ensuring security for its user base. And in fact, when Apple has to argue it’s procompetitive justification for the high fees. It will say consumers rely on us to make sure that no app that will seek to misuse their data, access it and appropriately or cause security harm gets to them. Therefore, in order to make sure that that happens in order to fulfill that promise to consumers. We need to charge what that costs us and that cost is 30%. Fortnite disagrees. Their value is only 12%.

Imad Khan  13:03

Thanks, Michael. And actually our fan of the week question has to do with this as well. It’s from Farah Collette. She’s the editor over at narrative muse, a matchmaking service that connects people to book and TV recommendations. She asks:

Farah Collette  13:15

Something I’d be curious about your take on is whether or not this will finally get people interested in tech monopoly. Because this is an old problem, to be honest, that has had trouble earning attention outside the industry, but fortnight’s massive, and its community is so passionate, then again, is its community of the age or do they have the clout to get anything done about it? I feel like Spotify had the same problem A while ago, and it also disappeared from the news cycle after a while.

Michael Arin  13:40

Hi, that’s actually a really good question. You’re right. Big companies have been fighting for a long while. And it seems that they’re just spur of the moment and in fact, Fortnite’s brand is to be a big flash in the pan and then disappear. It could be that this case is just settled in the end and we don’t really see anything as a result. But the public has really moved against Apple congressional hearings have began investigating into these 30% fees. And fortnight now does have the clout, just like Amazon or Google or Facebook. And in fact, a number of competitors to Apple are equally criticizing Apple. Just a couple of days back, Mark Zuckerberg came out and said, of course, it’s time to end 30% fee in support of Epic. And so well, it might just be a flash in the pan. I think this movement, something more. We’re truly seeing a reconsideration of what has been a standard industry practice. Spotify complained last year, but the investigation is still going on. And Apple still under scrutiny. While it might not be in the public news, it’s certainly ongoing.

Imad Khan  14:51

Yeah. And I feel that it’ll be important for Epic to reframe the argument against itself and start to advocate that, you know, we’re spending our billions and billions dollars help regular app developers regular people because I think the idea of like billion dollar companies is fighting each other gets, you know, makes people kind of roll their eyes. But if Epic can continue to read from the argument that college students are will be able to have more money will be able to create their apps and you know, be have more success in the future, etc, etc, that it will democratize the App Store in a way then I think there’s more public sentiment that could go towards Epic’s favor.

Michael Arin  15:31

Yeah, it’s really hard to reconcile both the the manufactured way that Epic is going about it by forcing Apple you know, intentionally violating ToS, forcing Apple to take down Fortnite and then suing them as a result, and its message of Apple is harming consumers, not just big companies like us.

Imad Khan  15:53

Well, we’ll continue, I guess following the story, and we’ll have you back on when something major develops. Thank you so much.

Michael Arin  15:59

Thank you Imad.

Imad Khan  16:01

And now I’m joined by freelance journalist Billy Studholme. Call of Duty league is set to come back this Wednesday for its inaugural playoffs, but things have not been going swimmingly for the new franchise league. Earlier this month, Billy published a column on Dot Esports asking if Call of Duty league had been a flop. In it he argues that viewership has been low storylines have been non existent and that Activision has done a poor job in creating a competitive title as it annually has to put up new games. According to Billy, it’s why famed Call of Duty pro and CEO of 100 thieves, Matthew “NadeShot” Haag decided to opt out and not pay the $25 million required to enter the league. So Billy, I’m sure the PR department at Activision will disagree with your column. But let’s get some common rebuttals out of the way. Can’t current low viewership be tied to the pandemic.

Billy Studholme  16:43

Partly, I think, mostly No, the answer is no mostly to that. I mean, I think he did a good job of summarizing the article in your intro. I think they were relying quite heavily on a Home and Away fixture system you know, similar to what you can find in say the Overwatch League for example, but obviously the COVID pandemic completely threw that out the window. But at the same time, as I say, in the article, you know, you can’t, there was a massive increase in viewership, you know, when the COVID, lockdown began, you know, within the lockdown, where other companies like EA were experiencing a boost in viewership and a boost in engagement, the CDL was doing the opposite viewership were just bad. Now viewership’s improved. It’s getting better. As of the last few events, it’s gradually getting a little bit better. But, you know, that’s also part of the problem is the events just feel meaningless, and people weren’t really paying much attention to them. And so I think to blame the failures on the COVID pandemic, I mean, I just, I think it’s quite misguided. I think it’s quite incomplete. I don’t think I think the failures would have still been there would have still been present, even without the COVID pandemic. Now it It may have been better he may have been you know, with because part of Call of Duty esports as well as is the crowd and everybody, you know, everybody really engages. So it’s, you know, to put a card online, it just feels it feels like a waste. And so, yeah, I don’t I don’t think it can be credited to the COVID pandemic, although that’s Yeah, I’m sure I’m sure that’s the first thing Activision would say. But I don’t really agree to be honest.

Imad Khan  18:18

You know, before a call of duty League, there was a Call of Duty World League and even in that league, which was, you know, not as structured as the current one, viewership was never tremendous, you know, it definitely wasn’t League of Legends level by any means, which has always been kind of odd, given just the popularity of the series in general. So is this just a problem that Activision, can they solve it? Or is it really unsolvable just because of the nature of how they distribute this game?

Billy Studholme  18:42

I don’t think it’s that unusual. I mean, there’s I think it I think it’s strange. I think the fact that the game is so popular shows that there’s potential for the franchise but at the same time, Activision, don’t do anything to kind of I mean, I’m not not to just crap all over Activision because the you know, they’ve done a lot of things right. as well, but it’s hard, you can’t really it’s difficult to expect CoD to be to ever reach us. And I say this at the end of the article that I wrote, it’s difficult to expect CoD to reach the levels of Counter Strike or League of Legends because they don’t care enough and with it and I think I definitely think I’ve started to believe more and more that you need some level of consistency with your esport. So if you bring a new Call of Duty game every single year, new bugs new maps new weapons, it can only go so far and you look at Riot with League you look at Valve Counter Strike, they really do everything they can to, to make the viewing experience and the and the playing experience in the tournament in the esports arena, as good as it can be. And I think with CoD, Activision, don’t really do that. I mean, as as I outlined this in the article as well, you know, it’s, it’s clear as day that their priority isn’t a thriving esport it is public appeal and earning money. But you know, there’s nothing wrong with that in the grand scheme of things, but from an esports perspective, there’s definitely something wrong with that. It means that it’ll never reach, you know, the heights that it could probably. So it’s it’s difficult because I think the potential is there. And I think so many people playing the game, I think a lot of them will would be interested in seeing the best place in the world play, but it’s just, you know, the ecosystem just isn’t created around that. And so, you know, yeah, there’s only this quiet low ceiling. I think from the moment.

Imad Khan  20:28

Yeah, you know, it’s interesting in that whenever I talk to people over at Madden who do the American football game or FIFA, obviously the regular football game, they say that their tournament series, it’s like an extension of their marketing arm, right, you know, these aren’t franchise leagues. These are kind of like these amateur tournaments, open tournament where anybody can enter and just a way to kind of build community and camaraderie, things like that. And that’s kind of how Call of Duty World League was right. It didn’t have that franchise structure. So in a sense, it was just part of the marketing arm of Activision. But it seems that in wanting to go in a franchise model, you’re now taking this really as a proper sport, but you’re still treating it in the same way as if it were a marketing event. So there’s that kind of incongruency between these, like two budding factors, which I feel is like trying to have it both ways, but really getting not a good result. Either way.

Billy Studholme  21:23

I couldn’t agree more. I don’t know how reliable This is. I mean, I’ve seen some rumors that maybe the CEO of Activision, you know, it was it was his, you know, mega rich friends kind of doing him a favor by buying spots in the Call of Duty League. And, you know, that’s just one example. There are so many examples that it could that you could list off of, Activision, just that, you know, if if they really did care about elevating it to a tier one esport eventually, that they they would have solved these problems much earlier on, and that hasn’t been done. So yeah, I agree with you. They’re not they don’t treat the game and the ecosystem. As though they want it to be a top esport.

Imad Khan  22:02

And I don’t feel that Activision is willing to commit to just creating one Call of Duty and making that be a platform that will be updated iteratively on for the next 10-20 years when clearly, you know, each Call of Duty makes like a billion dollars on day one, it’s just too much money to potentially leave on the table. I mean, it’s crazy if you think about it, that this esport is being sold annually at $60, right? Where no other competitive title really is doing that. It because you know, whenever a new title comes out, I feel that there’s always going to be that a bit of drop off, right, so people who normally play the game, may, maybe not opt to pick it up. And there might be some new players. But with that you don’t build that core base that can stick with the minutiae of, of one particular game that understands all the little nuances of one particular game because it’s always shifting

Billy Studholme  22:55

Well, on one hand, you can commend them for taking risks. Which is so difficult for a company of that size to have the courage to take risks, but at the same time, they’ve also done everything possible to, I suppose, alien, you alienating a large portion of your fan base just by doing that. And it’s such a seismic shift, especially for something could you imagine if Counter Strike, which is, to me one of probably the most stable esport, my favorite esport by far. Could you imagine making a shift in that game so deeply that, you know, players then flew across the map? I mean, it’s just, there’s no way you can be a top esport doing that. There has to be a, I guess, a shift in just how they approach it. But that’s, that’s what I’m saying. If the priority was to be a top esport, which obviously isn’t, and there’s nothing wrong with making billions of dollars every year. They can, you know, there’s nothing there’s no shame in that. But you know, I’m, I’m an esports writer, so I’m talking from an esports perspective. And so yeah, definitely needs to be a change.

Imad Khan  23:56

So my last question will be, sometimes when you’re writing art there’s, there are some things you can never really fit in just because of word limitations. What what are some maybe minor points that you weren’t able to get in that you’d like me to know about?

Billy Studholme  24:10

Probably going into more depth into the history of cod, I probably would have spoken about the rivalries and the storylines because you mentioned in your in your intro that there haven’t been many storylines and and I touched on that in the article and that’s that’s absolutely true. And this the this there have been storylines, there’s been bickering there’s always bickering and Call of Duty. I don’t know there’s just a lot left to be desired with the just with with the tournament’s, they just feel meaningless. That’s why I guess some of the stuff I would have left in there is just a bit more history on CoD and why they needed to have done things slightly differently.

Imad Khan  24:45

And with that, Billy, thank you so much for jumping on.

Billy Studholme  24:48

All right. Thank you very much for having me on man.

Imad Khan  24:51

And that was FTW with Imad Khan. If you liked the show, please subscribe and share. Your support will help the show grow full transcripts and links to our Patreon can be found at ftwimad.com. To follow Michael on Twitter he can be found @ArinMJ to follow Billy he can be found @BillyStudholme on Twitter. If you’d like to follow me and my writing over at the New York Times, Washington Post and elsewhere, you can find me on Twitter @Imad. Annie Pei is our producer questions about the show can be directed to her @Pei_Annie on Twitter. Joe Domeq is our Outreach Manager and Ron Lyons is our researcher. With that, we’ll catch you guys next week.

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