Things Learned from the Epic Games v. Apple Lawsuit
Even though it’s almost certain to be appealed, we’re curious to see the outcome of the legal battle between Fortnite maker Epic Games and Apple over App Store policies. In the meantime, the trial has revealed reams of internal communications that shed some insight into Apple’s business (for background on the dispute, see “App Store Wars: Facebook vs. Apple, Publishers vs. Apple, Apple vs. Brave,” 17 December 2020). The Verge has compiled some of the most interesting bits:
- Apple keeps iMessage exclusive to its devices to sell more iPhones.
- Apple went out of its way to get Netflix to keep using in-app purchases for subscriptions.
- Apple makes a huge profit from the App Store but denies knowing that it does.
- Apple may be slow to support modern Web app technologies on the iPhone to maintain control over iOS for security reasons.
- Apple is deeply concerned about malware on the Mac and seems inclined to lock macOS down much as iOS and iPadOS are.
- Epic Games CEO Tim Sweeney has been lobbying Tim Cook to open up iOS for years.
One document caught our interest for personal reasons. In January 2016, Phil Schiller forwarded Jason Snell’s first Six Colors Apple report card to other executives, featuring comments from Adam Engst and Josh Centers. At least Apple sees some of what we write and say, even if there’s seldom any indication that the company has acted on any of our comments.
Phil Schiller forwards a Six Colors report card to other Apple execs, highlighting App Store/developer comments from @jamesthomson, @rgriff, @Ihnatko, @gruber, and Katie Floyd
January 9, 2016 pic.twitter.com/o31lOV64dk
— Internal Tech Industry Emails (@TechEmails) May 27, 2021
It seems like you’ve taken Verge’s assertions as factual, when many of them are speculation and opinion. For example, “huge profit” is based on a third-party analysis provided by Epic. Additionally, “out of its way” is an arguable characterization of what what was revealed.
I agree that the profits Epic claims Apple makes on App Store sales are unreliable. Here’s what was stated at the trial:
“Apple says it doesn’t allocate costs for the App Store, and that internal documents discussing revenue for the marketplace typically don’t include expenses. That means, according to the company, any margins or profits don’t show the entire picture. In an expert witness testimony on behalf of Apple, Richard Schmalensee, a Massachusetts Institute of Technology economics expert, said that Barnes’s “estimate of the App Store’s operating margin is unreliable because it looks in isolation at one segment of the iOS ecosystem in a way that artificially boosts the apparent operating margin of that segment.” He added that “any accounting measure of the App Store’s stand-alone profitability is also arbitrary and thus unreliable as an indicator of anything.”
Epic is a multi billion dollar company that is owned in part by Tencent, an even bigger multi billion dollar that recently company dollar company that recently slipped out of the trillion dollar valuation club:
Apple built the App Store from scratch and surely invests a lot in keeping it running safely and securely. I think it’s safe to assume that the App Store’s operating costs are very significant. It costs a lot of money to vet apps, maintain servers and systems, handle payments, etc. And if a developer doesn’t like the App Store, they still have Google, PlayStation, Xbox.
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