Google executives considered approaching Tencent, which holds minority stake, to buy control of Epic Games, case filings reveal

https://www.wraltechwire.com/2021/04/01/epic-games-reportedly-ups-new-funding-round-total-to-1-7b-could-go-higher/Epic Games reportedly ups new funding round total to .7B, could go higher


CARY – Google considered approaching Tencent, which holds a 40% stake in Epic Games, to discuss how to take control of Epic Games, newly unredacted court filings in the case Epic Games v. Google presented by Epic Games reveal, after the judge presiding over the case ordered the filings released in unredacted form earlier this week.

The case filing for Epic Games, which was sent to by WRAL TechWire by a person affiliated with Epic Games, describes a meeting that involved senior executives from both Google and Apple, from which the notes of the meeting were summarized as “Our vision is that we work as if we are one company.”

Internally, Google prepared to offer Epic Games a deal to launch Fortnite on the Play Store in 2018, the filing states.  Why?

The filing notes that Google’s rationale was a  “[h]igh risk of contagion”, with “up to $310M in revenue at risk” as Epic Games decided to launch Fortnite on Android, but not on the Play Store, and after Epic Games entered a “Collaboration Agreement” with Samsung.

The partnership between Samsung and Epic Games “struck fear into senior Google executives, not only because it meant the loss of 30% of revenues that would be generated by the Android version of one of the most popular apps in the world, but also because Epic was paving the way for other Android app developers to distribute their apps without relying on Google Play,” the court filing reads.

That’s when executives prepared an offer to present to Epic Games containing what the filing refers to as a “special deal,” whereby Epic would provide an additional roughly 5% in revenue share, meaning 25% instead of 30% would be distributed to Google.

 

Epic CEO finds a surprise – Google contemplated buying Epic – in lawsuit documents

 

Alternatives were also discussed, the filing reveals.  One senior executive at Google proposed the company could approach Tencent.

The purpose of that approach would be, according to the filing, ” ‘to either (a) buy Epic shares from Tencent to get more control over Epic’, or ‘(b) join up with Tencent to buy 100% of Epic’.”

Tim Sweeney, cofounder of Epic Games, said in a Tweet on Thursday that “Google was indeed contemplating a coordinated, multinational hostile takeover.”

 

Sweeney Tweeted “Google calculated a potential revenue loss of $6 billion resulting from Epic competing with Google Play and showing other companies the way” in response to the original Tweet, and followed those statements with additional comments.

The court filings also note that Google was concerned that a move by Epic Games to offer Fortnite on Android devices outside of the Play Store would have deeper ramifications than the potential revenue loss from Epic Games, because it may set a precedent that would trickle down to other developers.

 

Tencent – 40% owner of Epic Games – faces growing pressure in China tech crackdown

 

Google responded by making moves of its own, as reported in The Verge, such as additional revenue shares with phone makers if certain terms were met or paying other game developers to stay on the Play Store.

Politico reporter Leah Nylen noted in a Tweet that the case filings contain the estimate that  ” ‘up to $6B / $1.1B in 2022’ was at risk,” and that Google responded to this risk in part by establishing what was known as “Project Hug.”

Project Hug “targeted top game developers with “extra love/promotion” to keep them in the Google Play store. The complaint doesn’t say how much Google spent exactly but “hundreds of millions” on at least 20 deals,” Nylen said in a Tweet.





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Anthony Barnett
Anthony is the author of the Science & Technology section of ANH.