Apple versus Epic trial ends with attorneys questioned by judge

Posted:
in General Discussion edited May 2021
Lawyers for Apple and Epic Games debated about market definition and potential remedies on the last day of the Epic Games v. Apple trial, capping off three weeks of testimony and arguments in court.

Credit: Epic Games
Credit: Epic Games


In lieu of traditional extended closing arguments, the last day of the trial was marked by a session of questioning from Judge Yvonne Gonzalez Rogers and a back-and-forth debate between Apple and Epic Games lawyers. At the start of the questioning, Judge Gonzalez Rogers asked each side what their top two issues were. Both agreed on market definition and potential remedies, or what changes Apple could make if it was found to be violating antitrust regulations.

Market definition

Epic Games lawyer Gary Bornstein kicked off the day by stating that Tim Cook's testimony on Friday confirms that Apple does compete with Google in the operating system market. That shows that developers write for both platforms because consumers choose one and rarely switch.

Apple's lawyers resisted this definition, stating that operating system competition is a "distraction." Apple lawyer (tk) Swanson reiterated that there is no foremarket, and although the term "duopoly" is thrown around, Apple faces competition from companies like Samsung, LG, and Huawei.

Swanson continued to hammer that "this is a digital game transaction market, defined by substitution with options for both consumers and developers." He argued that if Apple is a monopolist in this market, so is Google and every console maker.

Epic's lawyer countered by maintaining the "Fortnite" maker's definition of the market at hand: app distribution. Epic reiterated that its market distribution doesn't include any substitutes, but that potential remedies like sideloading and third-party app stores could increase competition.

Judge Gonzalez Rogers said one issue with Epic's formulation is that it "seems to ignore the reality that customers choose an ecosystem." Apple's strategy is to create an attractive ecosystem for consumers. Epic's substitutes would destroy that ecosystem, the judge said.

Part of Apple's key arguments included the fact that evidence shows iPhone owners also have other devices they could use to play "Fortnite," including tablets, consoles, and computers.

Gonzalez Rogers brought up Apple's 30% commission and the fact that it hasn't moved since its inception. She implied that if there were real competition, it would have.

Apple countered by claiming that its cut of app and in-app purchases is lower than retail commissions. The price also didn't go up at all when Epic Games claimed Apple became a monopoly in 2010. Swanson said that 80% of the revenue that came from "Fortnite" players on iOS actually originated from other platforms.

"We have an enormously well-resourced company that would like to pay less," Swanson said, adding that this doesn't mean there isn't real competition.

Epic's lawyer argued that the company's problem wasn't with the iPhone or the "real innovation" that has been made on the device. Instead, the "Fortnite" maker's issue is with the alleged monopoly on app distribution.

Judge Gonzalez Rogers also suggested that there might be a legal precedent in California that companies could violate the "spirit" of antitrust regulations without a strict monopoly definition under federal statures. That could lead to an outcome where Apple has to change its behavior only in California, she said.

Apple argued that it was Epic Games' burden to define a market, and they failed to do so. Judge Gonzalez Rogers also suggested that Epic's arguments ignore the fact that many apps are free and don't have to pay any sort of commission on app and in-app purchases.

Epic Games tried to counter that argument by claiming developers are unhappy with search and discovery methods on the App Store. Judge Gonzalez Rogers says it isn't a reasonable complaint to be upset that an app isn't at the top of a list in a category with a 100,000 competitors.

At the end of the market definition section of the debate Monday, Epic Games again tried to bring up the allegedly high profit margins that the App Store has. Epic's lawyers said "the numbers don't lie," even though Apple doesn't track App Store profitability.

Judge Gonzalez Rogers was skeptical, pointing out that even Epic Games doesn't break down profits in an itemized manner.

Apple's lawyers, for their part, also countered Epic's margin argument. "If those numbers mean what Epic says they do, Tim Cook should sell the device business and double down on the App Store," they said.

Company conduct

During a portion of the questioning focused on company conduct, Apple lawyer Veronica Moye tried to counter a report that indicated developers were unsatisfied with the App Store.

Moye showed off a survey that reported 64% satisfaction rating among developers. She also highlighted all of the time that Apple discounted its commission, including the Video Partner Program and the Small Business Program.

"Even if the Small Business Program was introduced because of litigation, it's still pro-competitive," Moye said.

"Does that mean we have to wait for people to sue Apple?" Judge Gonzalez Rogers responded. "How can you reasonably say that should be a competitive driver."

Epic's lawyers tried to argue that developer satisfaction ratings are tied to Apple's APIs, and not the App Store, leading to skewed results. Epic also argued that higher prices and lower innovation are its direct arguments that Apple is being anticompetitive in the App Store.

Moye countered on the first point, claiming that Apple's developer tools are provided to app makers so they can create apps for the App Store. She said Apple invests many resources into developing them.

She also reiterated that Apple's customers purchase iOS devices because of "Apple's long-standing brand promise" of privacy and security. If customers want an alternative, they should opt for an Android device, Moye added.

The Apple lawyer also criticized Epic's "desperate attempt" to "scrounge up" witnesses unsatisfied with Apple's conduct. The judge suggested that may not be a completely fair assessment, since apps like Down Dog and Match Group had prepared testimonies at the start of the trial.

Anti-steering provisions

The questioning then moved onto anti-steering provisions, or the regulations that ban App Store developers from advertising outside services within apps.

Judge Gonzalez Rogers suggested that Apple's "hiding" of alternative payment options could be anticompetitive, even in light of the American Express precedent that found them to be legal.

Moye said that there's nothing "unique or unusual" about anti-steering provisions. She compared a banner advertising outside prices to a sign at Nordstrom telling customers to shop at Macy's.

Judge Gonzalez Rogers offered an alternate solution: signs indicating customers can check out at Nordstrom using various payment methods like Visa or MasterCard. She suggested that App Store payment processing could be something like that.

Apple also argued that developers are free to email customers with promotions, but noted that its guidelines prohibit specific targeting of customers. Moye pointed out that Epic Games didn't raise a legal claim that it had been harmed as a result of anti-steering provisions.

Moye also said that the anti-steering provisions are proof that Apple does have competitive because it's trying to stop developers from referring their users to those alternate platforms.

Remedies

On the subject of remedies, Epic's lawyers said that they want Apple to nix specific anti-competitive restrictions, including restrictions on app distributions and in-app payments.

"The effect of both of these is that Epic Games would pay Apple nothing," Judge Gonzalez Rogers said of Epic's remedies.

Epic's lawyers countered by claiming that Apple could charge businesses differently, just not in these allegedly anticompetitive ways.

Apple lawyer Richard Doren called the remedies "a compulsory license of all Apple's intellectual property." Under the model, Doren said, Apple wouldn't receive any payment for the use of its IP or its platform.

Additionally, Doren said that the remedies would stop Apple from reviewing apps in third-party app stores. Even if it could review third-party app stores, it would be doing so for free, Doren said.

Doren said that Apple's business model was pro-competitive. Epic's lawyers countered by claiming that Apple just wants to license its IP without any concern for competitive consequences. Judge Gonzalez Rogers disagreed with Epic's characterization of Doren's comments.

At one point, Gonzalez Rogers also pointed out the fact that that Epic Games also sued Google. Google's Android platform allows multiple app stores. The judge questioned how opening up iOS would solve Epic's problems with Apple.

Additionally, she also brought up the fact that Epic Games may or may not have "ulterior motives" that hasn't been discussed in court yet.

"Be clear, right? Epic is here because if relief is granted, they go from a multibillion dollar company to a maybe-trillion dollar company. Who knows," Judge Gonzalez Rogers said. "But they don't do it out of the kindness of their heart."

Doren also reiterated Apple's arguments that Epic's remedies would destroy the company. Although the judge said that Android functions and is popular with a similar lack of restrictions, Doren said that Epic wants to turn iOS into a "poor imitation" of the competing operating system.

In closing remarks, Epic's lawyers said that Apple clearly has options to feasibly open up iOS. The lawyer also claimed that Apple is simply scaring the court into believing nothing can be done.

Doren said Epic is making stuff up about how reasonable it would be to manage the App Store with Epic's proposed remedies.

Capping off a three-week trial

The closing arguments bring to an end a three-week trial that puts the future of Apple's management of iOS apps and the App Store at stake. Depending on the court's decision, the outcome could see Apple lose not only billions of dollars in potential revenue, but also control over the ecosystem it created.

Epic used its time in court to frame Apple as holding a monopoly over iOS app distribution and App Store payments, framing its argument as being one that could be beneficial to all developers. Apple's 30% App Store fee was also a major bugbear to the "Fortnite" developer.

Apple's counter-arguments emphasized the privacy and security of its platforms and policies, as well as attacking Epic Games' motives for the lawsuit itself. The game developer was painted as an opportunist that didn't want to pay Apple for using its platform, and one that also wanted to sell apps itself on iOS away from the App Store entirely.

During the trial, it was discovered Apple's leadership had previously considered cutting how much it took from App Store transactions. Apple also insisted the Small Business Program was originally considered in 2016, but it was raised in court its introduction in 2020 may not necessarily have anything to do with COVID-19 concerns.

The processes behind App Store Review were explored in detail, ranging from emails about scam apps from 2012, to rare lapses in the usually rigorous process, and even a photo of a human review station. While Apple rejects around 40% of app submissions, Apple said that less than 1% of rejections were actually appealed.

Expert witnesses for Epic attacked the App Store's anti-steering provisions and iOS security, including insisting that iOS could be like macOS to offer a third-party app marketplace without any big security drawbacks. This led to Craig Federighi explaining to the court that multiple app stores are "regularly exploited on the Mac," and that there's a "level of malware on the Mac that we don't find acceptable."

Towards the end of the trial, Apple CEO Tim Cook himself took to the stand to bolster Apple's argument, reiterating that safety, privacy, and security were key components of Apple's strategies. Cook insisted that Apple wasn't a dominant player in the smartphone industry, and that the antitrust scrutiny wasn't the main driver for the small business program.

The Apple chief offered that Epic's proposed side-loading and third-party app stores measures would be a disaster for iPhone, and it wouldn't take long for the ecosystem to become a "toxic mess." Third-party payment mechanisms would be bad to consumers, Cook reckoned, with fraud concerns and the need for Apple to create a new way to gain its commission.

Cook was also the target of extra scrutiny from Judge Yvonne Gonzalez Rogers, who questioned the CEO directly for nearly 10 minutes. Judge Rogers expressed skepticism about Apple's business model, including how it seemed that game transactions were effectively subsidizing the rest of the App Store catalog.

With the end of closing arguments, it's now a case of waiting for the court to offer its ruling on the affair, followed by the inevitable appeals.

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Comments

  • Reply 1 of 23
    22july201322july2013 Posts: 2,894member
    A few days ago people were lambasting the judge for asking hostile questions to Tim Cook, concluding she was an idiot. I warned people don't read too much into that. Today she asked Epic some equally hostile questions. So you see, hostile questions from a judge aren't a good indicator of which way she will rule.
    haydn!edredchemengin1flydogJapheyasdasdmuthuk_vanalingamcanukstormMacProsdw2001
  • Reply 2 of 23
    XedXed Posts: 1,422member
    I don't know what the result will be and I honestly don't care about mega companies like Apple and Epic losing some money, but Epic really doesn't deserve to win here and this would be bad long-term for consumers if Epic does win.
    OferjeffzachariasBeatsmcdavemuthuk_vanalingampulseimageswilliamlondonpscooter63TRAGwatto_cobra
  • Reply 3 of 23
    jungmarkjungmark Posts: 6,916member
    I hope some savvy dev out there writes a program to bypass Epic’s gate keeping and then sue the Frakkers for having a monopoly in Fortnite. 
    BeatsMacProNoFliesOnMewatto_cobra
  • Reply 4 of 23
    hammeroftruthhammeroftruth Posts: 1,167member
    A few days ago people were lambasting the judge for asking hostile questions to Tim Cook, concluding she was an idiot. I warned people don't read too much into that. Today she asked Epic some equally hostile questions. So you see, hostile questions from a judge aren't a good indicator of which way she will rule.
    I wouldn’t exactly call them hostile. They were direct and cut thru any marketing speak to get down to behavior and the effects of the behavior. 

    I do like that she hinted that this is not the venue to try to force a change from Apple, since the lawsuit addresses Apple’s actions after Epic broke their agreement and not Apple’s actions forced Epic to break its agreement. <——- This is the main issue. 
    I feel that Epic is going to lose on these merits alone and Apple will get a speech about possible congressional and state legal issues going forward. 
    Oferhaydn!Beatswatto_cobra
  • Reply 5 of 23
    Apple is going to win this case as Epic's case was not a good one and I think that is hinted at strongly by the questioning.  I do think as a result of what was exposed in this trial that if not now there will be government intervention to address the anti-steering rules and possibly the lack of competition on payment options.

    Best case for everyone (including Apple in the long run as it would make the platform better) is if 3rd party payment processing was allowed and the anti-steering provisions Apple engages in removed for digital content. I would have no problem if they kept things as-is for games.  There is no justification for Apple getting 30% for non app related products and services where they are providing nothing but the forced payment processing.  If that went away the Apple platform would be greatly improved for consumers.  Consumers wouldn't be paying 30% more for services like Spotify subscriptions and the awful user experience of downloading an app like Netflix and app makers being banned from being transparent with users would be fixed.  Apps that cannot offer any product where the industry is on the agency model (comics, ebooks, etc...) would finally be available to purchase on iOS.  If Apple was forced to compete for payment processing and as a result were only making as much as say Stripe was instead of 30% that would surely be a short term hit but all the additional commerce they would earn by digital content that can't be sold on iOS today would make up a good chunk of that. 
    Oferhaydn!
  • Reply 6 of 23
    22july201322july2013 Posts: 2,894member
    If Apple was forced to compete for payment processing and as a result were only making as much as say Stripe was instead of 30% that would surely be a short term hit but all the additional commerce they would earn by digital content that can't be sold on iOS today would make up a good chunk of that. 
    You are living under a myth that Apple's 30% fee is a payment processing fee, which is clear because you compared Apple to Stripe which is nothing but a payment processor. On the contrary, there are billions of dollars in expenses that Apple has which Stripe doesn't have. Do you realize that? For example, Apple makes development tools that are free to obtain and use.

    Do you want Apple to start charging for all those free services when it loses its 30% exclusive fee? Here are a few examples:

    • Do you want Apple to add a $1 processing fee for every "free" app that's available on the App Store?
    • Do you want Apple to charge developers for its free tools such as Swift and xCode?
    • Do you want Apple to charge each developer for each free API that is used by any app that they develop?
    • Do you want Apple to charge end users each time their app accesses one of the currently free iCloud servers?
    • Do you want Apple to charge developers a processing each time there is an update to their app?

    All these free services, and dozens more, are funded through that 30% cut. If you want to reduce that 30% cut to 3%, then tell me where Apple will raise the prices to cover the $60 billion per year loss. Frankly, I don't mind if Apple choses to eliminate the 30% fee and start charging everywhere else.
    edited May 2021 Beatscanukstormdanoxsdw2001pscooter63watto_cobra
  • Reply 7 of 23
    maestro64maestro64 Posts: 5,034member
    There was an interesting point that came up here, the IP Apple developed in the way of tools and the App store itself which all developers get to use without having to pay licensing fees. The is sounds like the fees are pay via the commission on the transaction, grant it no company has a 30% licensing fee, but they could be as high as 5%. 

    I said this before, most developer have no idea what the amount of investment they would have to make to make software, market it, handle all the transactions, method of securing the transaction as well as ensuring the app is not corrupted in the process. Apple has made this investments on everyone's behalf and everyone benefits from it. The Developers complaining was all the benefits and profits and now of the cost or down sides. 

    The whole Anti-steering provisions idea is joke, how many stores do you go into today and tell you there is less costly way to pay for your purchase or you can get the same item for less down the street. No company is going to do your work for you, if you are not smart or knowledgeable enough to know what you are buying can be bought or paid for less money.

    When you go on Amazon they do not tell you that you could find the product for less on another website (which is true) or you can buy the same item directly from the seller's own website verses buying through Amazon and no need to let Amazon know what you are buying. Lately I find an item on Amazon see who the seller is and if they have their own website i will buy it directly from the seller and by pass Amazon all together. The only reason to buy from Amazon today is if Amazon stocks the item in their own warehouse and you truly get free shipping and 2 day or less shipping. No where does Amazon help consumer save money.

    edited May 2021 Beatscanukstormpscooter63NoFliesOnMewatto_cobra
  • Reply 8 of 23
    maestro64maestro64 Posts: 5,034member
    A few days ago people were lambasting the judge for asking hostile questions to Tim Cook, concluding she was an idiot. I warned people don't read too much into that. Today she asked Epic some equally hostile questions. So you see, hostile questions from a judge aren't a good indicator of which way she will rule.
    I wouldn’t exactly call them hostile. They were direct and cut thru any marketing speak to get down to behavior and the effects of the behavior. 

    I do like that she hinted that this is not the venue to try to force a change from Apple, since the lawsuit addresses Apple’s actions after Epic broke their agreement and not Apple’s actions forced Epic to break its agreement. <——- This is the main issue. 
    I feel that Epic is going to lose on these merits alone and Apple will get a speech about possible congressional and state legal issues going forward. 

    Do not start beating on who will win or lose based on the type of questions the Judge is asking and who they are directed at. There plenty of example of the judge asking some very difficult questions to one side only to award them in the end.

    I know they keep bring up the legal issue of antitrust regulations, but those are federal laws, which have to brought forth by the Federal government. Epic and Apple is civil case, claiming Apple some how volidate a contract or had disceptive business practice like bait and switch. The Judge here can not claim Apple violated  antitrust regulations and then say Apple lose because they are some how a monolopy. This was not an Antitrust case. I am curious now to see how this judge goes based on the question being ask, the judge was obviously not happy with the lawyers on either said which drove the questions being asked.
    watto_cobra
  • Reply 9 of 23
    If Apple was forced to compete for payment processing and as a result were only making as much as say Stripe was instead of 30% that would surely be a short term hit but all the additional commerce they would earn by digital content that can't be sold on iOS today would make up a good chunk of that. 
    You are living under a myth that Apple's 30% fee is a payment processing fee, which is clear because you compared Apple to Stripe which is nothing but a payment processor. On the contrary, there are billions of dollars in expenses that Apple has which Stripe doesn't have. Do you realize that? For example, Apple makes development tools that are free to obtain and use.

    Do you want Apple to start charging for all those free services when it loses its 30% exclusive fee? Here are a few examples:

    • Do you want Apple to add a $1 processing fee for every "free" app that's available on the App Store?
    • Do you want Apple to charge developers for its free tools such as Swift and xCode?
    • Do you want Apple to charge each developer for each free API that is used by any app that they develop?
    • Do you want Apple to charge end users each time their app accesses one of the currently free iCloud servers?
    • Do you want Apple to charge developers a processing each time there is an update to their app?

    All these free services, and dozens more, are funded through that 30% cut. If you want to reduce that 30% cut to 3%, then tell me where Apple will raise the prices to cover the $60 billion per year loss. Frankly, I don't mind if Apple choses to eliminate the 30% fee and start charging everywhere else.
    It is a payment processing fee for digital content.  As I've said, I'm fine with the higher commission for apps and anything else that relies on the platform like games.  And stop pretending like the App Store is being run at or close to break even making extracting 30% from both apps and digital content is somehow required for the platform to survive.  We don't know the exact number but best estimates are close to a 70% margin for the App Store so any argument that 30% is required for the App Store to thrive is nonsensical.  

    The difference between how to treat digital content and apps should be self-evident but if you don't see the difference take an example of digital content and think through what Apple says it provides for the 30% and tell me how it applies.  They don't provide discovery - individual eBook titles aren't advertised, searchable SKUs in the App Store.  Apple doesn't provide storage - unlike apps the developer handles that.  Apple doesn't provide distribution - unlike apps the developer handles that.  They don't provide the developer tools to create the digital content file.  So tell me, for an eBook, other than payment processing what specifically does that 30% cover?

    To address your questions - no, I don't think a processing fee is needed for free apps.  But a question the judge had is a good one.  Using the eBook example again - why is the provider of the eBook subsidizing billion dollar corporations like Facebook?  

    Apple does charge developers.  $99 a year.

    As for APIs and iCloud - no I don't think developers should pay for that - there is no need for Apple to double dip.  Those kinds of services are more than covered by the 30-40% margins on iOS hardware devices no different than how they are on Macs which do just fine with alternatives to using the App Store and paying 30%.

    If the end result was Apple lost the 30% on digital content and consumers getting a much better result led to their margins on the App Store going from 70% to say 40-50% why would you consider that a bad outcome?
    shareef777
  • Reply 10 of 23
    XedXed Posts: 1,422member
    If Apple was forced to compete for payment processing and as a result were only making as much as say Stripe was instead of 30% that would surely be a short term hit but all the additional commerce they would earn by digital content that can't be sold on iOS today would make up a good chunk of that. 
    You are living under a myth that Apple's 30% fee is a payment processing fee, which is clear because you compared Apple to Stripe which is nothing but a payment processor. On the contrary, there are billions of dollars in expenses that Apple has which Stripe doesn't have. Do you realize that? For example, Apple makes development tools that are free to obtain and use.

    Do you want Apple to start charging for all those free services when it loses its 30% exclusive fee? Here are a few examples:

    • Do you want Apple to add a $1 processing fee for every "free" app that's available on the App Store?
    • Do you want Apple to charge developers for its free tools such as Swift and xCode?
    • Do you want Apple to charge each developer for each free API that is used by any app that they develop?
    • Do you want Apple to charge end users each time their app accesses one of the currently free iCloud servers?
    • Do you want Apple to charge developers a processing each time there is an update to their app?

    All these free services, and dozens more, are funded through that 30% cut. If you want to reduce that 30% cut to 3%, then tell me where Apple will raise the prices to cover the $60 billion per year loss. Frankly, I don't mind if Apple choses to eliminate the 30% fee and start charging everywhere else.
    ⬆ Imagine going back to being charged $500 for macOS tools and having a separate charge for iOS just to develop. These people really don't think about how the dominos will fall—instead they look at one little aspect without considering how it affects everything else.
    edited May 2021 Beatscanukstormpscooter63NoFliesOnMewatto_cobra
  • Reply 11 of 23
    john gibson said: The difference between how to treat digital content and apps should be self-evident but if you don't see the difference take an example of digital content and think through what Apple says it provides for the 30% and tell me how it applies.  They don't provide discovery - individual eBook titles aren't advertised, searchable SKUs in the App Store.  Apple doesn't provide storage - unlike apps the developer handles that.  Apple doesn't provide distribution - unlike apps the developer handles that.  They don't provide the developer tools to create the digital content file.  So tell me, for an eBook, other than payment processing what specifically does that 30% cover?
    Amazon charges a 30% commission for ebooks priced between $2.99 and $9.99. For any price higher or lower than that range, they charge a 65% commission.
    XedBeatsapplguyradarthekatDogpersonpscooter63watto_cobra
  • Reply 12 of 23
    22july201322july2013 Posts: 2,894member
    If Apple was forced to compete for payment processing and as a result were only making as much as say Stripe was instead of 30% that would surely be a short term hit but all the additional commerce they would earn by digital content that can't be sold on iOS today would make up a good chunk of that. 
    You are living under a myth that Apple's 30% fee is a payment processing fee, which is clear because you compared Apple to Stripe which is nothing but a payment processor. On the contrary, there are billions of dollars in expenses that Apple has which Stripe doesn't have. Do you realize that? For example, Apple makes development tools that are free to obtain and use.

    Do you want Apple to start charging for all those free services when it loses its 30% exclusive fee? Here are a few examples:

    • Do you want Apple to add a $1 processing fee for every "free" app that's available on the App Store?
    • Do you want Apple to charge developers for its free tools such as Swift and xCode?
    • Do you want Apple to charge each developer for each free API that is used by any app that they develop?
    • Do you want Apple to charge end users each time their app accesses one of the currently free iCloud servers?
    • Do you want Apple to charge developers a processing each time there is an update to their app?

    All these free services, and dozens more, are funded through that 30% cut. If you want to reduce that 30% cut to 3%, then tell me where Apple will raise the prices to cover the $60 billion per year loss. Frankly, I don't mind if Apple choses to eliminate the 30% fee and start charging everywhere else.
    It is a payment processing fee for digital content.  As I've said, I'm fine with the higher commission for apps and anything else that relies on the platform like games.  And stop pretending like the App Store is being run at or close to break even making extracting 30% from both apps and digital content is somehow required for the platform to survive.  We don't know the exact number but best estimates are close to a 70% margin for the App Store so any argument that 30% is required for the App Store to thrive is nonsensical.  

    The difference between how to treat digital content and apps should be self-evident but if you don't see the difference take an example of digital content and think through what Apple says it provides for the 30% and tell me how it applies.  They don't provide discovery - individual eBook titles aren't advertised, searchable SKUs in the App Store.  Apple doesn't provide storage - unlike apps the developer handles that.  Apple doesn't provide distribution - unlike apps the developer handles that.  They don't provide the developer tools to create the digital content file.  So tell me, for an eBook, other than payment processing what specifically does that 30% cover?

    To address your questions - no, I don't think a processing fee is needed for free apps.  But a question the judge had is a good one.  Using the eBook example again - why is the provider of the eBook subsidizing billion dollar corporations like Facebook?  

    Apple does charge developers.  $99 a year.

    As for APIs and iCloud - no I don't think developers should pay for that - there is no need for Apple to double dip.  Those kinds of services are more than covered by the 30-40% margins on iOS hardware devices no different than how they are on Macs which do just fine with alternatives to using the App Store and paying 30%.

    If the end result was Apple lost the 30% on digital content and consumers getting a much better result led to their margins on the App Store going from 70% to say 40-50% why would you consider that a bad outcome?
    I believe Apple should be allowed to set its own prices for all its goods and services. You think that someone else should decide how much money Apple should be allowed to charge, but you aren't saying who gets to make that decision. Tell me who it is that gets to determine how much Apple, Google and Samsung get to charge for all their goods and services. The courts? The government? A national referendum?

    You complain about Apple's "70% margin on the App Store" (which is probably true only if you exclude all of Apple's development costs and online services costs) but you don't have any complaints about Epic's 90% margin on its Fortnite store. Why do you complain only about Apple? What is it that makes only Apple a target for you?

    Apple is a big company with big expenses. It gets some of its income from the sale of hardware, some from the sale of software, and some from the sale of online services. It is inevitable that some of these sales figures are used to subsidize other parts of the business. You are calling for Apple to subsidize most of its online services and developer tool expenses from the sale of its hardware instead of from a 30% cut of all apps. Well, Apple could choose to so that, and it would be legal. Apple could also choose to charge a mandatory 30% cut (which is an industry standard) and that would be legal too. I prefer giving Apple the choice of which system to use, whereas you are trying to force one system upon Apple.

    Basically my reasons for believing what I believe is FREEDOM. Apple has the freedom to charge what it wants. It's not a charity. There is lots of competition. People who don't like Apple can go to Android and get all the same software there from third party app stores. Many people argue that CONSUMER FREEDOM should FORCE Apple to make all the changes that certain individuals want. That's not how freedom works. You can't use your freedom to force other people to sell you what you want at the prices you want. That's called communism.
    BeatsDogpersonwatto_cobraDetnator
  • Reply 13 of 23
    john gibson said: The difference between how to treat digital content and apps should be self-evident but if you don't see the difference take an example of digital content and think through what Apple says it provides for the 30% and tell me how it applies.  They don't provide discovery - individual eBook titles aren't advertised, searchable SKUs in the App Store.  Apple doesn't provide storage - unlike apps the developer handles that.  Apple doesn't provide distribution - unlike apps the developer handles that.  They don't provide the developer tools to create the digital content file.  So tell me, for an eBook, other than payment processing what specifically does that 30% cover?
    Amazon charges a 30% commission for ebooks priced between $2.99 and $9.99. For any price higher or lower than that range, they charge a 65% commission.
    That is not their choice.  After Apple got it's hand slapped in the price-fixing lawsuit they helped convince the publishers to implement the agency model to help get around Amazon's attempt to dominate the market by selling books at a loss.  Agency model allows fixes the percentage that goes to them and the percentage that goes to the distributor.  It was a very clever approach as it guarantees that it's impossible for anyone other than Apple to offer eBooks from the big six publishers on iOS leaving Apple Books as the only available store.  

    If some developer created an amazing new app that revolutionizes how to read books their business is stillborn as it's impossible to offer any books from the big six as 70% goes to the publisher and the developer has to give 30% to Apple.  You might suggest they do the Spotify option and just raise the price to cover the Apple Tax. But that doesn't work as Apple doesn't let developers be transparent and bill it as a separate cost,  End result, 70% of the increased price ebook to the publisher, 30% to Apple.  It is impossible for any developer - whether they be large like Amazon or a small business bookstore to offer eBooks on iOS.  
  • Reply 14 of 23
    asdasdasdasd Posts: 5,684member
    If Apple was forced to compete for payment processing and as a result were only making as much as say Stripe was instead of 30% that would surely be a short term hit but all the additional commerce they would earn by digital content that can't be sold on iOS today would make up a good chunk of that. 
    You are living under a myth that Apple's 30% fee is a payment processing fee, which is clear because you compared Apple to Stripe which is nothing but a payment processor. On the contrary, there are billions of dollars in expenses that Apple has which Stripe doesn't have. Do you realize that? For example, Apple makes development tools that are free to obtain and use.

    Do you want Apple to start charging for all those free services when it loses its 30% exclusive fee? Here are a few examples:

    • Do you want Apple to add a $1 processing fee for every "free" app that's available on the App Store?
    • Do you want Apple to charge developers for its free tools such as Swift and xCode?
    • Do you want Apple to charge each developer for each free API that is used by any app that they develop?
    • Do you want Apple to charge end users each time their app accesses one of the currently free iCloud servers?
    • Do you want Apple to charge developers a processing each time there is an update to their app?

    All these free services, and dozens more, are funded through that 30% cut. If you want to reduce that 30% cut to 3%, then tell me where Apple will raise the prices to cover the $60 billion per year loss. Frankly, I don't mind if Apple choses to eliminate the 30% fee and start charging everywhere else.
    Those are a list of really dumb questions. Argument by really dumb questions is a logical fallacy. 

    Also can you explain your $60B a year? That exceeds all service revenue from last year, most of which isn’t IAP. 
    edited May 2021
  • Reply 15 of 23
    radarthekatradarthekat Posts: 3,486moderator
    If Apple was forced to compete for payment processing and as a result were only making as much as say Stripe was instead of 30% that would surely be a short term hit but all the additional commerce they would earn by digital content that can't be sold on iOS today would make up a good chunk of that. 
    You are living under a myth that Apple's 30% fee is a payment processing fee, which is clear because you compared Apple to Stripe which is nothing but a payment processor. On the contrary, there are billions of dollars in expenses that Apple has which Stripe doesn't have. Do you realize that? For example, Apple makes development tools that are free to obtain and use.

    Do you want Apple to start charging for all those free services when it loses its 30% exclusive fee? Here are a few examples:

    • Do you want Apple to add a $1 processing fee for every "free" app that's available on the App Store?
    • Do you want Apple to charge developers for its free tools such as Swift and xCode?
    • Do you want Apple to charge each developer for each free API that is used by any app that they develop?
    • Do you want Apple to charge end users each time their app accesses one of the currently free iCloud servers?
    • Do you want Apple to charge developers a processing each time there is an update to their app?

    All these free services, and dozens more, are funded through that 30% cut. If you want to reduce that 30% cut to 3%, then tell me where Apple will raise the prices to cover the $60 billion per year loss. Frankly, I don't mind if Apple choses to eliminate the 30% fee and start charging everywhere else.
    Excellent overview. And one the judge seems to have missed,

    Judge Gonzalez Rogers offered an alternate solution: signs indicating customers can check out at Nordstrom using various payment methods like Visa or MasterCard. She suggested that App Store payment processing could be something like that.”

    Customers already use various payment options.  I have a Visa card on file with Apple.  Others may have a MasterCard or Amex card on file that they use.. this isn’t the issue.  If it were, then we’d be arguing about allowing payment with PayPal or bitcoin.  The issue is who gets the money that’s paid.  Surely Epic isn’t asking to take on payment processing so that they can after-the-fact remit 30% to Apple. They are asking to be allowed to opt out of the commission altogether.  That’s not reflected in the judge’s alternate solution indicated above.  Which is a big WOW, REALLY? in my book.  Ugh. 
    edited May 2021 pscooter63watto_cobra
  • Reply 16 of 23
    22july201322july2013 Posts: 2,894member
    asdasd said:
    If Apple was forced to compete for payment processing and as a result were only making as much as say Stripe was instead of 30% that would surely be a short term hit but all the additional commerce they would earn by digital content that can't be sold on iOS today would make up a good chunk of that. 
    You are living under a myth that Apple's 30% fee is a payment processing fee, which is clear because you compared Apple to Stripe which is nothing but a payment processor. On the contrary, there are billions of dollars in expenses that Apple has which Stripe doesn't have. Do you realize that? For example, Apple makes development tools that are free to obtain and use.

    Do you want Apple to start charging for all those free services when it loses its 30% exclusive fee? Here are a few examples:

    • Do you want Apple to add a $1 processing fee for every "free" app that's available on the App Store?
    • Do you want Apple to charge developers for its free tools such as Swift and xCode?
    • Do you want Apple to charge each developer for each free API that is used by any app that they develop?
    • Do you want Apple to charge end users each time their app accesses one of the currently free iCloud servers?
    • Do you want Apple to charge developers a processing each time there is an update to their app?

    All these free services, and dozens more, are funded through that 30% cut. If you want to reduce that 30% cut to 3%, then tell me where Apple will raise the prices to cover the $60 billion per year loss. Frankly, I don't mind if Apple choses to eliminate the 30% fee and start charging everywhere else.
    Those are a list of really dumb questions. Argument by really dumb questions is a logical fallacy. 

    Also can you explain your $60B a year? That exceeds all service revenue from last year, most of which isn’t IAP. 
    I guess I should have quoted the source for that $60B/year. Read the article below. It says that "Apple's revenue" from the App Store was $64B last year. If you want to argue that that's before the 30% cut, then do so. But that's now how I read it. If the article meant that $64B was gross sales and not Apple revenue, then Apple's gain would have been about $20B instead. Either way, my point is valid. That's a lot of money to lose, and Apple would probably want to recoup that money using some of the ideas I listed above which you called dumb. You didn't say why they are dumb questions. Would you like to contribute something useful to the conversation by explaining your point?
     
    https://www.theverge.com/2021/1/8/22220873/apple-2020-app-store-revenue-60-billion-dollars
    radarthekatwatto_cobra
  • Reply 17 of 23
    larryjwlarryjw Posts: 906member
    I’m not understanding the anti-steering arguments.

    Every app entry in the App Store has a link to the developers website. From their website, the developer is free to make any information they want available, and, of course, get the user to signup for offers and alternative platform options.

    Whatever anti-steering provisions Apple requires of developers, it must be of the most narrow of restrictions in fact. 
    watto_cobra
  • Reply 18 of 23
    hammeroftruthhammeroftruth Posts: 1,167member
    maestro64 said:
    A few days ago people were lambasting the judge for asking hostile questions to Tim Cook, concluding she was an idiot. I warned people don't read too much into that. Today she asked Epic some equally hostile questions. So you see, hostile questions from a judge aren't a good indicator of which way she will rule.
    I wouldn’t exactly call them hostile. They were direct and cut thru any marketing speak to get down to behavior and the effects of the behavior. 

    I do like that she hinted that this is not the venue to try to force a change from Apple, since the lawsuit addresses Apple’s actions after Epic broke their agreement and not Apple’s actions forced Epic to break its agreement. <——- This is the main issue. 
    I feel that Epic is going to lose on these merits alone and Apple will get a speech about possible congressional and state legal issues going forward. 

    Do not start beating on who will win or lose based on the type of questions the Judge is asking and who they are directed at. There plenty of example of the judge asking some very difficult questions to one side only to award them in the end.

    I know they keep bring up the legal issue of antitrust regulations, but those are federal laws, which have to brought forth by the Federal government. Epic and Apple is civil case, claiming Apple some how volidate a contract or had disceptive business practice like bait and switch. The Judge here can not claim Apple violated  antitrust regulations and then say Apple lose because they are some how a monolopy. This was not an Antitrust case. I am curious now to see how this judge goes based on the question being ask, the judge was obviously not happy with the lawyers on either said which drove the questions being asked.
    I don’t beat, but I would bet that Epic does lose this case just based on Judge Gonzales repeated statements to Epic’s counsel that they themselves created the issue that got them kicked off the App Store. 

    Epic’s points while interesting, do not validate their behavior to break their contract with Apple and shut them out of the money they agreed on. 

    Epic may be playing the long game here and know that they will have to come up with a better argument when they appeal.  
    watto_cobra
  • Reply 19 of 23
    danoxdanox Posts: 837member
    If Apple was forced to compete for payment processing and as a result were only making as much as say Stripe was instead of 30% that would surely be a short term hit but all the additional commerce they would earn by digital content that can't be sold on iOS today would make up a good chunk of that. 
    You are living under a myth that Apple's 30% fee is a payment processing fee, which is clear because you compared Apple to Stripe which is nothing but a payment processor. On the contrary, there are billions of dollars in expenses that Apple has which Stripe doesn't have. Do you realize that? For example, Apple makes development tools that are free to obtain and use.

    Do you want Apple to start charging for all those free services when it loses its 30% exclusive fee? Here are a few examples:

    • Do you want Apple to add a $1 processing fee for every "free" app that's available on the App Store?
    • Do you want Apple to charge developers for its free tools such as Swift and xCode?
    • Do you want Apple to charge each developer for each free API that is used by any app that they develop?
    • Do you want Apple to charge end users each time their app accesses one of the currently free iCloud servers?
    • Do you want Apple to charge developers a processing each time there is an update to their app?

    All these free services, and dozens more, are funded through that 30% cut. If you want to reduce that 30% cut to 3%, then tell me where Apple will raise the prices to cover the $60 billion per year loss. Frankly, I don't mind if Apple choses to eliminate the 30% fee and start charging everywhere else.
    It is a payment processing fee for digital content.  As I've said, I'm fine with the higher commission for apps and anything else that relies on the platform like games.  And stop pretending like the App Store is being run at or close to break even making extracting 30% from both apps and digital content is somehow required for the platform to survive.  We don't know the exact number but best estimates are close to a 70% margin for the App Store so any argument that 30% is required for the App Store to thrive is nonsensical.  

    The difference between how to treat digital content and apps should be self-evident but if you don't see the difference take an example of digital content and think through what Apple says it provides for the 30% and tell me how it applies.  They don't provide discovery - individual eBook titles aren't advertised, searchable SKUs in the App Store.  Apple doesn't provide storage - unlike apps the developer handles that.  Apple doesn't provide distribution - unlike apps the developer handles that.  They don't provide the developer tools to create the digital content file.  So tell me, for an eBook, other than payment processing what specifically does that 30% cover?

    To address your questions - no, I don't think a processing fee is needed for free apps.  But a question the judge had is a good one.  Using the eBook example again - why is the provider of the eBook subsidizing billion dollar corporations like Facebook?  

    Apple does charge developers.  $99 a year.

    As for APIs and iCloud - no I don't think developers should pay for that - there is no need for Apple to double dip.  Those kinds of services are more than covered by the 30-40% margins on iOS hardware devices no different than how they are on Macs which do just fine with alternatives to using the App Store and paying 30%.

    If the end result was Apple lost the 30% on digital content and consumers getting a much better result led to their margins on the App Store going from 70% to say 40-50% why would you consider that a bad outcome?

    The actual cost per developer for all the goodies Apple provides is probably closer to 2 to 3 thousand dollars per year on the open market and not the stupidly low 99 dollars per year. All those place holder Apps within the AppStore would be gone if Apple charged the true rate.
    Dogpersonwatto_cobra
  • Reply 20 of 23
    22july201322july2013 Posts: 2,894member
    danox said:
    If Apple was forced to compete for payment processing and as a result were only making as much as say Stripe was instead of 30% that would surely be a short term hit but all the additional commerce they would earn by digital content that can't be sold on iOS today would make up a good chunk of that. 
    You are living under a myth that Apple's 30% fee is a payment processing fee, which is clear because you compared Apple to Stripe which is nothing but a payment processor. On the contrary, there are billions of dollars in expenses that Apple has which Stripe doesn't have. Do you realize that? For example, Apple makes development tools that are free to obtain and use.

    Do you want Apple to start charging for all those free services when it loses its 30% exclusive fee? Here are a few examples:

    • Do you want Apple to add a $1 processing fee for every "free" app that's available on the App Store?
    • Do you want Apple to charge developers for its free tools such as Swift and xCode?
    • Do you want Apple to charge each developer for each free API that is used by any app that they develop?
    • Do you want Apple to charge end users each time their app accesses one of the currently free iCloud servers?
    • Do you want Apple to charge developers a processing each time there is an update to their app?

    All these free services, and dozens more, are funded through that 30% cut. If you want to reduce that 30% cut to 3%, then tell me where Apple will raise the prices to cover the $60 billion per year loss. Frankly, I don't mind if Apple choses to eliminate the 30% fee and start charging everywhere else.
    It is a payment processing fee for digital content.  As I've said, I'm fine with the higher commission for apps and anything else that relies on the platform like games.  And stop pretending like the App Store is being run at or close to break even making extracting 30% from both apps and digital content is somehow required for the platform to survive.  We don't know the exact number but best estimates are close to a 70% margin for the App Store so any argument that 30% is required for the App Store to thrive is nonsensical.  

    The difference between how to treat digital content and apps should be self-evident but if you don't see the difference take an example of digital content and think through what Apple says it provides for the 30% and tell me how it applies.  They don't provide discovery - individual eBook titles aren't advertised, searchable SKUs in the App Store.  Apple doesn't provide storage - unlike apps the developer handles that.  Apple doesn't provide distribution - unlike apps the developer handles that.  They don't provide the developer tools to create the digital content file.  So tell me, for an eBook, other than payment processing what specifically does that 30% cover?

    To address your questions - no, I don't think a processing fee is needed for free apps.  But a question the judge had is a good one.  Using the eBook example again - why is the provider of the eBook subsidizing billion dollar corporations like Facebook?  

    Apple does charge developers.  $99 a year.

    As for APIs and iCloud - no I don't think developers should pay for that - there is no need for Apple to double dip.  Those kinds of services are more than covered by the 30-40% margins on iOS hardware devices no different than how they are on Macs which do just fine with alternatives to using the App Store and paying 30%.

    If the end result was Apple lost the 30% on digital content and consumers getting a much better result led to their margins on the App Store going from 70% to say 40-50% why would you consider that a bad outcome?

    The actual cost per developer for all the goodies Apple provides is probably closer to 2 to 3 thousand dollars per year on the open market and not the stupidly low 99 dollars per year. All those place holder Apps within the AppStore would be gone if Apple charged the true rate.
    That's a reasonable guess. That would work out to about $5B/year. I would guess that's not enough to cover the whole 30% fee, should that fee be eliminated, but at least you're in the general ballpark. I don't see why that would stop placeholder apps, though. Evil developers could just share the cost of the account and continue to provide placeholder apps.
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