Apple CEO Tim Cook testifies at Epic Games trial
Tim Cook, CEO of Apple Inc., center, arrives at U.S. District Court in Oakland, Calif. On Friday, May 21, 2021.
Nina Riggio | Bloomberg | Getty Images
Apple CEO Tim Cook was questioned by Judge Yvonne Gonzalez Rogers on Friday about Apple’s App Store business model at the end of his testimony in the Epic Games lawsuit against Apple.
The interrogation provided a glimpse into Judge Rogers ‘thinking before she decided whether Epic Games’ argument is strong enough to force Apple to allow it to install alternative app stores on the iPhone. and avoid the 30% App Store fee on in-app purchases.
Rogers asked Cook what his problem was in allowing iPhone users to choose lower fees, especially for games. Cook said users have a choice between iPhones or Android devices.
She then asked if Apple had a problem providing users with information to get the same in-app purchases through a web browser, bypassing Apple’s 30% fee, suggesting a compromise in which Apple would allow a company like Epic Games. to bind the users of the application. to a web browser to complete transactions, instead of forcing them to use Apple’s built-in purchasing mechanism.
“The gaming industry seems to generate a disproportionate amount of money for the intellectual property you give them and everyone else,” Rogers told Cook. “Basically it’s almost like they’re subsidizing everyone.”
Cook said Apple faces stiff competition for developers and users.
“You don’t have competition in these in-app purchases, however,” Rogers replied.
Rogers also expressed doubts that Apple’s Small Business program, which cuts App Store fees in half for small developers, was done out of concern for small businesses during the Covid pandemic, as Cook testified on Friday.
“It seems to be the result of pressure from the investigations, from the lawsuits,” Rogers said.
Cook said lawsuits were in his head, but what sparked the program was concern for small businesses during Covid.
Rogers noted that she had seen a poll that found 39% of Apple developers are unhappy with the App Store.
“It doesn’t seem to me that you feel any pressure or competition to actually change the way you act to address developer concerns,” Rogers said.
Cook disagreed and said Apple was “shaking up the place for developers.”
Friday was the first time Cook had testified in court, he said.
The three-week trial will end on Monday, but Judge Rogers warned this week that it could take weeks or months before she makes a decision. After that, the dispute will likely be appealed, she said.
Before Cook was interviewed by Rogers, he testified on Friday that Apple faces stiff competition in smartphones and in the United States, the iPhone has only “30%” of the market share. Internationally, the iPhone has around 15% of the market share, Cook said.
The market share figures Cook cited is a rare example of Apple discussing the market share of its most important product, the iPhone, in an attempt to say that it does not dominate the smartphone market.
“There’s a whole roster of different competitors on the handsets. It’s extremely competitive,” Cook said.
The US share of Apple cited by Cook is lower than many external estimates. For example, a recent report by Counterpoint Research has set it between 40% and 65% depending on the quarter since 2019.
Apple argued that controlling its App Store, the only way for consumers to install software on iPhones, is critical to the company’s security and privacy promises to its users, and an important distinguishing feature. in a competitive smartphone market.
“We could no longer make the promise of privacy, safety and security” if Epic Games wins, Cook said, saying the App Store would be a “toxic mess” without Apple’s rules and policies. Epic is fighting in court.
Epic Games argues that security is an excuse to extract fees and control what software makers do, and that Apple could safely open its platform to competing app stores.
Cook mentioned Samsung, Vivo, Oppo, Huawei and Google as handset competitors, all of which use some version of Android from Google. He said Apple also faces competition from other app stores, including Google Play, and consoles like Microsoft Xbox and Sony PlayStation.
Apple CEO Tim Cook testifies at Epic Games trial
Asked by lawyers for Epic Games, Cook declined to answer the question of whether Apple’s iPhone competes with Google’s Android in the operating systems market.
“Customers don’t buy operating systems. They buy devices,” Cook said.
Cook said Apple uses surveys to find out if iPhone users are switching to Android devices. “Making an effort to get Android users to switch to iPhone is a very important task for us,” said Cook.
Cook said on Friday that Epic Games’ decision last year to bypass Apple’s 30% in-app purchase fee on Fortnite, its shooter, was “malicious.” Apple then deleted the app from the App Store.
Much of Cook’s testimony on Friday surrounded an internal, non-public Apple document that was sent to him outlining the profitability trends of various Apple divisions, including the App Store. Epic’s attorneys have said he has shown Apple’s App Store to be very profitable, trying to bolster its argument that Apple is using its control to increase its own profits.
Cook said the document was not “fully loaded” with all the expenses Apple spends on the App Store and that it was a “benchmarking” exercise. He said he had an “idea” of the profitability of the App Store, but did not provide a figure. An accountant hired by Epic Games previously testified that Apple had an operating profit margin of 77.8% in 2019.
Lawyers for Epic Games also asked Cook about Apple’s deal with Google as the default search for the iPhone browser, which was estimated to $ 10 billion a year by a Congress report citing a Wall Street research note. Cook said he couldn’t remember how much Google was paying.
Cook was also asked by Apple lawyers about iMessage, Apple’s messaging program built into iPhones and exclusive to Apple products. Cook said he doesn’t think the lack of iMessage on Android has kept iPhone users from switching to competitors.
Cook dismissed concerns that people switching from iPhone to Android device could miss text messages, saying “you can easily turn off your iMessage.”