Epic v Apple: Apple’s CEO ‘has a feel’ about App Store profits but no data, closing arguments are made

    
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The Epic vs. Apple antitrust trial has entered its final stretch, closing out with a big moment for Apple’s side of the case as CEO Tim Cook took to the stand to provide his testimony.

Cook’s arrival to the stand followed testimony from a witness brought by Epic Games who calculated that the App Store saw a 78% profit margin in 2019. When asked about how much profit Apple gets from the App Store, Cook was mum on hard numbers but said that he believes in-app purchases drives the bulk of App Store revenue, a vague response due to the fact that Apple doesn’t calculate profit or revenue on a division-by-division basis. “I have a feel, if you will,” said Cook.

Both sides of the case have since made their closing arguments, with Apple arguing that Epic is “talking out of both sides of its mouth on this [case], when the impact, the results and the way this will play out, the impracticalities, are plain and are simple” while also saying the App Store’s model is already protected by law.

“The law protects technological incompatibility as pro-competitive. That is how consumers are given a choice. Apple’s business model was developed long before it had anything that anyone planned as market power, it served its customers and developers well, and Epic is now attempting to [change this] without any… guidances as to what the impact of that attack would be.”

Epic’s closing arguments, meanwhile, stated that their efforts are “of necessity” for the wider app development world, while also attempting to counter Apple’s argument that what it’s doing is already protected and should be left alone.

“You have them pretending to be a benevolent overlord and saying ‘We don’t think anybody should compete, we’re trying to do a good job.’ But the point is you have to compare, you have to decide whether what they’re doing is what it would be in the face of competition.”

The decision now falls on Judge Yvonne Gonzales-Rogers, who stated that she will provide a written ruling but doing so will take some time due to the massive amount of testimony and material provided in the case. For now, all anyone can do is wait and watch. For all of our previous coverage, make sure to check the links below.

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David Goodman

Forward: Not an iOS user. Never owned any Apple devices, always been an Android user. I find them overpriced and overhyped, but it was my choice.

The thing is, the laws as they are currently written are not in Epic’s favor. Judges do not, as a rule, interject into the business dealings between two companies. The judge isn’t going to say, for example, “You cannot charge 30%, you must charge 18.23%” — that’s simply not going to happen.

The way i’m reading the Judge’s feelings on this, I think she really doesn’t like the “anti-steering” clause apple has — that a developer can’t tell their customers that they can buy outside of iOS on their website.

If Epic is going to win anywhere, I think the judge is going to rule that this particular point is a problem. However, I really don’t think this is what Epic was going for.

We can expect Epic to appeal the decision – and they probably had THAT pre-written as well – but i’ll put fake money down on an Apple victory overall. (actual fake money, not crypto-fake.)

The one thing i’d like to end with, and it’s a point I don’t see raised often, is this:

Epic is not a customer of Apple’s. Developers aren’t consumers. They are business partners, and should be expected to be savvy enough to read an agreement and decide if they want to opt in or not. It’s literally their job to do so.

Epic is no more a consumer of Apple that needs legal protection, than Heinz is a consumer of Walmart for being on the ketchup aisle.

MilitiaMasterV
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MilitiaMasterV

Probably hoping nobody in law enforcement will look too closely into their financials…so they are outright lying about not knowing…but this is why they pay big money to bribe people to look the other way…erm, pay for lawyers I mean. :P

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Bryan Correll

Their publicly available financials don’t show any more detail than the SEC requires, so those in fact don’t show separate data for the app store. But the idea that they don’t have those numbers well known internally is absurd.

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Natalyia

There are real and genuine reasons for Apple (and consumers) to want the “walled garden” approach they take with the iPhone. As there are real (and genuine) reasons to want the ability to install anything from anywhere.

It’s a security/freedom tradeoff, and as long as Apple doesn’t abuse the marketplace to force everyone to do it their way, there’s no “monopoly” issue there. Android’s market-share dominance refutes that nicely.

Apple’s free to charge whatever it wants to list an app on the store – I think it’s on shakier grounds when it demands a fixed (and relatively high) percentage of revenues on purchases made within applications on the platform.

I suspect the AppStore itself is quite safe. I’m far less sure their “you pay us 30% of all purchases made on your iDevice” will survive. Although in the end it’s a “convenience tax” – nothing stops Epic (or anyone else) from putting their store on the web instead of in their app and skirting the issue that way. It would reduce impulse buys, which is why Epic hates that idea – but they could still do it. They simply calculate (rightly) that they’d lose more than the 30% fee in lost revenues if they did that.

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Arktouros

A lot of people are skeptical on how Apple claims they calculate profit and revenue but if they did calculate it in the way people are thinking wouldn’t those records end up in court? I mean these guys were requesting the records from other random companies pretty sure they’d have to provide them for their own companies as well. It’s the most likely explanation why there was only external estimates.

Regardless I don’t think the Judge was any more impressed with Epic’s talk of Apple’s numbers than she was impressed about Apple’s talk of Epic’s numbers.

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Rndomuser

To be fair there should be a law requiring smartphone manufacturers to allow users to download and install an app from any source and allow same access level to OS functions as any app from official app stores. Just like how it is on Windows, where developers are free to use whatever digital distribution platform they want to. Sure, Apple will lose the ability to charge for in-game transactions but I’m sure they’ll be easily able to compensate for it by increasing prices for their own hardware and other services.

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Arktouros

That’s really not being fair at all. What’s being fair is giving consumers options which we already have. For example Android’s 72% marketshare is very similar to Windows 74% marketshare which means consumers are clearly exercising our ability to choose (I certainly have no desire for an Apple product).

Over all I agree with the Judge on the matter:

But Judge Yvonne Gonzalez Rogers suggested by way of argument that Apple is trying to build “a particular kind of ecosystem that is incredibly attractive to its consumers.” Allowing other App Stores on iOS would “destroy the ecosystem into which they have made the choice to enter. If you buy the Xbox or buy into a variety of these particular walled off gardens, you know that that’s what you’re buying into, and you choose to make that decision.”

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Rndomuser

That’s really not being fair at all.

It is fair for customers. Which is the ones whose interest should be protected the most. And also fair for developers, especially the small ones.

What’s being fair is giving consumers options which we already have.

There is no good option. Many people choose Apple hardware and OS for various reasons and for them switching to Samsung’s smartphones with Android is not a good option. And those people should be allowed to keep enjoying their Apple phone and OS while having a choice of installing whatever app they want to. Same goes for developers. If a person wants to download a PornHub app onto their Apple smartphone – it should be their choice, not Apple’s, same goes for PornHub who does not have an app for Apple available even on their official website.

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Arktouros

It is fair for customers.

That’s not being fair. The concept of being fair is not having an unjust advantage which is what your suggestion gives to customers and developers at the expense of the smartphone manufacturers. The fair option is companies can design their products as they see fit so long as customers can choose which product they want to buy.

There is no good option

You talk a lot about choice and options but you seem to want to give zero choice and options into how a company designs it’s products or chooses what to sell. Walmart shouldn’t have to sell dildos out on corner isle because it’d give customer’s more choice and damnit if I want to buy a dildo from Walmart that’s my God given inherent right as a human being. That isn’t how anything has ever worked so why is it the expectation? If the PornHub app is that important to you then you’ll find it on any number of the thousands of different Android phones that make up 72% of all smartphone ownership in the world. I hated my iPhone because I couldn’t do what I wanted with it so I swapped out to a Samsung. I hated Samsung so I swapped out to a Pixel. People have choices, so long as you’re not myopically focusing on what shouldn’t be considered a relevant market.

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Rndomuser

That’s not being fair.

It is. You can’t be perfectly fair to everyone in such situation but you can be towards customers and developers while also not severely restricting the corporation such as Apple. And I always want the customers to have as much choice as possible, even if it will decrease revenue for corporation which provides those services, something which corporation can compensate for through other ways. Like I said above, Apple can easily compensate the lost revenue through other means, for example by raising the price of their monitor stand from $1000 to $2000, or raising the price of the phone itself, or raising the price of charging cable for the phone and in many other ways.

you seem to want to give zero choice and options into how a company designs it’s products or chooses what to sell

That is not what I want. And in this case Apple is free to design their hardware any way they want to, same goes for OS as long as they provide an option for consumers and developers to either use their own store or someone else’s. Just like it works on desktop OSes. And Microsoft is doing fine selling their desktop OS as well as many other software, some of which can be installed on different OSes. And they are not trying to make Microsoft Store as the only way to install games and other programs on the Windows.

Walmart shouldn’t have to sell dildos out on corner isle because it’d give customer’s more choice and damnit if I want to buy a dildo from Walmart that’s my God given inherent right as a human being.

This is completely wrong analogy. I am not against Apple not wanting to sell specific apps in their own store, they have a full right to allow selling only specific apps and charge whatever percentage they want to through their own store. The right analogy I will use is that I want to have an option to shop at different stores in my city, like Costco, BestBuy, Trader Joe’s, and not only Walmart. And I do have this right in the city I live at, same should be true about mobile OSes.

That isn’t how anything has ever worked so why is it the expectation?

The expectation is to let me choose what I want to install on the hardware and OS that I already paid for. Just like I can do it on PC.

People have choices

No, they do not when it comes to Apple smartphones. Neither customers nor developers have a choice of using whatever app they want to on the iPhones. This should not be the case. Especially for people who either have to use iPhones and iPads because their work/school provided them with those or really like the quality of hardware as well as the stability and performance of the mobile OS and don’t want to switch to any Android device.

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Arktouros

So let me get this straight…you think it’s more fair for the customer that if Apple allowed developers to install their own software and bypass their market fees and in turn Apple should then pass the cost onto the consumer by charging them more for the hardware…? Ignoring the fact that’s decidedly unfair for the consumer to bear the costs of Apple’s investments into the development platform (IE: SDKs and APIs etc) it’s doubly bad because as alternative platforms such as Epic Game Store has shown the customer doesn’t even receive lower prices when the developer cut is less. So your suggestion actually doubly screws the customers entirely.

Any “real life” comparison is flawed on some level. For example your Trader Joes, Cost Cos and Best Buys all pay property taxes on the property they inhabit in the city. However even in that analogy the “city” is constantly doing road work and upgrades to the city but you want businesses to be able to open up shop and contribute no taxes and, according to above, expect the city to just raise income taxes on the citizens to foot the bill for the businesses. Oh, but at least they can now shop at Target instead of just Walmart.

I didn’t ask what your expectation was, I asked why do you have it? There is absolutely nothing fact based to have that kind of expectation. You’ve imagined the possibility and now are demanding reality just figure it out somehow and make it happen.

People have the only choice that matters: Do you want to purchase an Apple smartphone? If you’re choosing to buy an Apple Smart phone then you choose all that comes along with it. Period. You made a decision, take responsibility for making that decision. You don’t get to buy an Xbox and bitch and moan and throw a temper tantrum about how you can’t play Super Mario Brothers. You also got some real fucking gall for talking about iOS performance when it’s the kind of bloatware installs that Android allows for that creates most of that bad performance and will 100% happen to iPhones if anyone (including Carriers) can install all that garbage on phones. Again comes back to what the Judge said, people know what they’re buying into, and the restrictions are as much part of it as the quality and performance.

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McGuffn

Yeah well I want to play Mario and Zelda on the xbox or playstation. Nintendo has to be fair and let me do that.

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Greaterdivinity

Not quite the same.

Apple/iPhone is more akin to consoles and have always been marketed that way – Apple does everything from software/hardware R&D to manufacturing to handling sales and updates etc. etc. Sure, it does a bit more than consoles do nowadays (consoles do a lot, they’re like little PC’s!), but this was something that’s been a “feature” of the phone line since it was announced.

There’s more argument to be made on Android, which bills itself as a more open platform and is used by dozens of different companies who create their own phones/hardware and tweak the OS in their devices. The open nature of it is its competing feature against Apple/iOS, and it already allows different storefronts (Samsung, Amazon, F-Droid, plus all the various APK storefronts you can access), so there’s already choice there depending on what you want out of your phone.

Windows is radically different than iOS, and even considerably different than Android (despite being a bit closer to that than iOS).

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Lily Cheng

“To be fair, companies who design and manufacture both the software and the hardware for their devices should be forced to follow what only manufacturers of software do”

Is this really what you are saying? Are you making a bad attempt at being sarcastic or do you truly not understand what you are saying?

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Bryan Correll

Apple doesn’t calculate profit or revenue on a division-by-division basis.

Tim, even your own grandma wouldn’t believe that one.

Lighthope
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Lighthope

“…that Apple doesn’t calculate profit or revenue on a division-by-division basis…”

What a bald-faced lie. Apple knows down to the penny what each revenue-earning division brings in.

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Ardra Diva

That’s complete nonsense that Tim Cook doesn’t have the financial books at his disposal and a CFO to give him facts and figures at the press of a button. Child, please. We’re not talking about a home business running out of a garage using QuickBooks.

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Kickstarter Donor
Greaterdivinity

Apple doesn’t calculate profit or revenue on a division-by-division basis.

While definitely possible, I don’t quite buy this and feel like they’re hoping they can get away with not releasing this information without getting caught. There’s no way they don’t have the tools to figure this out, or have the actual data handy.

From comments, it seems that Rogers isn’t super thrilled with either company, especially Epic. She seemed pretty skeptical of their claims in her questions to them, as she should be. She made a great callout in that players purchasing things like an Xbox or an iPhone are well aware of the “closed ecosystem” they are entering and that said ecosystem is often promoted as a “feature” rather than a bug, both by the companies and consumers. She may have been playing devil’s advocate, but IMO it was pretty telling about her thinking on the matter.

I wonder if the Fortnite team is prepping two different marketing campaigns now, one for if they win and one for if they lose.

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Bryan Correll

While definitely possible

To the same degree that it’s possible that Tim Cook is an automaton being operated by the digitally preserved mind of Steve Jobs. A company less than 1% of Apple’s size couldn’t operate without more detailed accounting than that.

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McGuffn

That’s massively’s wording, and If we’re talking about the same thing, that’s not how I would word it. What i’d say is that apple doesn’t break down their financials for the iphone between hardware/software. If you want to say that Apple has an “iphone diviision” they expressly do report their financials as a division.