Will video video games be huge tech's Achilles heel in antitrust investigations?

It could finally be an antitrust game against big tech.

As the game grows in importance in Americans' lives during the pandemic, it has highlighted the extraordinary impact two of the four tech companies studied have on the red-hot industry.

Epic Games Inc.'s lawsuits against Apple Inc.
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and Alphabet Inc.
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Google for punitive business practices that come with a 30% fee could, for the first time, throw anti-competitive light on so-called network effects platforms, which have the deep reserves of power that the largest tech companies have, say game developers and experts in the field.

"This is a turning point and the beginning of a longstanding debate about how these platforms are pushing us to the edge of our willingness to pay," said James Currier, managing partner at NFX, a Silicon Valley-based venture capital firm. Currier has co-founded several startups, including the video game company Wonderhill.

"These enclosed gardens feel like blackmail," Currier told MarketWatch. “You have to pay to survive. It is reminiscent of Microsoft
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and the Justice Department investigation (in the 1990s) and AT&T.

Indeed, the epic lawsuits are likely to serve as the starting point for a long-standing debate in an economy with network effects from major players. A handful of companies – Apple, Google, Inc.
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and Facebook Inc.
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Currier said that everyone is being screened for their business practices – massive platforms that make it almost imperative for smaller businesses to live if they are to survive.

Apple is already the subject of a Justice Department investigation into its App Store while Google is under scrutiny on its search practices.

"Ultimately, app developers are the distributor at their whim – it's quite common that an app is temporarily suspended without recourse," said Adam Landis, managing director of AdLibertas Inc., a small technology company that helps mobile developers get money from their apps.

"When customers ask us if we have to pay the 30% Apple tax, our advice is that the developer just bite the bullet or take an 'around-the-horn' approach – Spotify
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is the best example of this, ”Landis told MarketWatch. (Spotify filed a complaint against Apple with the European Commission last year.)

Apple and Google make billions of dollars annually by charging game companies to access their app stores. Currier and others compare this to pay-to-play forums.

"The gaming industry, with everything that's happening all over the world, and it's really unfortunate, but it has made gaming the greatest entertainment medium in the world," said Nvidia Corp.
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CEO Jensen Huang said during an earnings call on Wednesday. “What people haven't noticed about video games is that it's no longer just a game itself. You hang out with your friends. You use it to make your dreams come true. People use it for broadcasts, for ideas and techniques to share with other people, and then of course it's an incredibly fun way to spend time. "

Revenue with naming chips from Nvidia rose faster than expected in the second quarter to 1.65 billion US dollars compared to 1.31 billion US dollars in the previous year.

Read more: Nvidia's server business dwarfs gaming chips for the first time, though it may not last for long

With gaming industry profits at record levels, deciding how to distribute them has never been more important. Apple and Google, for example, run the risk of losing one of their most profitable titles, "Fortnite", as they face tighter antitrust scrutiny by lawmakers. (Fortnite has raked in $ 1 billion in gaming spending on Apple iOS devices by mid-May, based on estimates by mobile app research firm Sensor Tower, suggesting Apple will earn hundreds of millions of dollars from the hit video game Has.)

Significantly, as well, these and other companies may finally abandon their demands for a fee charged on game cartridges in the early 1980s. Nintendo Entertainment System introduced the platform fee in 1983 when Namco Ltd., the then developer of Pac-Man and other arcade games, wanted to expand its distribution through the emerging Nintendo console. Since then, Apple, Google, Sony Corp.
and Microsoft Corp.
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have billed software manufacturers for a 30% reduction in sales, regardless of whether game purchases are made via a physical format or a digital download.

Tim Cook, Apple's CEO, claims his company provides security, development support, and the ability for small businesses to reach 1 billion users for an annual fee of $ 99 to join its developer program.

See Also: Fortnite's Impact Could Be Epic On Big Tech Antitrust Investigations

An outcry among video game makers underpins a greater sense among developers that Apple is charging a high, criminal price. On Thursday, a trading group representing the Wall Street Journal, the Washington Post, and the New York Times sent a letter to Cook asking for cheaper terms on Apple's App Store.

For now, the fronts of the Battle Royal are focused on Epic Games, whose CEO Tim Sweeney has insisted that software developers deserve a bigger share of the pie.

If Epic is successful, it would have "significantly positive effects" on the video game industry, Cowen analyst Paul Gallant told MarketWatch. "This can only go one way: better terms from Apple," he said, noting that Epic is represented by Cravath, Swaine & Moore – which he sees as perhaps the best antitrust law firm in the country – and possible concerns within Apple of a Biden administration on the Epic site.

According to lawyer Scott Wagner, Epic's lawsuit also concerns the business relationship between Apple and its developers, as well as antitrust investigations. "Antitrust law in general is way behind the times," he said. "For these reasons, I believe there will be a solution."

However, Google's problem is not that clear-cut.

Proving that Play Store rules violate antitrust laws could be more difficult than with the App Store, said antitrust attorney Paul Swanson. Apple requires all apps to be installed through the app store, while Google offers options through various app stores. About 70% of US app revenue comes from App Store users.

However, in a class action lawsuit filed earlier this week, Google was accused of violating federal antitrust law by "continually abusing its market power, including excluding competition, suppressing innovation, stifling consumer choice, and imposing Google for App developer of an overcompetitive transaction fee of 30% “in Google Play, the marketplace for Android operating system apps.

An Android app developer, Pure Sweat Basketball Inc., filed a lawsuit against Google's alleged anti-competitive, illegal practices related to its Google Play Store.

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