SAN RAMON, Calif. (AP) – If Epic Games is to tear down the fortress around Apple’s iPhone and app store, the video game maker will likely have to deploy heavier artillery during the second week of a process that threatens Apple’s $ 2 trillion Empire .
So far, at least, Epic has struggled to prove its claims that the iPhone maker’s 13-year-old app store has become an illegal monopoly.
Epic, the maker of the popular Fortnite game, claims Apple has charged app makers with commissions between 15% and 30% for in-app transactions because it bans other options on its iPhone, iPad, and iPod. When Epic tried to dodge commissions with an alternative payment system in Fortnite last August, Apple pushed it off the App Store to set up a legal showdown that could force it to cut its fees.
Apple claims the commissions are a reasonable fee paid by a minority of the 1.8 million apps in its store to cover the more than $ 100 billion the company has invested in mobile software. The Cupertino, Calif. Company also maintains control over what apps are allowed and mobile devices help protect customer security and privacy.
At times, it seemed like Epic of Cary, North Carolina, was helping make Apple’s case the best it could during the first week of trial in an Oakland, Calif. Courtroom.
For example, Epic CEO Tim Sweeney admitted during his two days on the stand that he personally used an iPhone instead of smartphones with Google’s Android software because he believed Apple had better security and privacy controls.
Sweeney also admitted that Apple made changes to the iPhone software to allow Fortnite players to compete against each other while one is on a phone and the other is on a video game console. The expansion of what is known as the cross-platform game helped fuel Fortnite’s growth to more than 400 million users.
Other internal documents showed that Epic executives thanked Apple for the support Fortnite received on the App Store.
Other evidence raises questions about whether Epic’s efforts to create a competing app store that charges a commission of only 12% will pay off. The business is expected to generate profits between $ 15 million and $ 36 million by 2024, but according to Epic’s internal projections presented at the study, there will still be cumulative losses of between $ 654 million and $ 854 million. Give dollars.
In contrast, the Apple Store quickly became highly profitable shortly after it opened with just 500 apps in 2008 – a year after the debut of the first iPhone. Epic has repeatedly pointed to evidence that Apple’s late co-founder, Steve Jobs, initially didn’t expect the App Store to be a profit center, but then apparently changed his mind after seeing bills of up to 10 percent, according to an Apple presentation in 2010 Had amassed $ 2.1 billion.
The trial version has not yet shown how profitable Apple’s App Store has become. Apple does not release the business’s financial results, but it’s an important part of the company’s ever-growing services division, which posted $ 57 billion in revenue last year alone. The success of these services coupled with the continued popularity of the iPhone is a major reason Apple is currently valued at $ 2.2 trillion – more than any other US company. In contrast, the privately owned Epic is valued at nearly $ 30 billion.
Further financial details about the Apple App Store are expected to be presented in the second week of testing. Perhaps the most insightful moments may come when one of Epic’s experts, Ned Barnes of Berkeley Research Group, takes a stand to discuss his analysis of the app store’s profits.
Apple tried unsuccessfully to convince US District Judge Yvonne Gonzalez Rogers to close the courtroom while Barnes testified because his financial analysis was “overly confusing” investors and causing wild swings in their stocks.
But even if the app store’s profits are higher than anyone thought, it won’t necessarily help Epic prove its claims that Apple has a monopoly that damages competition.
“Being successful is not, in and of itself, an antitrust violation,” said Daniel Lyons, a law professor at Boston College. “The argument that your prices are much higher than your costs may be fine for a lay audience, but it doesn’t legally hold up.”
Despite all the drama, Lyon and other experts say the decision the judge will ultimately make during this trial without a jury will boil down to market definitions. Epic claims the iPhone has become its own market, while Apple argues it should include other devices as well, including video game consoles like Microsoft’s Xbox and Sony’s PlayStation, which also charge 30% commission on game transactions.
“If I were a bettor, I would say with certainty that Apple has the stronger case under existing case law,” said Larry Downes, project leader for the Center for Business and Public Policy at Georgetown University. “You have to put yourself in the consumer’s point of view, and the judge really has to do that. If it doesn’t harm consumers, it’s just a contractual dispute between two companies, one of whom is trying to renegotiate the terms through litigation. ”