Epic claims that the app store has been transformed into a price reduction vehicle that not only gets a 15 to 30 percent commission for in-app transactions, but prevents apps from offering other payment alternatives. .
Apple CEO Tim Cook will testify Friday to defend the company’s iPhone app store against charges that has become an illegal monopoly, far more profitable than its predecessor Steve Jobs imagined when it opened 13 years ago.
The technology company has the appearance of Cook to put an end to Apple’s defense against an antitrust case filed by Epic Games, creator of the popular video game Fortnite.
Epic is trying to topple the so-called “walled garden” for iPhone and iPad apps that welcomes users and developers while keeping the competition on the sidelines. Created by Jobs a year after the iPhone debuted in 2007, the App Store has become a key source of revenue for Apple, a money-making machine that helped the company make $ 57,000 in profits. million dollars in the last fiscal year.
Epic is trying to show that the store has been transformed into a vehicle that not only gets a commission of between 15 and 30% of transactions from the app, but prevents apps from offering other payment alternatives. This extends to only displaying a link that would open a web page that offered commission-free ways to pay for subscriptions, game articles, and the like.
Apple fiercely advocates commissions as a fair way for app makers to help pay for innovations and security checks that have benefited both iPhone users and app developers, including Epic. Apple says it has invested more than $ 100 billion in these features.
He also argues that the App Store charges the mirror fees charged by major video game consoles (Sony’s PlayStation, Microsoft’s Xbox and Nintendo’s Switch), as well as a similar app store run by Google for more than three billion of Android mobile devices. It’s about twice the number of active iPhones, iPads, and iPods that depend on Apple’s app store.
Apple’s ironic control over the App Store is already being investigated by regulators and lawmakers in Europe and the United States.
Epic Games’ lawyers are expected to spend several hours on Cook’s grill at the booth. The question is likely to dissect the strategies Cook has worked out since he took over as CEO nearly a decade ago, just a few months before Jobs died of cancer in October 2011.
The App Store is among Apple’s biggest hits during Cook’s reign. Since it started with just 500 apps in 2008, the store has grown to 1.8 million apps, most of them free. Apple has leveraged its commissions and its unique in-app payment system to help double the annual revenue of its services division, from $ 24 billion in 2016 to $ 54 billion last year.
Jobs did not anticipate this boom. Shortly after the store opened, Jobs said publicly that Apple did not expect the App Store to be very lucrative. Epic’s lawyers have repeatedly cited these comments as evidence that Apple refurbished the store to fuel its profit growth once the popularity of mobile apps became apparent.
The degree of profitability of the App Store has been a point of discussion during the three-week trial. An accounting expert hired by Epic estimated that its profit margins range from 70 to 80 percent, according to a review of confidential Apple documents. But Apple has insisted that these figures are not accurate because they do not reflect the costs spread across the company’s operations.
Phil Schiller, a longtime Apple executive and former confidant of Jobs, acknowledged earlier this week that the company’s commission system had generated revenue of more than $ 20 billion as of June 2017. Epic Games’ lawyer, Katherine Forrest, had presented this estimate to him, based on the numbers that Apple publicly released in mid-2017.
Schiller’s question about Epiller may foreshadow the way Epic’s lawyers intend to prosecute Cook, who is generally unassailable in public and who is focused on his message when it comes to journalists and lawmakers.
Epic’s lawyers have repeatedly referred to internal exchanges involving Jobs and other executives to describe Apple as an investment in security and personal privacy as an excuse to preserve the huge benefits that flow from its app store.
During Schiller’s testimony, for example, Epic’s lawyers sent a 2008 Jobs email sent to Schiller and another executive. In that note, Jobs wondered if Google was targeting the advertising market that was already born on the iPhone, which is based on operating software called iOS. “The more energy they devote to iOS, the better,” Jobs wrote to Schiller.
Forrest challenged Schiller with two questions. “Did you want Google to force Apple?” he asked, then with, “Were you taking power to destroy a company’s business?”
Schiller answered no to both questions.
