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Fortnite picks a fight
Apple and Google have kicked Fortnite out of their app stores, making the wildly popular and hugely lucrative video game unavailable to many iPhone and Android device users. It follows moves by Epic Games, the maker of Fortnite, encouraging the game’s mobile-app users to pay it directly rather than going through the online stores, which take a cut of sales.
The tech giants insist on handling app payments and take a 30 percent commission on transactions via their stores. This gatekeeper policy is at the center of antitrust complaints against Apple and Google in the U.S. and Europe. After the Fortnite ban, Epic sued Apple and Google in federal court, with its C.E.O., Tim Sweeney, promising “a hell of a fight.”
• Epic’s argument: Apple and Google collectively dominate mobile platforms and cannot be trusted to charge “fair” prices.
• Apple and Google’s argument: They built and maintain their platforms and should be allowed to charge whatever they want. In other words, they aren’t public utilities.
It’s a gutsy gambit by Epic, and probably a losing one, at least in the short term. Neither Apple nor Google is likely to capitulate: If they did, they’d have to offer the same terms to everyone on their platforms. (“These guidelines create a level playing field for all developers and make the store safe for all users,” Apple said in a statement.) However, a protracted legal battle could put more pressure on the tech giants in Washington, Brussels and other places that are looking closely at their market power. If Epic rallies app developers to get behind its cause, that could be a problem for the platforms, too.
• Since March 2018, Fortnite has been downloaded more than 130 million times on iPhones and iPads, generating about $360 million in revenue for Apple, according to Sensor Tower. It’s easier to download apps on Android devices outside Google’s store, so it has made less in commissions from sales of Fortnite, which has appeared in its online store only since April. Fortnite can also be played on other devices, computers and consoles, giving it leeway to lose iPhone and Android users without going completely dark.
This is not a genuine negotiation. For Epic Games, it is as much a public relations event as anything else. Within minutes of Fortnite’s being banned by Apple — something that Epic clearly anticipated — it released a slickly produced video parody of Apple’s famous “1984” ad. Mr. Sweeney, the game maker’s chief, framed the dispute as no less than “critical to the future of humanity,” citing the risk of submission to “corporations who control all commerce and all speech.”
• Spotify, which has waged a similar battle with Apple, issued a statement in support of Epic and against what it called Apple’s “unfair practices.”
• It’s worth noting that Epic brought out its own app store in 2018. It charges developers a 12 percent commission, which it says is still comfortably profitable.
Which is worse for Apple: No Fortnite or no WeChat? Losing the mostly young fans of Fortnite is bad, but the Trump administration’s threat to ban U.S. companies from doing business with China’s WeChat could affect vast numbers of iPhone users. Whatever the case, the longer these disputes endure, the bigger the risk that people who feel they can’t live without a certain game or messaging app will think twice about buying Apple devices.
Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York, and Geneva Abdul and Jason Karaian in London.
Here’s what is happening
The Trump administration said that Yale discriminated against Asian-American and white applicants. After a two-year investigation, the Justice Department accused the Ivy League university of violating federal civil rights law, bolstering challenges to affirmative action policies that are expected to eventually reach the Supreme Court. Last year, the administration backed Asian-American students who accused Harvard of systematic discrimination.
Refinancing mortgages is about to get more expensive. Interest rates remain at record lows, but two of America’s largest mortgage finance firms, Fannie Mae and Freddie Mac, announced a 0.5 percent fee, citing a need to cover anticipated losses related to the pandemic. The charges will add an additional $1,400 to refinance a mortgage for the average homeowner.
Real estate investors are taking owners to court. Mezzanine lenders like hedge funds and private equity firms are suing commercial property landlords and developers to foreclose on assets and recoup losses on delinquent debts. One of the battles features a retail complex in Times Square that’s owned by the family of Jared Kushner, President Trump’s adviser and son-in-law.
The Labor Department chief was accused of interfering in a pay discrimination case. A senior lawyer said the head of the agency, Eugene Scalia, had sought a low settlement with Oracle, the tech giant, in a long-running dispute over pay discrimination that originated in the Obama administration.
Daimler settled emissions-cheating charges by paying a $2.2 billion fine. The money covers federal fines and a class-action suit by Mercedes owners, at a fraction of the $20 billion that fellow German automaker Volkswagen paid to settle similar charges.
Help is not yet on the way
The good news: New claims for U.S. state unemployment benefits fell below one million last week for the first time since March.
The bad news: Claims remain high by historical standards, and other signs suggest that the economy is losing momentum. Also, new aid for jobless workers looks likely to be smaller than initially suggested, and it’s not clear when it will start, how long it will last or how many workers it will cover.
In the papers
Some of the academic research that caught our eye this week, summarized in one sentence:
• The rise in companies’ market power explains a lot of “undesirable” trends. (Isabel Cairó and Jae Sim)
• For small businesses in places underserved by banks, fintech firms have stepped up. (Isil Erel and Jack Liebersohn)
• Companies often confuse luck for skill when hiring a new C.E.O. (Mario Daniele Amore and Sebastian Schwenen)
Weekend reading: How to restore the middle class
Jim Tankersley covers economic and tax policy for The Times in Washington. His new book, “The Riches of This Land: The Untold, True Story of America’s Middle Class,” is out this week. In it, he challenges the “whitewashed, ‘Leave It to Beaver’ tale that so many people have been led to believe” about the post-World War II economic boom — and subsequent bust for many who once considered themselves middle class.
Jim spoke with DealBook about what went wrong, and how to fix it.
What’s in the book for DealBook readers?
I hope that it’s both enlightening and challenging. And, perhaps, hopeful.
The basic idea is that reducing discrimination in the American economy is what really got us the prolonged middle-class boom of the postwar era. The research says that 40 percent of post-1960 growth in this country came from breaking down occupational barriers for women of all races and for Black men.
If we could break down the barriers for women and Americans of color to advance, get good jobs and be paid what they’re worth, we can unleash another productivity boom, which I know is something that Wall Street loves to contemplate.
How do you define “middle class”?
Essentially, it’s about economic stability. The middle class, to me, means that you have a high enough income and enough wealth that you can afford a house and a car and education for your kids and retirement and health care. You can give your kids the chance to build an even better life than you built for yours.
We’ve seen millions of Americans either fall short of those dreams or be knocked out of the middle class over the past few decades, for lots of reasons.
What’s one of the main things that went wrong?
We got impatient. There is this idea that the work was finished on civil rights. White men have run this country for most of its history, and the white men who ran the country in the 1980s, in particular, did a lot of things to roll back civil rights. They fought affirmative action in court, and the Reagan administration waged a war on drugs that led to the mass incarceration of Black men. Those things impeded progress.
Has the pandemic changed your thinking on this? Or the protests against racial inequality?
I had a finished draft of the book around New Year’s. In March, we decided to rip it up and add 10,000 words on the pandemic. If anything, the events of the past few months have strengthened what I had in there. This crisis is uniquely aimed at exactly the sort of workers who have been left behind by the economy.
On the racial injustice protests, I have a contrarian take: I think the protests, more than any other development in the last couple of months, have given me economic hope for America. The protests have forced an increasingly large share of white Americans to acknowledge the degree to which systemic racism still exists. Recognition of a problem is always the first step toward policy. That gives me some hope that we can have another middle-class resurgence in our country.
The speed read
• SoftBank will lend $1.1 billion to WeWork to help it cover costs related to the pandemic. The Japanese conglomerate has already invested more than $10 billion in the shared-office start-up. (FT)
• The plant-based meat purveyor Impossible Foods raised $200 million in its latest funding round, bringing the total it has raised since 2011 to $1.5 billion. (Reuters)
• Betting that casual dining will bounce back from the pandemic, Fat Brands is buying the burger chain Johnny Rockets for $25 million (WSJ)
Politics and policy
• The former Fed chair Janet Yellen is advising the Biden-Harris campaign. (Bloomberg)
• “Think QAnon Is on the Fringe? So Was the Tea Party” (NYT)
• India is set to bar China’s Huawei and ZTE from helping build its 5G network. (Bloomberg)
• The U.S. government seized $2 million in cryptocurrencies tied to Al Qaeda, ISIS and Hamas’s paramilitary arm. (NYT)
Best of the rest
• Reliant on tourism and facing a 15 percent unemployment rate, Nevada is grappling with reopening bars and large entertainment venues. (CNN)
• Despite European governments’ offering furlough lifelines to workers, many with irregular contracts in tourism, catering and service industries have been excluded. (NYT)
• How the NBA is trying to give playoff games in the “bubble” some sense of normalcy. (Quartz)
Thanks for reading! We’ll see you next week.
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