The king who is situated anywhere immediately on the circumference of the conqueror's territory is termed the enemy.
The king who is likewise situated close to the enemy, but separated from the conqueror only by the enemy, is termed the friend (of the conqueror).
—Arthasastra Book VI "The Source of Sovereign States", Kautilya
This week, we follow up on Epic Games move to illuminate Apple’s monopolistic behavior and we wonder below if an alignment with Facebook might bolster their attack?
New Gaming Show Note: I was one of the lucky first guests of New Game w/Jonah Blake, an exciting discussion on all things blockchain + gaming (NFTs) + Mythical Games & Blankos (see: how to create, share, and tweak your Blankos Block Party community levels on the fly).
Upcoming Signum Growth Capital Report on The Tokenized Digtal Art Market: Stay tuned for a deep dive led by SGC’s Max Fiege on one of my favorite topics - the evolution of digital assets from video games to culture more broadly. Art is the perfect first deep dive! I have called out Behind the Art with @Josie Bellini - exciting lineup here. *This* quote grabbed my attention - Just how #Tesla sends software updates to their cars, I am now sending updates to my physical art pieces.
Thanks, and have a great long weekend!
Angie
Angela Dalton | LinkedIn | Twitter | Email
The Enemy of my Enemy is my Friend
The quote above (aka “the enemy of my enemy is my friend”) which dates to around the 4th century BC, came to mind in thinking about Epic vs. Apple. Substitute “Epic” for conqueror, “Apple” for the king situated on the circumference of the conqueror, and “Facebook” for the other enemy of Apple, who happens to be very close, thus becoming Epic’s friend.
Just after Epic kicked off a very public battle against Apple and Google’s 30% store tax, Facebook piled on with some very interesting comments that made Apple look like a very bad guy, especially during COVID-19.
Fidgi Simo, an impressive and articulate Head of Facebook App, explained in a blog that linked to Facebook research with the OECD and the World Bank. She explained, “access to cash continues to be the most common ongoing challenge for SMBs. Only 19% of surveyed businesses were getting any financial help (down from earlier in pandemic). Many businesses are struggling and every cent matters.” Facebook will support SMBs by not collecting any fees from paid online events for at least a year with the idea that changing their business to online is hard enough. They said that on Android, in countries where Facebook Pay is available, small businesses will keep 100% of the revenue they generate from paid online events. However, Apple will not give up their 30% and “SMBs will only be paid 70% of their hard-earned revenue” during COVID-19.
Facebook Gaming is New to Apple’s Battlefield
Facebook Gaming has been rejected many times by Apple’s App Store based on their guideline “4.7 HTML5 Games, Bots, etc.” which states that apps may “not provide access to real money gaming.” Facebook has reported that it shared usage data from its Android Facebook Gaming app that showed 95 percent of activity is watching streams, but this didn’t change Apple’s stance. Finally on August 7, 2020, Facebook Gaming announced that they would be available on iOS with no games (i.e., tough road for a gaming app.)
“Unfortunately, we had to remove gameplay functionality entirely in order to get Apple’s approval on the standalone Facebook Gaming app — meaning iOS users have an inferior experience to those using Android. We’re staying focused on building communities for the — whether Apple allows it in a standalone app or not.”
—Sheryl Sandberg to The Verge
Sheryl Sandberg also commented to The Verge that more than 380 million people play games on Facebook every month.
How many Twitch Partners are there? According to Twitch.TV, there are over 2 million active broadcasters and 27,000 Partners. According to Statista, in July 2020, following a large spike, there were over 7 million active streamers on Twitch.
There have been many press reports of Facebook Gaming’s 210% streaming growth in 2019, with market share up dramatically from ~3% to 8.5% at the expense of Twitch’s share dropping from 67% to 61% according to StreamElements. Still, Twitch’s hours watched were still up slightly, and remember: when Mixer shut down, Ninja returned to Twitch. So to me, this seems to be a story of a rising tide lifting all boats, and Facebook pulling ahead of the other newcomers. Not surprising, Microsoft Mixer decided to throw in the towel and actually join Facebook about a month ago. While Mixer only accounted for ~2.5% overall share, it implies that Facebook Gaming is currently at least more than 11%. Still, YouTube Gaming has held steady at ~27% share.
Back in June at Apple’s WWDC, they announced the ability to challenge the App Store guidelines saying“developers will not only be able to appeal decisions about whether an app violates a given guideline of the App Store Review Guidelines, but will also have a mechanism to challenge the guideline itself.” Facebook says they did this, to no avail.
A Spanner in Big Tech “Competition”?
Most of the competitive changes between the Big Tech giants feel analogous to tectonic plates shifting, mainly because rises and falls in competition between them doesn’t really impact the net result. Net/net, they are all in charge here. Could Epic’s entrance into the battle, especially if they could align with Facebook, make this a battle royale worth watching? The backdrop here is that two antitrust probes from the European Union were kicked off by Spotify in mid June. It's also worth remembering a May 2019 Supreme Court 5-4 ruling which allowed plaintiffs to move forward against Apple; they were representing users hurt by Apple’s practices that limit consumer choice and competition, making apps more expensive.
In our last post, A Perfectly Executed Antitrust Production, we mentioned that we believe Epic’s move is a true act of leadership. Regardless of how this all ends for Apple, Epic Games certainly makes the outcome more interesting. As a fan of efficient markets and capitalism over government-led regulation as a driver of change, Epic appears to be in pole position to drive efficiency.
Signum Growth Capital Team
Angela Dalton | Founder and CEO | angela@signumgrowthcapital.com
Max Fiege | Director, Digital Assets | max@signumgrowthcapital.com