Opinion: The fierce battle between EPIC Games and Apple shows the inherent vulnerability of business ecosystems
August 14, 2020
Every day, millions of teenagers engage in strategic battles in the popular game Fortnite, which is owned by the company EPIC Games. Today, this game has become the center stage of another kind of battle between EPIC Games and Apple. Recently EPIC Games launched an alternative mobile payment system, allowing Fortnite players to buy Fortnite tools at a discount without using the Apple payment system. In this way, however, Apple no longer receives its 30% commission on Fortnite purchases from users that play Fortnite on the Apple mobile platform. As a reaction, Apple decided to remove Fortnite from its mobile store, implying that new users can no longer download the popular game via the Apple platform. This has resulted in a public fight, where EPIC Games have publicly accused Apple of acting as a corporate mogul, launching an online parody of Apple’s famous 1984 commercial (https://www.youtube.com/watch?v=bPn_PGuYesw). Below, I will explain why this fight illustrates the inherent vulnerability of ecosystems.
Business ecosystems are complex collaborative constellations in which different companies engage in strategic partnerships to combine their complementary resources. In the gaming industry, for instance, different platform owners (Apple, Google, Microsoft, Sony, Nintendo) have started orchestrating ecosystems where they engage in multiple partnerships with a wide variety of game developers and providers. Such ecosystems can trigger huge benefits for the involved companies. For game developers, it is important to collaborate with multiple platform owners to maximize the number of potential users. At the same time, platform owners want to make sure that popular game developers such as EPIC Games are on their platform because they can attract many gamers to their particular platform. In sum, by teaming up in an ecosystem, game developers and platforms can jointly create a bigger pie from which they can both profit.
However, the current conflict between EPIC Games and Apple shows that ecosystems can also lead to fierce conflicts between the involved partners. An important driver of such ecosystem instability is the perception of unfair distribution of ecosystem benefits among the involved actors. When one of the actors gets the feeling that she is not getting a fair share of the bigger pie, which has been jointly created, tensions are likely to emerge that can substantially damage the stability of the ecosystem. In the Fortnite case, it is clear that EPIC Games felt that Apple was gaining too many benefits from their strategic partnerships. Launching the alternative payment system was a strategic move to create a more fair distribution of the benefits from the perspective of EPIC Games, which triggered retaliation by Apple, who clearly did not agree with this perspective.
In sum, the Fortnite battle between Epic Games and Apple shows that building successful ecosystems does not only require jointly creating a bigger pie, but also asks for careful management of how this pie is divided among the participants. If ecosystem actors get the feeling that their share of the pie is too small, they are likely to engage in competitive actions that can substantially threaten the stability of the overall ecosystem. This is not only the case in the gaming industry. Multiple retailers and boutique stores, for instance, are exploring alternative options for their online offerings to avoid and circumvent the dominant Amazon ecosystem. We also see that novel startups are using blockchain infrastructure to develop decentralized autonomous organizations, where users and producers of services (i.e. taxi rides, renting apartments) can directly engage in interactions without the need to rely on the ecosystem platforms of powerful intermediaries such as Uber and AirBNB. In this way, the instability of current ecosystems can give rise to the development of novel business models that will disrupt the disrupters of the internet age.