An Apple restriction also threatens to prevent ‘Fortnite’ creator Epic Games from updating the videogame on iPhones and iPads.
Photo: Brendan McDermid/ReutersThe battle between Apple Inc. AAPL 0.71% and the creator of “Fortnite” is fraying a nearly decadelong relationship, but could also upend business at some makers of videogames, Hollywood productions and virtual-reality simulations.
Apple, the world’s most valuable company, threatened to pull Epic Games Inc.’s developer credentials—which are required to release software on Apple devices—after Epic introduced a way to buy virtual goods within the popular videogame that skirts the tech giant’s 30% commission on in-app purchases. The restriction would leave Epic unable to update “Fortnite” on iPhones and iPads—as well as its Unreal Engine, a software suite used to build mobile games among other apps and to create complex video effects and animations.
This week, a federal judge in California is expected to rule on Epic’s motion that seeks to prevent Apple from pulling its credentials. The outcome would be an early test in a lawsuit Epic filed Aug. 13 after Apple pulled “Fortnite” from the App Store. Epic claimed the iPhone maker’s operations violate antitrust rules.
Unreal, Epic’s flagship product, has been used to make videogames such as Tencent Holdings Ltd. ’s “PUBG Mobile” and Warner Bros. Interactive Entertainment’s “Mortal Kombat 11.” The Third Floor Inc., a studio based in Los Angeles, has used Unreal to produce shows such as HBO’s “Game of Thrones.”
The Unreal Engine software suite has been used to make the ‘PUBG Mobile’ game.
Photo: Soumyabrata Roy/Zuma PressOn Sunday, Microsoft Corp. threw its support behind Epic’s motion, saying it uses Unreal’s tools for making the mobile game “Forza Street” and that Apple’s move could hamper its game-development business.
“It’s a gun with a barrel at both ends,” said Cowen analyst Doug Cruetz, of the dispute between Epic and Apple. “A lot of people who use Unreal for game development and other purposes might choose to walk away from Epic, but they might instead choose to walk away from Apple.”
Like their namesake car part, engines such as Unreal are software workhorses that help games and special effects run. Unreal has more than 11 million licensees across videogame, movie production, architecture, aerospace and other industries, according to Epic.
Most games made with Unreal are for consoles and computers, rather than mobile devices. But the fight with Apple has put some Unreal customers in a precarious position. If Epic can no longer update the software toolkit within Apple’s product ecosystem, some developers say they would have to decide whether to abandon their apps, maintain them with limited ability to make changes, or recreate them using a different toolset—tasks that would be costly and time-consuming.
A handful of other companies make game-development software, including Unity Technologies Inc. and Amazon.com Inc. Unity and Amazon declined to comment.
That said, not every game developer depends on Apple’s ecosystem to make a buck. A game-studio executive whose firm is close to completing a game using Unreal for multiple platforms said the company would probably skip the App Store if the software engine couldn’t be updated.
“For us, iOS [Apple’s mobile operating system] is additional, but if that’s your bread and butter, you’re potentially completely out in the cold,” this executive said. “You just don’t want to put a target on yourself.”
In its response to the lawsuit, Apple said Friday that Epic is seeking relief from the court to fix a self-inflicted wound and that it is treating the company no different than any other developer. It also disputed Epic’s characterization of the App Store as a monopoly, citing in part the popularity of “Fortnite” across several platforms.
“Epic has put customers and developers in this position, not Apple,” Apple said in a court filing.
The Third Floor studio used Unreal Engine to make HBO’s ‘Game of Thrones.’
Photo: /Associated PressEpic Chief Executive Tim Sweeney in a tweet Friday described Apple’s statements as misleading.
Epic also sued Google after the Alphabet Inc. unit pulled “Fortnite” from its app store. While the app can’t be downloaded or updated from Google Play, it remains available on Samsung’s Android app store and through Epic’s website; Apple devices only allow downloads through its own app marketplaces. To garner support in its fight, Epic launched a social-media campaign around #FreeFortnite.
Apple and Google have said they would return “Fortnite” to their app stores if Epic removes the in-app payment system. Google hasn’t commented on the lawsuit, but said it has “consistent policies that are fair to developers and keep the store safe for users.” According to Epic, “Fortnite” has more than 350 million players world-wide.
Epic has said developers shouldn’t have to exclusively rely on Apple’s or Google’s systems to process financial transactions in apps. Both companies charge a 30% commission on sales from paid apps as well as in-app payments, amounts that Epic considers excessive. A group of companies including Spotify Technology SA and Facebook Inc. have complained in recent years about app marketplace fees, though the Cupertino, Calif., company has barely blinked. Major news organizations are also joining the chorus of companies pushing Apple for more favorable terms, The Wall Street Journal reported Thursday.
Apple and Google have both defended their policies, stating that they are intended to maintain security as well as consumer privacy. Based on research it commissioned, Apple said last month the app fees it collects are in line with what other digital marketplaces charge.
Unreal is free to license, and publishers pay Epic a 5% royalty if their product using the toolkit generates more than $1 million in lifetime revenue. The company also offers custom licenses.
‘The Mandalorian’ was created using Unreal Engine’s software tools.
Photo: /Associated PressA spokesman for Epic declined to specify how many customers could be hurt if Apple were to cut off its developer credentials. In a court filing, Epic described the move as potentially devastating to its business. Epic is planning to debut its Unreal Engine 5, featuring upgrades to development tools and content libraries, next year.
The general sentiment at Epic, a closely held company based in Cary, N.C., is a mixture of concern for its customers and confidence in its mission to defeat Apple, according to a person familiar with the company’s thinking. Apple’s threat to cancel Epic’s developer credentials “could make our partners’ lives more difficult,” this person said. “It’s definitely troublesome.”
Mr. Sweeney, Epic’s CEO, declined to comment when asked about the company’s operations as litigation proceeds.
—R.T. Watson contributed to this article.
Write to Sarah E. Needleman at sarah.needleman@wsj.com
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