Epic Games Inc. CEO Tim Sweeney arrived in district court in Oakland, California, USA on Monday, May 3, 2021.
David Paul Morris | Bloomberg Getty Images
Epic Games argued that Apple intentionally locked its customers on the first day of a lawsuit with Apple over the App Store rules.
Epic is trying to force Apple to open iPhone software distribution so that it can use its payment processor, bypassing Apple’s customary 30% charge on digital goods. A favorable ruling Epic may also offer its own App Store for iPhones.
Apple is arguing that it created the App Store and gets to set the rules, which are designed to ensure that apps are high-quality and secure.
Apple’s lawyer Karen Dunn said, “Epic wants us to be Android, but we don’t want that. And our consumers don’t want that either.”
Epic argues that Apple’s App Store is anticommatic, and that its arguments about quality and safety are essentially an excuse to exclude competitors like Epic Games’ title Fortnite, which booted from Apple’s store last year Because it introduces a direct payment mechanism.
On Monday, both Apple and Epic’s lawyers gave their opening statements, and Epic Games founder and CEO Tim Sweeney testified. The trial is expected to last three weeks.
A core part of the debate centers around the relevant market, which reportedly dominates Apple.
Epic is arguing that the related market is iPhone app distribution. Apple says that this is game distribution, and users can easily switch to other phones and game consoles.
To reinforce its definition, Epic is trying to demonstrate how Apple works to lock users into its products, making it more difficult to switch to Android or other platforms. On Monday, Epic’s attorneys cited several internal Apple documents, some more than a decade old, while arguing that Apple officials built a “walled garden” out of brick.
In 2013, Apple CEO Tim Cook wrote, Apple CEO Eddy Cue wrote, “Customers using our stores (iTunes, app and iBookstore) are one of the best things we can do in the ecosystem. To include in the can. According to an email from Epic Games.
“They give up Apple products when they buy apps, music, movies, etc.!” The cue ended.
In another exchange, Apple executives discussed in 2013 whether releasing a version of iMessage for Android would make it easier to switch phones. iMessage is still exclusive to Apple products.
“I’m concerned that iMessage on Android will only serve to remove and disrupt iPhone families giving Android phones to their children,” Craig Federighi, senior vice president of Apple Software, wrote in 2013.
In 2016, a customer emailed Apple, saying that iMessage was a “serious lock-in”. As part of an internal conversation about that email, Apple’s current head of marketing, Greg Jojvac, wrote to colleagues, “We hear it a lot.”
Recently, Federghi wrote to Cook about Apple’s sign-in feature that enables users to enter the app with an Apple login, adding that the feature is “more sticky to our platform in 2019” Creating “.
Epic also argued that Apple does not require an App Store approval process to protect iPhone users. Epic argued that because Apple has occasionally approved low-quality apps for the store, its approval process is ineffective and does not protect user safety.
In an email produced as part of the proceedings, Schiller wrote in 2012 “Doesn’t anyone shop? It’s crazy !!!!!!!” In response to a report of the “clear rip off” app, Apple has become the top free app on the platform.
Apple does not want to be Android
Apple Fellow Phil Schiller arrived in federal court on May 03, 2021 in Oakland, California.
Justin Sullivan | Getty Images
In Apple’s initial statement, it was emphasized that its rules helped create a vibrant ecosystem benefiting iPhone developers with more than 1.8 million apps in the App Store.
Apple said that Epic earned $ 750 million from the App Store, which means the trial is only about the money. Apple also said that Epic was looking at the wrong market and could not show anticommunic behavior in the gaming market.
Apple defended its “walled garden” without using those terms, citing its App Review Department, which manually reviews an approved app and filters out “explicitly malicious apps”. It stated that based on its research, iOS represents only 2% of malware infections among all computing platforms.
Dunn said, “Take protection from iPhones in particular and bad actors have a field. That’s why Android security figures are much worse.”
“We thought about the fact that the iPhone is a phone you’re carrying around, you need to work for you as a phone, and we took a deep note of the security of that device. Is so that it is more secure and reliable. There were PCs at the time, “Apple quoted former marketing head Phil Schiller as saying.
This is why Apple does not allow “sideloading”, or manual installation of apps like Android, Apple argued.
What is App Store Margin?
Epic Games’ filing about the disputed Apple App Store margin.
Epic game / court filing
In its initial argument, Epic lawyers stated that Apple’s App Store makes huge profits, with operating margins of 78% in 2019 and 75% in 2018.
Epic cited Ned Barnes, one of its expert witnesses, who says he used internal Apple documents to come up with the calculations.
The profitability of Apple’s App Store will be part of Epic’s argument that Apple uses its market power to extract additional fees from software developers.
“We have long detailed PowerPoints designed for Apple’s senior executive team, which present the App Store’s profitability in regular presentations for many years,” said Epic’s attorney, Catherine Forrest.
Apple disputes the accuracy of the number, stating that the company does not look at profits and losses for specific units, instead looking at Apple’s financials at a higher level.
Apple’s attorney Karen Dunn said, “They are going to pull the documents out of context in this case. This is incredibly misleading.” She said in court on Monday that Apple does not allocate the costs of building the technology for the store internally to the App Store, and the company has an integrated business model.
Apple’s lawyers had previously filed in court. “Apple believes that analysts, investors, journalists, and others in the market misinterpret public disclosure of non-public, unauthorized financial information.”
Apple’s App Store is part of Apple’s services business, which officials have exposed to investors as a source of growth. Apple increased sales of its services by $ 53.77 billion in its fiscal year 2020 with a 66% gross margin (its fiscal year ended September 26, 2020). Apple’s services sales include subscriptions such as Apple Music, Applecare warranties and licensing fees in addition to the App Store.
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