Epic Games’ Founder Tim Sweeney Is Fighting Apple, Google. He’s Been Preparing For Years. – The Wall Street Journal

Tim Sweeney, chief executive of the company behind the popular videogame “Fortnite,” is now spearheading a battle that app developers have waged for years against two of the world’s biggest technology companies.

And he is uniquely positioned to lead that fight against

Apple


AAPL -0.09%

Inc. and

Alphabet


GOOG -0.71%

Inc.’s Google. Mr. Sweeney and his company Epic Games Inc. have deep pockets. He is worth more than $8.5 billion, according to Bloomberg’s Billionaires Index, and his company is valued at $17.3 billion, landing investments from companies including

Walt Disney Co.,

Tencent Holdings Ltd.

and

Sony

Corp.

Unlike others who have challenged Apple and Google, Epic is closely held, meaning it faces less pressure from shareholders. And “Fortnite” boasts a massive and loyal user base—with more than 350 million registered users world-wide—that has been nudged to show their dismay about the situation on social media.

“Tim is altruistic and wants this to be a fight for the little guy,” said Mike Salmon, an executive at Magid Consulting, a videogame advisory firm in Los Angeles. He thinks Mr. Sweeney and Epic are going down this path now because of the stiff antitrust scrutiny Apple and Google are facing and because Epic is looking to build out its own digital game store beyond the strictly computer games it sells now. “Epic is making a retail play,” he said.

Apple and Google pulled “Fortnite” from their app stores Thursday after Mr. Sweeney’s Epic rolled out a new way of making in-game purchases that circumvents the 30% cut the tech giants take from digital transactions within apps—a percentage established in Apple’s case more than a decade ago and some developers have called to reduce for years.

Epic was spoiling for the fight, as it filed separate federal lawsuits, more than 60 pages each, against Apple and Google within hours of the app’s removal. The game developer hired Cravath Swaine & Moore LLP, the same law firm chip maker

Qualcomm

Inc. employed to defend itself against antitrust allegations brought by the Federal Trade Commission, to bring the lawsuits.

Apple and Google separately declined to comment on the litigation, but both have successfully defended their business models from a host of challengers over the years. They are cash rich and operate app marketplaces that appear on nearly every smartphone in the U.S., giving them power over which mobile software people can and can’t obtain and unique access to myriad consumer data.

“The App Store guidelines ensure a high-quality, reliable and secure user experience,” Apple CEO Tim Cook said last month at a congressional hearing. “The only apps that are subject to a commission are those where the developer acquires a customer on an Apple device and where the features or services would be experienced and consumed on an Apple device.”

A number of other app developers, including video-streaming company

Netflix

Inc., dating app provider

Match Group Inc.

and music-streaming service

Spotify Technology SA,

have challenged or publicly complained about the 30% commission.

Social-media giant

Facebook

Inc. on Friday joined those protesting the fee, when during a launch of a new virtual-events business the company said it asked for but didn’t get an exemption from Apple. Facebook said the 30% cut makes it harder on small businesses that are having to shift certain operations online. “For small businesses struggling through a pandemic, every dollar matters,” said Fidji Simo, head of the Facebook app.

“We have worked closely and collaboratively with many developers over the years adding helpful ways for them to get support and assistance, and even appeal our reviews and guidelines,” Apple said in a statement.

Mr. Sweeney, who learned to program on an Apple II Plus home computer, also is something of an iconoclast, running his company thousands of miles from Silicon Valley—in Cary, N.C.—and having antipathy toward tech giants dictating the fate of the industry’s smaller players. Running Epic, which he founded in 1991 from his parents’ basement with $4,000 in personal savings, is the only real job the 49-year-old says he has ever had.

And this isn’t the first time Mr. Sweeney has stared down tech giants. He successfully pushed for longtime rivals

Sony

Corp.,

Microsoft

Corp. and

Nintendo

Co. in 2018 to make the unprecedented move of enabling players on their respective consoles to play with one another, calling the monthslong negotiations “an effort in international diplomacy.”

The app market is massive, with global consumer spend on apps totaling $120 billion last year, according to App Annie Inc.

Epic’s lawsuits could have serious consequences for Apple and Google, said Damien Geradin, a competition lawyer in Brussels focused on technology markets and an adviser to app developers. For one, Apple could be forced to change a lucrative business model important to its overall success, he said. And both Apple and Google might need to disclose confidential emails and other information as part of the discovery process, he added.

With iPhone sales slowing, Apple has increasingly focused on the App Store as a revenue driver. Last month, Apple said its services business helped the company set a new June quarter sales record, demonstrating the value of that move.

Services revenue—which includes the App Store, plus Apple Music and AppleCare, among other businesses—jumped 15% to $13.16 billion last quarter.

Apple lost a battle over its App Store policies last year when the Supreme Court ruled that consumers can sue the company for forcing them to buy apps exclusively from Apple. The decision was handed down in response to an antitrust suit alleging consumers pay inflated prices because Apple requires that all software on the iPhone and iPad be sold and purchased through its App Store.

For Epic, the decision by Apple and Google to boot “Fortnite” isn’t a major short-term setback. The game is available on consoles and computers, where the most dedicated of players tend to invest the bulk of their time and money. “Fortnite” generated about $46.5 million of in-app spending through the App Store and Google Play combined over the past 30 days, estimates research firm Sensor Tower Inc.

Epic opened its own digital computer-game store in late 2018, and it collects 12% of sales from external developers. Mr. Sweeney has said the revenue-sharing arrangement leaves his company with a decent profit margin.

Game development also isn’t Epic’s only source of revenue. The company developed the Unreal Engine, a software program for developing games, and it owns the popular video-chat app Houseparty, among other assets.

Other developers rely largely on the major app stores to generate revenue, making it more of a risk for them to speak out publicly against Apple’s and Google’s fees, said Mr. Geradin.

Some small app makers have pushed back against demands from app marketplaces. Chicago-based Basecamp LLC butted heads with the tech giant in June after it submitted an update for its email app called Hey. Apple rejected the app update because it didn’t enable payments for its subscription service through Apple’s system, said Basecamp CEO Jason Fried.

To resolve the matter, Basecamp agreed to build a free version of Hey that doesn’t mention that it offers a subscription service. “We don’t pay Apple 30% and never will,” Mr. Fried said. “The whole thing is ridiculous. It’s very anticompetitive.”

Apple didn’t respond to a request for comment on the Basecamp matter.

It is possible Apple or Google might agree to adjust their 30% take on in-app purchases or allow some flexibility on how payments are processed, said Cowen & Co. analyst Paul Gallant. But Epic, in its lawsuits, asked the court to bar the companies from engaging in what it described as anticompetitive conduct.

“At the most basic level, we’re fighting for the freedom of people who bought smartphones to install apps from sources of their choosing, the freedom for creators of apps to distribute them as they choose, and the freedom of both groups to do business directly,” Mr. Sweeney said in a tweet Friday.

Write to Sarah E. Needleman at sarah.needleman@wsj.com

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