Case 4:20-cv-05640-YGR Document 812 Filed 09/10/21 Page 1 of 185
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`EPIC GAMES, INC.,
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`Plaintiff,
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`v.
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`APPLE INC.,
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`APPLE INC.,
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`Defendant.
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`Counterclaimant,
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`v.
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`EPIC GAMES, INC.,
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`Counter-Defendant.
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`Case No. 4:20-cv-05640-YGR
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`RULE 52 ORDER AFTER TRIAL ON THE
`MERITS
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`Northern District of California
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`United States District Court
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`Case 4:20-cv-05640-YGR Document 812 Filed 09/10/21 Page 2 of 185
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`Plaintiff Epic Games, Inc. sued Apple, Inc. alleging violations of federal and state
`antitrust laws and California’s unfair competition law based upon Apple’s operation of its App
`Store. Broadly speaking, Epic Games claimed that Apple is an antitrust monopolist over (i)
`Apple’s own system of distributing apps on Apple’s own devices in the App Store and (ii)
`Apple’s own system of collecting payments and commissions of purchases made on Apple’s own
`devices in the App Store. Said differently, plaintiff alleged an antitrust market of one, that is,
`Apple’s “monopolistic” control over its own systems relative to the App Store. Apple obviously
`disputed the allegations.
`
`Antitrust law protects competition and not competitors. Competition results in
`innovation and consumer satisfaction and is essential to the effective operation of a free market
`system. Antitrust jurisprudence also evaluates both market structure and behavior to determine
`whether an actor is using its place in the market to artificially restrain competition.
`
`Central to antitrust cases is the appropriate determination of the “relevant market.” Epic
`Games structured its lawsuit to argue that Apple does not compete with anyone; it is a monopoly
`of one. Apple, by contrast, argues that the effective area of competition is the market for all
`digital video games in which it and Epic Games compete heavily. In the digital video game
`market, Apple argues that it does not enjoy monopoly power, and therefore does not violate
`federal and state law.
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`The Court disagrees with both parties’ definition of the relevant market.
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`Ultimately, after evaluating the trial evidence, the Court finds that the relevant market
`here is digital mobile gaming transactions, not gaming generally and not Apple’s own internal
`operating systems related to the App Store. The mobile gaming market itself is a $100 billion
`industry. The size of this market explains Epic Games’ motive in bringing this action. Having
`penetrated all other video game markets, the mobile gaming market was Epic Games’ next target
`and it views Apple as an impediment.
`
`Further, the evidence demonstrates that most App Store revenue is generated by mobile
`gaming apps, not all apps. Thus, defining the market to focus on gaming apps is appropriate.
`Generally speaking, on a revenue basis, gaming apps account for approximately 70% of all App
`Store revenues. This 70% of revenue is generated by less than 10% of all App Store consumers.
`These gaming-app consumers are primarily making in-app purchases which is the focus of Epic
`Games’ claims. By contrast, over 80% of all consumer accounts generate virtually no revenue,
`as 80% of all apps on the App Store are free.
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`Having defined the relevant market as digital mobile gaming transactions, the Court next
`evaluated Apple’s conduct in that market. Given the trial record, the Court cannot ultimately
`conclude that Apple is a monopolist under either federal or state antitrust laws. While the Court
`finds that Apple enjoys considerable market share of over 55% and extraordinarily high profit
`margins, these factors alone do not show antitrust conduct. Success is not illegal. The final trial
`record did not include evidence of other critical factors, such as barriers to entry and conduct
`decreasing output or decreasing innovation in the relevant market. The Court does not find that
`it is impossible; only that Epic Games failed in its burden to demonstrate Apple is an illegal
`monopolist.
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`Case 4:20-cv-05640-YGR Document 812 Filed 09/10/21 Page 3 of 185
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`Nonetheless, the trial did show that Apple is engaging in anticompetitive conduct under
`California’s competition laws. The Court concludes that Apple’s anti-steering provisions hide
`critical information from consumers and illegally stifle consumer choice. When coupled with
`Apple’s incipient antitrust violations, these anti-steering provisions are anticompetitive and a
`nationwide remedy to eliminate those provisions is warranted.
`
`The Court provides its findings of facts and conclusions of law below.1
`
`PART I
`FINDINGS OF FACT
`To determine the relevant market, the Court must first understand the industry and the
`markets in that industry. This is a heavily factual inquiry. Thus, in this Order, the Court
`explains in detail, the facts underpinning each parties’ theory and other relevant facts uncovered
`during the trial. These details include the background of the parties, their products, the industry,
`and the markets in which they compete.2 To assist the reader, given the length of this Order, an
`outline is included in an Appendix hereto.
`I. THE PARTIES
`A. Overview
`
`Some basic background information may be helpful. Epic Games is a multi-billion dollar
`video game company. It defines the relevant market by way of Apple’s own internal operating
`system. Apple has maintained control of its own operating system for mobile devices, called
`iOS, since its inception in 2007. Apple’s creation and cultivation of the iOS device (and its
`ecosystem) has been described as a walled garden. Said differently, it is a closed platform
`whereby Apple controls and supervises access to any software which accesses the iOS devices
`(defined as iPhones and iPads; also referred to collectively as iOS devices). Apple justifies this
`control primarily in the name of consumer privacy, security, as well as monetization of its
`intellectual property. Evidence supports the argument that consumers value these attributes.
`
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`1 The Court notes several pending administrative motions to seal relating to the parties’
`proposed findings of facts and conclusions of law, pending motions, and submitted and docketed
`materials. See Dkt. Nos. 517, 650, 656, 696, 702, 707, 777, 778, 810. These motions are
`GRANTED to the extent that they remain sealed and are not referenced in this Order. Otherwise,
`to the extent the information is referenced and included in this Order, the motions are DENIED.
`Previously sealed documents remain sealed unless otherwise noted in this Order.
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`2 In considering these issues, the Court conducted a sixteen-day bench trial, admitted
`over 900 exhibits, and, to expedite the in-court proceedings, considered pre-trial submissions
`including written testimony of the experts and designations of deposition transcripts. The Court
`in this Order refers to the findings of facts (“FOF”) and conclusions of law (“COL”) for the
`parties’ arguments as these documents effectively served as the parties’ post-trial briefs. See
`Dkt. Nos. 777-4 (Epic Games’ filing), 778-4 (Apple’s filing).
`2
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`Case 4:20-cv-05640-YGR Document 812 Filed 09/10/21 Page 4 of 185
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`Due in part to this business model, Apple has been enormously successful and its devices are
`now ubiquitous.
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`Both Apple and third-party developers like Epic Games have symbiotically benefited
`from the ever-increasing innovation and growth in the iOS ecosystem. There is no dispute in the
`record that developers like Epic Games have benefited from Apple’s development and
`cultivation of the iOS ecosystem, including its devices and underlying software. Nor is there any
`dispute that developers like Epic Games have enhanced the experience for iOS devices and their
`consumers by offering a diverse assortment of applications beyond that which Apple can or has
`provided.
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`Until this lawsuit, Epic Games’ flagship video game product, Fortnite, could be played
`on iOS devices. The product generated an immensely profitable revenue stream for Epic Games.
`However, Epic Games was also required by contract to pay Apple a 30% commission on every
`purchase made through the App Store, whether an initial download or an in-app purchase.
`Consequently, Fortnite generated a profitable revenue stream for Apple as well. Epic Games
`tried to use Fortnite as leverage to force Apple to reduce its commission fee and to open its
`closed platform. When Apple refused, Epic Games breached its contract, which it concedes, and
`filed this lawsuit. Apple countersued for breach of contract.
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`Plaintiff focuses its challenge on Apple’s control over the distribution of apps to its users
`and the requirement that developers of apps use Apple’s in-app purchases or in-app payments
`(“IAP”) system3 if purchases are offered in the app. Under this IAP system and under its
`agreements with app developers, Apple collects payments made to developers, remits 70% to the
`developers, and keeps a 30% commission. This rate has largely remained unchanged since the
`inception. The trial also contained evidence of Apple’s use of anti-steering provisions to limit
`information flow to consumers on the payment structure related to in-app purchases.
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`Once acceptable, Apple’s commission rate is now questioned by some consumers and
`some developers, like Epic Games, as being overly burdensome and violative of competition
`laws. Indeed, two related lawsuits were already pending before the Court well before the
`commencement of this action. The first, In Re Apple iPhone Antitrust Litigation, 4:11-cv-6714-
`YGR (Pepper), was filed in 2011 on behalf of a class of iOS device consumers alleging harm
`from the commission rate. The second, filed in 2019 after Pepper returned from the Supreme
`Court of the United States, Donald Cameron v. Apple Inc., 4:19-cv-3074-YGR (Cameron), on
`behalf of a class of iOS app developers also alleging violations of antitrust and competitions
`laws.
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`The Court begins the analysis with Epic Games.
`
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`3 The Court notes that it uses the term IAP in this Order to refer exclusively to Apple’s
`IAP systems, as described and discussed later herein. See supra Facts § II.C. The Court
`clarifies, however, that certain witnesses use the term IAP to refer generically to any app
`purchases or payments made in games and apps. The Court notes that the underlying transcripts
`and cited materials in which IAP is being referenced clarifies which of the two is being
`discussed.
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`B. Plaintiff Epic Games
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`Epic Games is a video game developer founded in 1991 by Tim Sweeney.4 It is
`headquartered in Cary, North Carolina, has more than 3,200 employees in offices around the
`world, and was recently valued at $28.7 billion. Mr. Sweeney serves as the controlling
`shareholder and chairman of the Board of Directors. 5 Other notable shareholders include: (1)
`Tencent Holdings, Ltd., a Chinese video game company and one of the largest gaming
`companies in the world, which owns about thirty-seven percent of Epic Games, with two board
`seats; and (2) Sony Corporation, a major player in the console gaming market, which also owns
`about 1 to 2 percent of Epic Games.6
`
`Epic Games first began publishing games for other developers when the company
`started.7 Around 1998, it moved away from publishing other companies’ products to developing
`its own product.8 During the mid-2000’s, the company, which had been focused on personal
`computers (“PC”) games up to that point, shifted to developing for game consoles.9
`
`In addition to game development, Epic Games offers software development tools and
`distributes apps.10 Epic Games now touts a number of different lines of business, much of which
`occurred during the pendency of this lawsuit and on the eve of trial, such as distribution of non-
`game apps.
`
`The Court summarizes each of the three significant areas of its business: (1) gaming
`software development (e.g., Unreal Engine, Epic Online Services); (2) game developer (e.g.,
`Fortnite and other video games); and (3) gaming distributor (e.g., the Epic Games Store). The
`Court thereafter summarizes the prior relationship between Epic Games and Apple.
`
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`4 Trial Tr. (Sweeney) 89:19, 112:18–25.
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`5 Id. 112:18–113:14, 165:17–166:1, 179:7–8.
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`6 Id. 178:24–179:6, 179:21–180:3.
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`7 Id. 172:6–8.
`8 Id. 172:21–173:3.
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`9 DX-3710.005–.006.
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`10 Trial Tr. (Sweeney) 93:22–94:17 (“Epic is in a variety of businesses all tied to the
`common theme of building and supporting real-time 3D content, both through consumer
`products and to developers, and . . . other services that socially connect users together.”), 166:6–
`12.
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`1. Gaming Software Developer: Unreal Engine and Epic Online Services
`As a gaming software developer, Epic Games licenses two notable products to other
`developers: Unreal Engine and Epic Online Services.11
`
`The first, Unreal Engine, is a software suite that allows developers to create three-
`dimensional and immersive digital content.12 It is not used by consumers and is not an app on
`the App Store.13 Developers wishing to use Unreal Engine must be licensed by nonparty Epic
`S.A.R.L. (“Epic International”), an Epic Games Swiss subsidiary.14 Epic International licenses
`Unreal Engine because it sought to protect their intellectual property rights.15 Licensed
`developers are governed by the End User License Agreement.16
`
`Epic Games profits from Unreal Engine by charging fees for paid content.17 Separately,
`Epic International charges a royalty on products that use any version of the Unreal Engine
`(typically 5% of gross revenue).18 In the past, developers were required to pay royalties after a
`product exceeded $3,000 in revenue per quarter. After a change in policy in 2020, Epic
`International is now owed royalties after a product earns $1,000,000 through the product’s life.19
`
`Epic International therefore profits in perpetuity from any success a developer enjoys
`using the Unreal Engine.20 As Epic Games’ former chief financial officer stated, this model
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`11 Id. 94:5–7; Trial Tr. (Grant) 662:8–13.
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`12 Id. 116:17–22 (“The Unreal Engine is a development tool aimed at content creators
`rather than consumers. It contains content creation tools, real-time 3D graphics, capabilities, and
`real-time physics and simulation technology that is used by a wide variety of industries to make a
`variety of 3D content.”).
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`13 Id. 162:19–163:14.
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`14 Id. 162:5–12; Trial Tr. (Grant) 724:11–16.
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`15 Trial Tr. (Grant) 754:13–19.
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`16 DX-4022; Trial Tr. (Grant) 667:3–11, 753:19–754:7.
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`17 DX-4022.006–.007 (§ 4).
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`18 DX-4022.007–.008 (§ 5).
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`19 Trial Tr. (Grant) 681:4–7, 754:20–755:4.
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`20 DX-4022.008 (“The royalty will be payable under this Agreement with respect to each
`Product for as long as any Engine Code or Content (including as modified by you under the
`License) incorporated in or used to make the Product are protected under copyright or other
`intellectual property law.”); Ex. Depo. (Penwarden) 30:7–8.
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`ensures that if developers succeed, Epic Games “can participate in that success.”21 For instance,
`in 2019, Unreal Engine generated about $97 million in revenue for Epic International,22 which
`enjoys a 100 percent gross margin on its “engine business.”23
`
`Although Unreal Engine itself is not available on the App Store, Epic Games develops
`apps that work in conjunction with Unreal Engine, including Unreal Remote and Live Link Face,
`and distributes on iOS. These apps “provide[] a means for people who work in the movie or TV
`industry to capture performances and view them on Unreal Engine.”24 They do not include
`competitive game play.25 Separate and apart from the App Store, Epic Games also provides
`Unreal Marketplace, a store for pre-created two-dimensional and three-dimensional assets for
`purchase by Unreal developers.26
`Second, in addition to Unreal Engine, Epic Games offers third-party developers a suite of
`back-end online gaming services through Epic Online Services. These services include
`matchmaking, Epic Games’ friends system, and voice system.27
`2. Game Developer: Fortnite
`With respect to Epic Games’ primary business of development and release of its own
`video games including its flagship video game, Fortnite, Epic Games develops and owns through
`its subsidiary, other apps, such as Houseparty, which incorporates some optional gaming
`elements into its video chat application.28
`
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`21 Ex. Depo. (Babcock) 180:5–9.
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`22 DX-3795.009.
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`23 DX-3359.003.
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`24 Trial Tr. (Grant) 664:21–665:17.
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`25 Trial Tr. (Sweeney) 304:25–305:2 (noting there is no competitive game play
`associated with Unreal Engine).
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`26 Trial Tr. (Ko) 799:18–21.
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`27 Trial Tr. (Sweeney) 120:7–14 (“Epic Online Services . . . provides many of the social
`features that we built for Fortnite and makes them available to other companies, such as Epic’s
`account system, Epic’s matchmaking system, to put players together into a shared game session.
`It includes Epic’s friends system. And we’re soon to release the Epic Games voice system for
`voice chat.”).
`
`28 Id. 161:10–112 (“[W]e make Houseparty, which is a social video application, sort of
`like a version of Zoom that’s for friends.”), 117:8–12, 305:14–21. The record does not contain
`any information, financial or otherwise, with respect to these other games. 
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`a. Fortnite’s Game Modes
`Fortnite is Epic Games’ most popular game and app, with over 400 hundred million
`registered players worldwide.29 Originally a cooperative shooter game consisting of player-
`versus-environment (“PVE”) mechanics, Fortnite now has four main game modes: (i) Save the
`World, (ii) Battle Royale, (iii) Creative, and (iv) Party Royale.30 Of these four game modes,
`“nearly half of the players coming into [Fortnite] on a daily basis,” around 15 million users, “are
`playing Creative and Party Royale Modes.”31
`
`Save the World launched in July 2017 as the original game mode. It is a cooperative
`campaign consisting of PVE mechanics. Squads of up to four players team up to build forts and
`fight non-playable, computer monsters.32 Save the World is not available on mobile platforms,
`including the iOS platform, or on the Nintendo Switch.33
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`Battle Royale is a player-versus-player (“PVP”) elimination and survival match involving
`up to 100 players.34 It is the most popular Fortnite game play mode with storylines and game
`play that evolve over time, as new chapters and seasons are released.35 A season typically lasts
`around ten weeks and is a subset of a larger chapter.36 This mode also offers a “sit out” feature,
`permitting players to observe Battle Royale matches instead of competing.37 Importantly, and as
`discussed below, although the Battle Royale game play mode is available to download and play
`free of charge,38 players can make in-app purchases for digital content, including digital avatars,
`costumes, dance moves, and other cosmetic items.39
`
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`29 Trial Tr. (Sweeney) 99:5–6, 100:5–7. Epic Games also owns and/or develops other
`games, including Rocket League, Fall Guys, Battle Breakers, Spyjinx, and the Infinity Blade
`series. Trial Tr. (Sweeney) 89:22–90:5, 116:8–12; Trial Tr. (Grant) 664:13–14.
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`30 DX-5536; Trial Tr. (Sweeney) 99:5–10, 328:4–8; Trial Tr. (Weissinger) 1354:23–24.
`31 Trial Tr. (Weissinger) 1296:5–8.
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`32 DX-5536.004.
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`33 Trial Tr. (Weissinger) 1354:18, 1354:21.
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`34 DX-5536.001–002.
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`35 Trial Tr. (Sweeney) 99:5–10, 105:21.
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`36 Trial Tr. (Weissinger) 1393:14–19.
`37 Id. 1296:14–1297:5.
`38 Trial Tr. (Sweeney) 108:15–16.
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`39 Id. 108:23–109:3.
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`Creative mode allows players to create their own content in Fortnite.40 According to
`Epic Games’ website: “Included free with Battle Royale, Fortnite Creative puts you in charge of
`your own Island . . . . Creative is also a great place for just creating your own scenery. . . .”41
`Content generated in Creative mode can be more broadly shared by other Fortnite players.42
`With the aid of avatar Agent Peely, an anthropomorphic banana man,43 and Mr. Weissinger’s
`testimony, the Court was walked through different gaming and experiences islands within the
`Creative mode hub, including “Prison Breakout,” “Rockets vs. Cars,” “Cars Now With Snipers,”
`and “Creative Mayhem Regional Qualifier.”44
`
`The final mode, Party Royale, is described as “an experimental and evolving space that
`focuses on no sweat, all chill fun. Attractions include aerial obstacle courses, boat races, movies,
`and even live concerts from top artists[.]”45
`
`In 2017, Fortnite debuted on a number of platforms—including Windows, Mac, Xbox
`One, and PlayStation 4—with only the Save the World game mode. Later that year, Epic Games
`released Battle Royale—a free-to-play game mode with features available for in-app purchase.
`With Battle Royale’s success, Fortnite quickly “became more about Battle Royale” and, thus, a
`primarily “free-to-play game.” The success of Fortnite has been profitable for both Epic Games
`and its partners. For instance, the Epic Games-Microsoft partnership generates hundreds of
`millions of dollars for both parties.46
`
`b. Key Features of Fortnite
`Fortnite has many distinct features. First, most of its game play is multiplayer and
`requires an Internet connection. Users can play Fortnite online with friends and family, with
` 
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`40 Id. 328:4–8.
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`41 DX-5536.003.
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`42 DX-5539.
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`43 With respect to the appropriateness of Peely’s “dress,” the Court understood Apple
`merely to be “dressing” Peely in a tuxedo for federal court, as jest to reflect the general
`solemnity of a federal court proceeding. As Mr. Weissinger later remarked, and with which the
`Court agrees, Peely is “just a banana man,” additional attire was not necessary but informative.
`Trial Tr. (Weissinger) 1443:17.
`
`44 Matthew Weissinger is Vice President of Marketing at Epic Games. Trial Tr.
`(Weissinger) 1365:16–1366:1, 1367:25–1368:10, 1368:12–1371:20, 1373:22–1374:12, 1374:13–
`1376:6 (testimony agreeing that Creative mode includes game play and game mechanics).
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`45 DX-5536.002; see also Trial Tr. (Allison) 1246:20–1247:7. The Court viewed a
`portion of this mode whereby Peely participated in a game called “Skydive Glide Drop,” before
`engaging in dance to celebrate a B rank finish. Trial Tr. (Weissinger) 1363:13–1364:12.
`
`46 Trial Tr. (Wright) 590:5–9, 592:12–17.
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`teams, or with other gamers of similar skill levels with whom they are matched.47 Second, in
`order to play together online, users must have the same “version” of Fortnite software installed
`on their device or platform.48 Third, Fortnite releases new content and updates, including major
`changes to the map and game play, on a regular basis. These updates ensure that users can enjoy
`new and surprising in-game experiences each time they open the app. Having a purely static
`environment without these updates would materially degrade the player experience.49
`
`Fourth, Fortnite features cross-play, allowing players on different platforms to play with
`one another.50 Since September 2018, cross-platform play for Fortnite has been available on
`Sony’s PlayStation, Microsoft’s Xbox, the Nintendo Switch, Windows PCs, Mac computers,
`certain Android devices, and (until recently) certain iOS mobile devices.51 In fact, Epic Games
`pioneered cross-platform play for the gaming industry. It persuaded both Sony and Microsoft to
`erase the artificial barriers between players on their console platforms, making Fortnite the first
`game to achieve full cross-play functionality across those devices, as well as PCs and mobile
`devices.52 Epic Games believed so strongly in cross-platform play that it threatened litigation
`against Sony for using policies and practices to restrict the same.53
`
`Other cross-platform innovations featured on Fortnite include cross-progression and
`cross-purchase or cross-wallet. Cross-progression allows users to access the same account and
`maintain their progress, regardless of the platform on which they play. Thus, for users who play
`Fortnite on multiple platforms, cross-progression is an important feature.54 Nevertheless, most
`Fortnite users play on a single platform.55 Cross-purchases allows Fortnite users to buy V-
`
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`47 Trial Tr. (Sweeney) 107:12–18.
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`48 Id. 158:17–19.
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`49 Id. 105:21–106:14.
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`50 Id. 106:18–24, 196:8–22. Cross-platform scenarios also occur when games on one
`platform access “content, subscriptions, or features” acquired on other platforms or on a
`developer’s website. PX-2790.011 (§ 313(b)).
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`51 Trial Tr. (Sweeney) 107:2–10, 237:15–18.
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`52 Id. 106:23–107:10, 196:18–22, 198:22–199:6.
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`53 DX-3125.007; Trial Tr. (Sweeney) 107:2–10, 234:3–238:12, 252:22–255:16.
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`54 Trial Tr. (Sweeney) 108:3–11 (“Cross-progression refers to . . . a user who owns multi
`devices to connect with Fortnite on . . . different platforms, and to have the same . . . state [of]
`ownership of virtual items on all different platforms . . . .”).
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`55 PX-1054.
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`Bucks, or virtual currency, on one platform and spend them on another platform. Cross-
`purchases are not available on Sony or Nintendo platforms.56
`
`Fifth and finally, as evidenced above, Fortnite features gaming and non-gaming
`experiences.57 For instance, Party Royale allows players to watch movies or TV shows, attend
`concerts, and participate in global cultural events within the app itself.58 Fortnite’s capacity to
`bring people together has been particularly important during the COVID-19 pandemic.59
`Notable events include:
`
` Travis Scott’s in-game concert in April 2020, viewed by 12.3 million concurrent users,
`including two million iOS users;60
` Three of Christopher Nolan’s feature-length films—The Dark Knight, Inception, and
`The Prestige—virtually screened in June 2020;61
` Exclusive episodes of ESPN’s The Ocho, viewed by more than two million users, and
`the Discovery Channel’s Tiger Shark King, viewed by more than 900,000 users;62
` We the People, a series of discussions on racial equality and voter suppression in the
`United States, viewed by 1.5 million users;63 and
` DJ Kaskade hosted a virtual concert in March 2021.64
`Based on these in-game experiences, Epic Games considers Fortnite to compete not only
`with gaming companies but also with other social media companies such as Facebook and
`Netflix.65
`
` 
`56 Trial Tr. (Sweeney) 197:1–5, 198:1–3, 239:3–14.
`
`57 Id. 98:6–8.
`
`58 Id. 98:12–99:3.
`
`59 Id. 107:14–18; Trial Tr. (Weissinger) 1295:8–16.
`60 Trial Tr. (Weissinger) 1294:10–22.
`
`61 Trial Tr. (Sweeney) 103:12–16; Trial Tr. (Weissinger) 1289:8–25.
`
`62 Trial Tr. (Sweeney) 104:16–24; Trial Tr. (Weissinger) 1290:5–7, 1290:16–23.
`
`63 Trial Tr. (Sweeney) 105:5–7; Trial Tr. (Weissinger) 1291:5–11.
`
`64 Trial Tr. (Weissinger) 1293:25–1294:1.
`
`65 Trial Tr. (Sweeney) 94:4–7, 98:16–99:3.
`
`10
`
`
`
`

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`Case 4:20-cv-05640-YGR Document 812 Filed 09/10/21 Page 12 of 185
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`c. Fortnite’s Business Model: In-App Purchases and V-Bucks
`Fortnite uses the “freemium” game model, under which a game is largely free to
`download and play but certain additional in-game features can be purchased.66 Epic Games
`primarily generates revenue by selling V-Bucks, which can be used to obtain items in Fortnite.67
`V-Bucks can be purchased in-app or directly from Epic Games’ website.68 Players can use V-
`Bucks to purchase digital content within the app, including a “Battle Pass” (a feature that
`provides access to challenges and otherwise locked content) or cosmetic upgrades.69 Unlike
`other games employing the freemium model, in-app purchases do not buy game play advantages
`in Battle Royale.70 Instead, players can make in-app purchases of different items that function as
`forms of self-expression, including cosmetic enhancements or “skins” (i.e., in-game costumes),
`dance moves known as “emotes,” and more.71 As of December 2020, players can also subscribe
`to Fortnite Group, which provides users with the Battle Pass for each new Battle Royale season,
`a monthly allotment of 1,000 V-Bucks and exclusive cosmetics.72
`
`Epic Games sells V-Bucks to consumers in various bundles and packages at increasing
`prices: 1,000 V-Bucks for $9.99; 2,800 V-Bucks for $24.99 and so on—all the way to 13,500 V-
`Bucks for $99.99. After Epic Games implemented its hotfix on iOS (discussed at length below),
`Epic Games dropped V-Bucks pricing by 20% for purchases made through Epic Games’ direct
`payment option on iOS and Google Play, as well as for purchases on every other platform
`through which Fortnite was offered.73 Notably, there is “no cost to [Epic Games for] V-Buck
`. . . V-Bucks themselves don’t have a marginal cost.”74
`
` 
`66 Id. 187:15–188:3, 226:18–19.
`
`67 Id. 189:9–11.
`
`68 Id. 188:13–21, 298:21–23.
`
`69 Id. 108:17–109:3, 188:13–189:11; Trial Tr. (Weissinger) 1300:3–7.
`
`70 Trial Tr. (Sweeney) 110:5–10.
`
`71 Id. 108:23–109:3; Trial Tr. (Weissinger) 1299:6–8.
`
`72 Trial Tr. (Weissinger) 1301:15–21.
`73 DX-3774.009; Trial Tr. (Sweeney) 190:6–9, 14–16.
`
`74 Trial Tr. (Sweeney) 190:14–16.
`
`
`
`11
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`Case 4:20-cv-05640-YGR Document 812 Filed 09/10/21 Page 13 of 185
`
`Although Epic Games claims that it would not have a viable way of monetizing Fortnite
`without being able to sell in-app content,75 the record shows it monetizes Fortnite in nine other
`ways:76
`
`Two are internal to the game. First, since December 2020, users “can subscribe to
`Fortnite Crew, a subscription” service offered by Epic Games.77 Second, users can pay an up-
`front fee to gain access to one of Fortnite’s game modes, Save the World, that also has in-app
`content for purchase.78
`
`The remaining seven are external. One, Epic Games “generates revenue . . . typically in
`the form of redeemable codes sold through traditional retail and online stores.”79 Two, Epic
`Games generates revenue through in-game advertising or cross-promotions.80 Three, it “has
`received revenue for providing third-parties with promotional codes redeemable for Fortnite
`content.”81 Four, “Epic has in the past entered into hardware bundle agreements with console
`makers,” through which “the console makers offered for sale a bundle containing their game
`consoles along with exclusive Fortnite cosmetics and V-Bucks . . . .”82 Five, “Epic has provided
`other partners with redeemable codes for exclusive Fortnite cosmetics and V-Bucks, and Epic
`was paid by the partner on a per redemption basis.”83 Next, it “has entered into licensing
`agreements with brands through which it received the revenue from sales of in-game cosmetics
`featuring the licensed content as well as a small portion of the brand’s sales generated from
`Fortnite.”84 Finally, it “licenses Fortnite intellectual property to third parties to use in physical
`merchandise, such as toys, apparel, accessories and home goods. In some circumstances, such
`physical merchandise also may include a code that can be redeemed for Fortnite in-game
`content.”85
`
` 
`75 Trial Tr. (Weissinger) 1303:18–1306:7.
`
`76 DX-3691.008–.010.
`
`77 Trial Tr. (Weissinger) 1357:17–25; DX-3691.009.
`
`78 DX-3691.009.
`
`79 Id.
`
`80 DX-3691.010; see also Trial Tr. (Weissinger) 1306:19–1307:7, 1311:7–1312:1.
`
`81 DX-3691.010.
`
`82 Id.
`
`83 Id.
`
`84 Id.
`
`85 Id.
`
`
`
`12
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`Case 4:20-cv-05640-YGR Document 812 Filed 09/10/21 Page 14 of 185
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`Based on the freemium model which relies upon in-app purchases, as well as these
`alternative ways of monetization, Fortnite is quite lucrative and integral to Epic Games’ overall
`business operations.86 Given that Fortnite utilizes cross-platform technology to capture a larger
`audience and appears on several different platforms, Epic Games faces commission rates on its
`in-app purchases. Generally, plaintiff must pay 30% acro