Epic Games says Google paid phone and game makers to avoid $1-bln app store hit

Aug 19 (Reuters) - "Fortnite" developer Epic Games on Thursday unsealed details about contracts it alleges Alphabet Inc's (GOOGL.O) Google signed with phone makers and other top video game companies to avoid losing $1.1 billion in annual app store profit.

Epic in 2018 launched "Fortnite" through its website and a partnership with handset maker Samsung Electronics Co (005930.KS), bypassing Google's Play Store, which charges developers fees of up to 30% of their sales.

Google feared other companies copying Epic and blocked that possibility by erecting unlawful hurdles, Epic alleged in an antitrust lawsuit filed against Google last year.

Google said the lawsuit remains baseless and mischaracterizes business conversations. A trial has not been scheduled.

Among new details a judge ordered be unredacted, Google in 2019 estimated up to $6 billion in Play revenue and $1.1 billion in profit would be at risk in 2022 alone if Epic's approach spread and alternative stores found success, according to the lawsuit.

But Google avoided the feared hit.

In 2019, it launched "Premier Device Program" to pay phone makers to ensure the Play Store's exclusivity and limit the appeal of partnerships similar to what Epic had reached with Samsung, according to the newly released details.

Premier partners received 12% of Google's search revenues from their phones, compared with 8% traditionally, according to the filing. Some partners, including LG Electronics Inc (066570.KS) and Lenovo Group's Motorola (0992.HK), also received 3% to 6% of Google "Play spend."

Separately, Google in 2019 as part of an effort dubbed "Project Hug" approved spending "hundreds of millions of dollars" on over 20 top developers in marketing and other benefits to keep them on the Play Store, according to the details. The "vast majority" accepted Google's offer by December 2020.

According to the lawsuit, Google internally called the new deals a success in stopping a "contagion" of developers sidestepping the Play Store.

Reporting by Paresh Dave; Editing by Dan Grebler

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Thomson Reuters

San Francisco Bay Area-based tech reporter covering Google and the rest of Alphabet Inc. Joined Reuters in 2017 after four years at the Los Angeles Times focused on the local tech industry.