Epic and Google have a secret $800 million Unreal Engine and services deal

A judge is questioning whether Epic Games and Google are settling their long-running antitrust fight partly because of a previously unannounced partnership involving the Unreal Engine, Fortnite, and Android. In a hearing in San Francisco today, the court revealed that Epic and Google have struck a new deal that apparently includes “joint product development, joint marketing commitment, joint partnerships.” California District Judge James Donato expressed concerns that the agreement — which he indicated would involve Epic “helping Google market Android” and Google newly “using Epic’s core technology” — could have led Epic to soften its demands for changes to the overall Android ecosystem.

Donato allowed Epic and Google to keep most of the details of the plan under wraps. But during the hearing, he quizzed witnesses, including Epic CEO Tim Sweeney and economics expert Doug Bernheim, on how it might impact settlement talks — revealing some hints in the process. “You’re going to be helping Google market Android, and they’re going to be helping you market Fortnite; that deal doesn’t exist today, right?” Donato asked Bernheim, who answered in the affirmative. He also described it as a “new business between Epic and Google.”

Sweeney’s testimony cracked the mystery a little further. He referred to the agreement as relating to the “metaverse,” a term Sweeney has used to refer to Epic’s game Fortnite. “Epic’s technology is used by many companies in the space Google is operating in to train their products, so the ability for Google to use the Unreal Engine more fullsome… sorry, I’m blowing this confidentiality,” Sweeney said.

Donato then offered a hard dollar figure on one part of the deal: “An $800 million spend over six years, that’s a pretty healthy partnership,” he said. We soon learned that refers to Epic spending $800 million to purchase some sort of services from Google: “Every year we’ve decided against Google, in this year we’re deciding to use Google at market rates,” he said. Sweeney did throw cold water on the idea that Epic and Google are jointly building a single new product together, though. “This is Google and Epic each separately building product lines,” he clarified, when Judge Donato asked what the term sheet referred to with the line “Google and Epic will work together.”

Google declined comment on the deal; Epic did not immediately reply to a request for comment.

Donato seemed potentially leery of the partnership, asking Bernheim whether it could constitute a “quid pro quo” that reduced Epic’s incentive to push for terms that would benefit other developers. Currently, Epic is backing a settlement that would see Google reduce its standard app store fees worldwide and allow alternative app stores to register for easy installation on Android.

Sweeney disputed the notion that Epic might be getting paid off to soften its terms, when it’s the one paying out. “I don’t see anything crooked about Epic paying Google off to encourage much more robust competition than they’ve allowed in the past,” he said. “We view this as a significant transfer of value from Epic to Google.” He also says the Epic Games Store won’t get any special treatment from Android in the future under this deal.

It appears that the settlement arrangement is tied to the business deal. Judge Donato suggested that Epic and Google would only make the deal if the settlement goes through. Sweeney says the specific terms of the deal have not yet been reached, but admitted that he expects them to. He told Judge Donato that yes, he considers the settlement and deal “an important part of Epic’s growth plan for the future.”

Sweeney has said in the past that Epic won’t cut sweetheart deals with platforms. In 2023, after the Epic v. Google victory, he told The Verge that “we’ve always turned down special deals just for Epic. We’ve always fought on the principle that all developers should be, you know, given the same opportunities.”

Disclosure: Vox Media, The Verge’s parent company, has filed a lawsuit against Google, seeking damages from its illegal ad tech monopoly.