Since the Epic Games versus Apple battle began, I think we all knew that it was going to balloon out of control. Both companies have a vested interest in the outcome of the case. Apple's whole business model is dependent upon taking a large cut from app and game developers and publishers. Epic Games, on the other hand, maintains a smaller profit margin on its digital goods, and the Apple Tax prevented them from offering in-app purchases before the big move. This week, the lawsuit is growing in size and scope.
This week, Epic Games officially filed a suit in the European Union, similar to its existing suits, covering Apple's monopolistic approach to managing apps on iOS. This new target means that there are active suits in the United States, United Kingdom, Australia, and the European Union. The suits all allege that, while Apple has every right to decide which apps it allows in its App Store, it does not have the right to prevent users from installing other app store alternatives.
Seemingly in an attempt to prove that it is the evil giant that Epic Games makes it out to be, Apple has attempted to pull in a company that is currently not involved in the case: Valve. Part of Apple's defense has revolved around the market relevance of "competing platforms on which Fortnite is distributed and monetized." As part of that, Apple has issued a demand that Valve turn over a ton of data about sales. The demand of Valve was for them to
identify, from 2015 to the present, every version and all digital content or items for each of these games on Steam, then (b) provide exhaustive information about all of them, including...
In that collection of things was sales dates, prices, and price changes for 436 games that appear in both stores, gross revenue for each game and each version of the game, and all of Valve's revenue related to these games. Valve points out that there is a problem with this request: they are not a public company and, as such, are not required to maintain these types of reports or data. In response to the request, Valve said,
Valve does not in the ordinary course of business keep the information Apple seeks for a simple reason: Valve doesn't need it.
The company has said that it has put together various reports, but until they receive a demand fro mthe court, they will not turn it all over. The data that has been turned over, according to Apple, is so redacted that it is completely useless.
Last week, we learned that Maryland was about to tax digital ads. The state senator who sponsored the bill said that the companies that run online ads don't contribute, and this bill would force them to. It was clear that this attempt was going to be closely watched, both by other states who might be interested in similar legislation, and by tech companies about to be affected by it.
This week, expectation became reality, as a collection of business groups came together to sue the state of Maryland looking to halt the implementation of the new tax. The group, in its suit, called the law "deeply flawed" and "illegal in myriad ways." It also claims that the new tax would "harm Marylanders and small businesses and reduce the overall quality of Internet content." One of the groups acting as plaintiff, the Internet Association, said in a statement,
This is a case of legislative overreach, punishing an industry that supports over one hundred thousand jobs in Maryland and contributes tens of billions of dollars to its economy each year. Internet services and companies are proud to play a role in creating opportunities for Maryland's small businesses and citizens.
This argument is similar to the ones that were brought about when internet sales taxes were issued early on. Online retailers who also had physical retail locations claimed that their businesses would be harmed, because only they would be required to collect taxes. As such, consumers would be harmed because they would lose choice in locations to purchase. Today, we know that was a false argument, because there has never been more choice in online retail, despite sales tax.
In a similar way, this new tax on digital advertising is unlikely to affect consumers. Instead, its most likely outcome will be a small decrease in ad buying up front. There is a small chance that Maryland could see ad buy blocks, but it's not realistic for big companies like wireless carriers, food and drink companies, etc., to skip an entire state.
Last month, we learned that Australia wants to charge Google for news. The country's proposition stands in stark contrast to what Google recently agreed to pay in France. In France, Google will pay for access to republish some or all of a news article in its Google News app. In Australia, the proposition is to charge Google to LINK to a news article, including in Search.
If that idea sounds insane to you, you're absolutely right. Even Tim Berners-Lee, the inventor of the World Wide Web, said that it represents a fundamental misunderstanding of the web. With that, you're already in good company with the man who created the technology in question. But, it seems that Berners-Lee, and therefore you, is slowly finding himself in the minority.
Obviously, Australia is standing up in defense of its position. The country said that it doesn't back down to threats, following Google saying they would shut down Search in the country if the law is passed. Australia thinks they are calling a bluff, but Google is famous for following through on these statements. As such, fiery rhetoric like we don't back down will not likely work in their favor.
The real surprise, however, has been the global attention on the story. While you might expect the tech companies to support Google, one in particular is a major surprise - Microsoft. The company says it supports the move. It's possible that they do not quite understand the repercussions, because Bing Search would almost certainly be required to pay for linking to news articles, as well. The reason Microsoft is supporting the bill is that they are hoping that Google will pull out of the country, and Bing can come in and fill the gap.
Google has fired back at Microsoft, calling the plan unworkable. They have said,
The issue isn't whether companies pay to support quality content; the issue is how. The law would unfairly require unknown payments for simply showing links to news businesses, while giving, to a favoured few, special previews of search ranking.
The real reason why the two main search companies are fighting so hard on this is that Australia will set a precedent for the rest of the world. Other countries, including the US, are eyeing this case to decide whether or not to implement similar. Google sees these laws as the end of their business model, while Microsoft sees it as a way to swoop in and steal market share. Microsoft is good at waiting out competitors while they self destruct and filling the space they leave behind.
Over the years, many new technologies online have managed to go untaxed for long periods of time. In fact, even sales of physical goods managed to go untaxed for years. With time, states changed their laws requiring online sellers to tax any purchases made from stores doing business within those states. Early on, companies like Amazon avoided having warehouses, distribution centers, and offices within states that had implemented online sales taxes. Today, however, that is a thing of the past, as there is no avoiding it. The next online tax battleground has been chosen, and it is advertising.
The state of Maryland has passed a law requiring the collecting of tax for digital ad sales. The bill's sponsor, Sen. Bill Ferguson (D), explained the bill saying,
Right now, they don't contribute. These platforms that have grown fast, and so enormously, should also have to contribute to the civic infrastructure that helped them become so successful.
The bill had a difficult path on the way to being passed. Both of the state's General Assembly chambers, Senate and House of Delegates, passed the bill by a wide majority last year. However, the state's governor, Larry Hogan, vetoed the bill in May. In most circumstances, this would have killed the bill, but it had such strong support outside of the governor's office that a veto override was passed this week.
The state has setup a percentage system to determine how much of a company's revenue applies to the state of Maryland for the purposes of taxation: amount of ads shown to Maryland residents divided by total number of ads shown in the US. So, assume everyone in the country sees the same ad, and the ad costs a penny. The state's 6 million residents divided by the country's 330 million residents comes to about 1.8 percent. 1.8% of the $3.3 million comes to about $60,000, which becomes the taxable revenue for the company.
While this bill only applies to Maryland, there is no way this doesn't start a trend similar to that of online sales tax. Over the next few years, we can expect to see similar bills, likely with similar revenue calculators, pop up in states across the country. The companies most involved in online ad sales are the same ones that are coming under fire from both sides of the political isle, so this could be a way to apply pressure on them, and get something back from companies that are becoming less trusted.
We have said many times that malware, including ransomware, can affect anyone, so everyone should be vigilant. Late last year, SolarWinds was hacked. This company makes network management software, and yet they were hit. Last month, malware detection company Malwarebytes was hit by the same group. The latest high-profile company to fall victim to malware is CD Projekt Red, the publisher for Cyberpunk 2077.
The company, which has had a rough 12 months, announced they had been hit by ransomware. The hackers claimed to have source code for several of the company's popular titles, including Cyberpunk 2077 and The Witcher 3, and the code would be released in some manner if the company didn't pay up. The company's official position was,
We will not give in to the demands nor negotiate with the actor, being aware that this may eventually lead to the release of the compromised data.
This stand was possible in part because the data that was lost did not contain customer data, only their own. Presumably, the company would have responded differently if the hackers had information about you. The company was also likely hoping that the hackers were bluffing - either not having all of the data they claimed or not going through with the sale after the deadline. This week, that might have gone awry.
According to VX Underground, the code was posted on a dark web auction site. Security firm KELA confirmed the authenticity of the code, and told The Verge about the rules of the auction. It cost just shy of $5000 to participate, and had a $500k bid raise and a $7 million "buy it now" option. As of Thursday, the auction was listed as closed successfully, with a note saying,
An offer was received outside the forum that satisfied us.
Presumably, the note wants us to believe that someone offered a large sum well over the $1 million going price, but below the BIN price. However, because of the slow movement of the auction, there is another theory - no one actually bid on the auction and the closure was an attempt to save face following a spectacular failure. Emisoft analyst, Brett Callow, said in a blog post,
There is another possible scenario that we think is more likely: no buyer exists and the closure of the auction is simply a means for the criminals to save face after failing to monetize the attack following CD Projekt's refusal to pay the ransom. We have seen this behavior in the past with REvil, a ransomware group that threatened to release damaging information about Donald Trump. Although the hacked law firm refused to pay to prevent the leak, the information was never published-the attackers just claimed to have sold it.
For ransomware attacks to continue to be successful, the threat has to be credible, and if the threat in this case was a failure, it could affect future attempts. However, it is good to see that this one, in particular, was a failure.
Over the past few years, Apple has done a lot of marketing around the idea of privacy. This is likely because they have begun to lose their perceiver authority in security, which only existed because no one used their products, making them a worthless target. These days, however, Apple devices (at least the mobile kind) can be found everywhere, so there's value in attacking them now. So, the company's public perception of a focus on privacy has become its driving goal. However, there is a point where privacy, usability, and ownership collide, and iOS is that place.
While Apple has received praise for their tracking change, except from Facebook, there has been a lot of backlash on another topic - app fairness. The topic was originally raised by Epic Games when they were not allowed to keep Fortnite in the App Store after removing the in-store payment system. Since then, the Coalition for App Fairness has been formed, even adding major media publishers. Now, the group has a new unofficial partner - the state of North Dakota.
The state has proposed a bill that would prevent any "digital application distribution platform" from locking users into a single, exclusive distribution method, such as an app store. While this law seems specifically aimed at Apple's devices, such as iOS, iPadOS, tvOS, and watchOS, it would apply to other companies, including Android, Roku, and more. While the Coalition for App Fairness, and most users, are excited about this potential, Apple is not. Apple's Chief Privateness Engineer, Erik Neuenschwander, said that the bill would "destroy iPhone as you know it." Yes, Erik, that's kind of what they're going for.
There are a few important notes to keep in mind. If passed, the law would only apply to North Dakota. However, as we know with vehicle emissions, one state can set the rules for the country. Apple would be required to make the capability possible, and it would have to apply to all iPhones and iPads within the state of North Dakota, even if they were purchased somewhere else. As such, it might come down to implementing the capability nationwide. Knowing Apple, though, it is more likely that they will be as vindictive and petty as possible and implement a GPS-enabled feature.