CEO Tim Cook testifies in Epic Games v. Apple trial

Posted:
in General Discussion edited May 21
Apple CEO Tim Cook is testifying Friday in the Epic Games v. Apple trial, answering questions from both Apple and Epic lawyers and offering a recap of the Cupertino company's arguments.

Credit: Apple
Credit: Apple


Cook will be on the stand for a total of an hour and 40 minutes. Though his testimony likely won't impact the trajectory of the trial, it's a noteworthy event because it marks the first mark that Cook himself has testified in a legal case.

The Apple chief executive kicked off his testimony by reiterating his limited involvement in managing the day-to-day operations of the App Store. He described his role as "limited, obviously, in a review capacity."

Cook says Apple's mission is to "make the best products in the world that really enrich people's lives." To that end, Apple invests "like crazy in R&D," Cook added.

"We've invested $100 billion since the start of the iPhone's development, and that number has just accelerated," Cook said. "We have a maniacal focus on the user and doing the right thing by the customer."

He also reiterated that safety, privacy, and security are key components of Apple's strategies. He emphasized the importance of the App Review process and new features like App Tracking Transparency as safeguards against malicious apps or companies that "vacuum up data."

On the ATT feature, which has been criticized by some companies reliant on user data, Cook says that the reaction among developers has been mixed. "Some applaud it, and some are not happy with it." However, Cook said that, when a developer disagrees with the policy, Apple listens.

"We listen. We don't have a tin ear, but we're making decisions in the best interests of the user. And I think it's important to know that sometimes there's a conflict between what the developer may want and what the user may want," Cook said.

Security and R&D spending

The Apple chief executive also bashed the security of competing platforms like Android and Windows. Citing third-party data, Cook said "it's literally an off-the-chart level of difference" between those platforms and iOS.

When Judge Yvonne Gonzalez Rogers asked him to clarify what the data said, Cook said that 1% to 2% of malware is on the iPhone. By contrast, it's about 30% to 40% on Windows and another 30% to 40% on Android. Although App Review process isn't perfect, Cook said "we do a really good job."

On the subject of R&D spending, Cook says that its research efforts do benefit the App Store. He also maintained that R&D has increased each year. In 2018, Apple invested $14.2 billion in R&D. By 2019, that number hit $16.2 billion, up 14% year-over-year. In 2020, R&D spending reached $18.8 billion.

Anti-steering rules, App Store programs, and 'stickiness'

When questioned about the App Store small business program that slashes commissions to 15% for companies making less than $1 million per year from the App Store, Cook denied that antitrust scrutiny was the primary driver of the program.

Cook said that antitrust regulation "was in the back of my mind," but maintained that the primary reason for the program was the COVID-19 pandemic.

He also addressed Apple's anti-steering guidelines that prohibit developers from advertising services outside of the App Store within their apps.

"It would be akin to Apple down at Best Buy saying 'Best Buy, put in a sign there where we are advertising that you can go across the street and get an iPhone," Cook said.

When asked about competing app stores like those from Sony, Microsoft, and Nintendo, Cook confirmed that he's "not a gamer."

Cook also shot down notions that Apple's iPhone is a dominant player in the smartphone industry. He says iPhone has a 15% share of the market globally, and that Android is dominant.

Additionally, the Apple executive denied that the company makes it more difficult to switch from iPhone to Android. He cites features like the Data Transfer Project and says that Apple is focused on "making efforts to get Android people to switch to iPhone."

On that note, Cook was also questioned about the term "sticky," as well as emails from Steve Jobs about "locking" people into the Apple ecosystem. Cook says the term "sticky" is rarely used within Apple, but defines it as Apple having "such a high customer satisfaction that people don't want to leave."

When asked whether he believes the App Store is profitable, Cook said he does. However, he noted that Apple does not break down profitability in a granular manner. In other words, he said "we don't do profitability at that level."

Citing earlier testimony from Epic witness Ned Barnes that suggested that the App Store had profit margins in the 70% to 80% range, Apple maintains that this doesn't account for investments in research and development or other areas. Cook said that number applied to both the iOS and macOS App Stores.

Cook's comments on Epic prayers for relief

If Epic Games got its way and Apple was forced to allow side-loading apps and third-party app stores, Cook said the result would be a disaster.

"I think it would be terrible for the user because if you look at it today we review 100,000 apps a week and reject 40,000 for different reasons," Cook said, adding that it wouldn't take long for the ecosystem to become a "toxic mess."

Developers would also be hurt since they rely on the App Store being a "safe and trusted place where customers want to come," Cook said.

On Epic's argument to allow third-party payment processing, Cook said it would be problematic for a couple of reasons.

"It would wind up where customers would then have to [fill in] their credit cards for all these different apps, so it would be a huge convenience issue, but also the fraud issues could go up."

"Also, we would have to come up with an alternate way of collecting our commission. We would then have to figure out how to track what's going on and invoice it and then chase the developers," Cook said. "It seems like a process that doesn't need to exist."

Cross-examination, questions from Epic lawyers

During the cross-examination portion of the testimony, Cook was asked by an Epic lawyer about whether Apple competes with Google in the operating system market. Cook said "customers don't buy operating systems, they buy devices."

Epic's lawyers continued to press Apple about its App Store margins. Cook continued denying that it separates out its businesses like that, but noted that revenue from the iOS App Store is a lot larger than the Mac App Store.

Cook also confirmed that he agreed with the decision to terminate Epic's developer account. He noted that it would benefit users if Epic returned to the App Store, though he maintained that Apple doesn't want Epic to return because of the money.

When questioned about how an App Store could be curated if it has 1.8 million apps, Cook said apps "only have to live up the rules." He notes that Apple features apps, but doesn't pass a "moral judgement" on them.

Cook said that there are only "just a few" developers who don't like the App Store ecosystem. However, Epic's lawyers also brought up the fact that no developers were testifying on behalf of Apple. Cook said that doesn't surprise him, since "I don't see that there would be a natural way to include them."

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Comments

  • Reply 1 of 12
    BeatsBeats Posts: 2,410member
    Epic is doomed. 
    aderutterMisterKit
  • Reply 2 of 12
    And much of that $billions of R&D money came from the App Store which in turn the developers have used these new features and enhancements to further their products to encourage users to purchase, update, subscribe to their software and services. 
    How can Epic not see this crucial fact? Without all of that R&D on Apple’s part creating fabulous new features and APIs would there even be such a healthy App Store would their game be able to be what it is? I doubt it!
    edited May 21 Beatsronnwatto_cobra
  • Reply 3 of 12
    BeatsBeats Posts: 2,410member
    And much of that $100 billion of R&D money came from the App Store which in turn the developers have used these new features and enhancements to further their products to encourage users to purchase, update, subscribe to their software and services. 
    How can Epic not see this crucial fact? Without all of that R&D on Apple’s part creating fabulous new features and APIs would there even be such a healthy App Store would their game be able to be what it is? I doubt it!

    It’s not such software. New Hardware helps developers. 
  • Reply 4 of 12
    mcdavemcdave Posts: 1,691member
     it wouldn't take long for the ecosystem to become a "toxic mess."” - he missed off “like the others”
    chadbagwatto_cobra
  • Reply 5 of 12
    chadbagchadbag Posts: 1,397member
    I think it is  kind of disingenuous to deflect the questions of App Store margin etc.  I am sure at least one bean counter at Apple had a spreadsheet that shows the costs and margins and every other figure for the App Store, including applying a share of R&D etc.  

    Deflecting it only make it look like Apple has something to hide.  Apple could’ve asked Epic the same questions.  Their sales of in app stuff is almost pure profit. 
    edited May 21 CheeseFreezewatto_cobra
  • Reply 6 of 12
    lkrupplkrupp Posts: 9,277member
    Beats said:
    Epic is doomed. 
    Nope. If Apple wins they’ll come crawling back to the App Store because... money.
    watto_cobra
  • Reply 7 of 12
    lkrupplkrupp Posts: 9,277member
    chadbag said:
    I think it is  kind of disingenuous to deflect the questions of App Store margin etc. 
    Who’s business is it to question App Store margins? Who determines what a fair margin is? Who gets to regulate  corporate profits in a capitalist economy? 
    jony0watto_cobra
  • Reply 8 of 12
    gc_ukgc_uk Posts: 113member
    lkrupp said:
    chadbag said:
    I think it is  kind of disingenuous to deflect the questions of App Store margin etc. 
    Who’s business is it to question App Store margins? Who determines what a fair margin is? Who gets to regulate  corporate profits in a capitalist economy? 
    When companies are unable or unwilling to self regulate and are causing harm we have laws and regulations. That’s why a chemical plant can’t just dump whatever waste they like into waterways. 
    watto_cobra
  • Reply 9 of 12
    Apple’s arguments on third party payment providers is a little nonsensical. It’s up to the consumer to decide to work with MasterCard, VISA etc; these are all payment options that are used world-wide, and proven.
    Heck, even Apple built their own system - Apple Pay - based on credit-cards, to reduce payment friction and get more control over digital transaction revenues.

    The reason why they don’t allow for Apple Pay within their digital goods store, and allow direct credit card payment by having developers offer that directly has nothing to do with the security argument. Their primary concern is simply money - their precious 30%. Apple should just admit that and be honest about it.

    The natural result of a singular payment option, is control, which indeed leads to a more cohesive payment experience and fewer fraud cases. But it’s not their starting point! That’s just marketing bullocks to defend their abusive monopoly.

    The answer is simple: allow side-loading on their “amazingly secure operating system” and when side-loading is initiated, inform the consumer that Apple cannot vouch for the payment options provided and does not offer any support with payment (they should go to the vendor). Keep their previous App Store and their 30%.

    In 2021, the consumer needs choice. That is the Apple App Store or side-loading. There is nothing scary about that, and Apple has no rights to play mommy and daddy over my own choices. 

    I wouldn’t want to be forced in renting a house from one of the 2 landlords in the world either and having to accept their terms. That would spark outrage, but for some reason this forum feels Apple is entitled to be the exception.

    Per someone’s comment on another forum; as for Tim’s point: why is Apple’s return on its IP any more important than a developer’s return in its IP? 
    At some point, the outlet of purchase has to shut up and go away. Walmart shouldn’t get a cut of every slice of bread I buy for the toaster I bought there.

    This isn’t black and white; it is serving Apple to mislead us into thinking it is. They can spin off the App Store, remove in-app purchase restrictions (or make their in-app offering more competitive to where developers will use it out of desire rather than force), and they can provide the same security benefits to iOS without being anticompetitive. 
    You heard it in plainspeak straight from the source; in-app purchase restrictions are about Apple’s money only, competition be damned.
    edited May 22 onnyt
  • Reply 10 of 12
    gc_ukgc_uk Posts: 113member
    Apple need to maintain 150,000 APIs because Apple won’t allow developers to create their own. 
  • Reply 11 of 12
    davidwdavidw Posts: 1,278member
    Apple’s arguments on third party payment providers is a little nonsensical. It’s up to the consumer to decide to work with MasterCard, VISA etc; these are all payment options that are used world-wide, and proven.
    Heck, even Apple built their own system - Apple Pay - based on credit-cards, to reduce payment friction and get more control over digital transaction revenues.

    The reason why they don’t allow for Apple Pay within their digital goods store, and allow direct credit card payment by having developers offer that directly has nothing to do with the security argument. Their primary concern is simply money - their precious 30%. Apple should just admit that and be honest about it.

    The natural result of a singular payment option, is control, which indeed leads to a more cohesive payment experience and fewer fraud cases. But it’s not their starting point! That’s just marketing bullocks to defend their abusive monopoly.

    The answer is simple: allow side-loading on their “amazingly secure operating system” and when side-loading is initiated, inform the consumer that Apple cannot vouch for the payment options provided and does not offer any support with payment (they should go to the vendor). Keep their previous App Store and their 30%.

    In 2021, the consumer needs choice. That is the Apple App Store or side-loading. There is nothing scary about that, and Apple has no rights to play mommy and daddy over my own choices. 

    I wouldn’t want to be forced in renting a house from one of the 2 landlords in the world either and having to accept their terms. That would spark outrage, but for some reason this forum feels Apple is entitled to be the exception.

    Per someone’s comment on another forum; as for Tim’s point: why is Apple’s return on its IP any more important than a developer’s return in its IP? 
    At some point, the outlet of purchase has to shut up and go away. Walmart shouldn’t get a cut of every slice of bread I buy for the toaster I bought there.

    This isn’t black and white; it is serving Apple to mislead us into thinking it is. They can spin off the App Store, remove in-app purchase restrictions (or make their in-app offering more competitive to where developers will use it out of desire rather than force), and they can provide the same security benefits to iOS without being anticompetitive. 
    You heard it in plainspeak straight from the source; in-app purchase restrictions are about Apple’s money only, competition be damned.
    And all those payment options and more, are offered in iTunes. All iOS users have an iTune accounts and they can choose to fund that account or purchase, with a MasterCard, Visa, Discover, AmEX, debit card, Apple Pay, gift cards and PayPal. All this without giving any of your credit information to some developer selling a $.99 app. When deciding on making an online purchase, the decision should be based on, it is safe? Not on how many choices of CC can I use?  

    Side loading? LOL. Epic tried that with Fortnight on Android devices for over a year, before they came running to the Google Play Store crying about how it's not fair that the vast majority of Android users do not trust side loading apps. If most of Android users are not going to trust even a well known developer like Epic, when it comes to "side loading", what makes Epic think they will fare any better with iOS users? 

    https://bgr.com/tech/fortnite-for-android-download-no-google-play-security-risks-5643156/

    https://www.pcworld.com/article/3539283/you-can-finally-play-fortnite-on-your-android-phone-without-side-loading.html


     
    edited May 22 watto_cobra
  • Reply 12 of 12
    docbburkdocbburk Posts: 36member
    Apple’s arguments on third party payment providers is a little nonsensical. It’s up to the consumer to decide to work with MasterCard, VISA etc; these are all payment options that are used world-wide, and proven.
    Heck, even Apple built their own system - Apple Pay - based on credit-cards, to reduce payment friction and get more control over digital transaction revenues.

    The reason why they don’t allow for Apple Pay within their digital goods store, and allow direct credit card payment by having developers offer that directly has nothing to do with the security argument. Their primary concern is simply money - their precious 30%. Apple should just admit that and be honest about it.

    The natural result of a singular payment option, is control, which indeed leads to a more cohesive payment experience and fewer fraud cases. But it’s not their starting point! That’s just marketing bullocks to defend their abusive monopoly.

    The answer is simple: allow side-loading on their “amazingly secure operating system” and when side-loading is initiated, inform the consumer that Apple cannot vouch for the payment options provided and does not offer any support with payment (they should go to the vendor). Keep their previous App Store and their 30%.

    In 2021, the consumer needs choice. That is the Apple App Store or side-loading. There is nothing scary about that, and Apple has no rights to play mommy and daddy over my own choices. 

    I wouldn’t want to be forced in renting a house from one of the 2 landlords in the world either and having to accept their terms. That would spark outrage, but for some reason this forum feels Apple is entitled to be the exception.

    Per someone’s comment on another forum; as for Tim’s point: why is Apple’s return on its IP any more important than a developer’s return in its IP? 
    At some point, the outlet of purchase has to shut up and go away. Walmart shouldn’t get a cut of every slice of bread I buy for the toaster I bought there.

    This isn’t black and white; it is serving Apple to mislead us into thinking it is. They can spin off the App Store, remove in-app purchase restrictions (or make their in-app offering more competitive to where developers will use it out of desire rather than force), and they can provide the same security benefits to iOS without being anticompetitive. 
    You heard it in plainspeak straight from the source; in-app purchase restrictions are about Apple’s money only, competition be damned.
    This is about the biggest pile of manure I’ve read today.  If you want side load buy an android, it’s that simple.  I bought an iPhone for the reliability and security.  That includes not having to do to different websites or app stores to buy an app, and trust that store is legit, and hasn’t been hacked, as well as has excellent security so my payment data isn’t stolen.  You sound like you are an Epic Employee.  Epic’s arguments about in app purchases is such a line of bull.  They take advantage ok kids lack of impulse control, buying skins and all kinds of crap that has no real world value.  Who would any of us trust more, Apple or Epic?  Lets be honest, even if your paycheck comes from Epic, the answer would be Apple 
    watto_cobra
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