Epic v. Apple, Day 16
Nick Statt (tweet):
Apple hoped to establish the market as the entire gaming market, in which the App Store is just one complete digital marketplace among many and in which consumers substitute purchases on one platform for another. In that context, it’s clear Apple doesn’t have a monopoly.
Epic lawyer Gary Bornstein pushed for more. Epic wants the market to be defined as the iOS app distribution market, over which it has argued Apple has an illegal monopoly that results in higher prices and reduced competition. As evidence, Bornstein said Apple feels no pressure to lower its prices, that there’s a lack of innovation in the store, and that in the event of a price increase, it’s unlikely developers would leave the iOS platform.
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In one notable exchange, Gonzalez Rogers rejected the notion that anti-steering rules are in place to improve transaction “efficiency,” as Moye tried arguing. “[Tim] Cook conceded that it’s a method of being compensated for intellectual property,” the judge said. It was a strong example of Cook’s frank Friday testimony undermining the Apple legal team’s more sugar coated justifications behind its iOS restrictions.
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Judge Gonzalez Rogers ended the session after a little more than three hours of courtroom debate, saying she anticipates a ruling to take a considerable amount of time but declining to give a firm date.
Elizabeth Lopatto (tweet, Adi Robertson, Leah Nylen):
Throughout the trial, Epic’s general strategy appears to have been to stuff the record as full of evidence as possible — just in case it’s needed on the inevitable appeal. To do that, Epic sacrificed telling a coherent story.
Apple, on the other hand, was on brand. It had a clear story and it spent the entire trial hammering it home: Apple controls the App Store because the alternative would be a security and privacy nightmare.
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Judge Yvonne Gonzalez Rogers pointed out that it was possible Epic’s proposed remedy — allowing other app stores onto the iPhone and allowing side-loading of apps — destroyed consumer choice. After all, she suggested, people are generally aware of Apple’s tightly controlled ecosystem and are choosing it on purpose. Besides, she noted, the cost of apps in Google’s store was roughly the same.
Well, Epic’s Bornstein said, that’s because it’s a duopoly.
At the conclusion of the trial, Judge Rogers said that she expects that her verdict will take quite some time, but she did not provide a concrete date. It could be several weeks before we hear about the Epic Games v. Apple trial again, and it’s quite likely that any decision will be appealed, so this is a lawsuit that could carry on for months to come.
Both sides are now trying to figure out what the hell Apple actually means when it says you can’t tell iOS users about cheaper in-app purchase options outside the App Store using a sign-up email.
Everyone seems to be confused because there are different rules for different apps.
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There is now a debate over whether anyone has complained about anti-steering.
It’s literally the entire focus of the EU’s antitrust investigation into Apple, instigated by Spotify… which doesn’t let you sign up for Spotify Premium on iOS anymore.
Judge: “If the relevant market here includes developer-side competition, so far there doesn’t seem to be anything that is in the market itself that is pressuring Apple to compete for developers.”
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Swanson says the commissions now are de facto lower than they were under physical distribution. “It’s not a monopoly price. It’s a competitive price.”
Bornstein describes Apple’s argument as “we’re doing a really good job, your honor, please let us continue to do a really good job,” and “we’re the benevolent overlord of this ecosystem.” But “that is not a defense under the antitrust laws."
The Judge had a QA with Apple and Epic’s lawyers today, and her questions and comments seem favorable to Apple.
However, Apple made a very worrisome argument that using it’s APIs are akin to licensing their intellectual property, and developers owe them a cut simply for that use
It’s a very strange argument that everyone should be kissing Apple’s feet for releasing Metal instead of… I dunno… QuickDraw 3D? And that because of that they should get a 30% cut.
There’s a lot of fact-twisting, misdirection and dishonest arguments coming from Apple’s lawyers in closing in the Epic case, which contrasts starkly with Epic’s factual points. I feel like if Apple were on the right side of history here, they wouldn’t have to lie & manipulate
But the iPhone doesn’t let you execute whatever program you see fit to run. It only executes programs that Apple has approved, and if they don’t approve it, you can’t run it. That might sound obvious, but it’s a startling reversal of computing history.
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The only loophole here in the web. Apple hasn’t (yet?) taken to censor what parts of the web you can access using your pocket computer, but they could. Tomorrow. Because one of the categories that Apple doesn’t allow any competition within is browsers!!
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Can you imagine trying to submit an app for a new system called the web today? If the web hadn’t existed prior to the iPhone, there’s no way in hell Apple would ever have approved a browser with unfettered, unfiltered access today. No way.
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It’s a computer. It’s my computer. Whether it fits in my pocket or sits on my desk just doesn’t matter.
I think there is a strong chance that Apple prevails, for reasons I’ll explain below, but that doesn’t mean the trial has been waste of time: it has cast into stark relief the different arguments that pertain to the App Store, and not all of them have to do with the law.
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The most important case for Apple’s defense, though, is 2004’s Verizon v. Trinko, which established and/or reiterated several important precedents that support Apple’s position, even if Apple were held to be a monopolist.
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This does, I would note, put Apple’s antitrust conviction in the ebooks case in considerably more dubious light: Apple was trying to shift the industry away from a wholesale model to an agency model, which is the exact sort of model that doesn’t work with the App Store. That the company was offering its own alternative — iBooks — makes it worse, just as the introduction of Apple Music made the application of App Store rules to Spotify particularly problematic.
What is also worth acknowledging, though, are the kinds of businesses that never get off the ground.
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What the company no longer admits, though, is that developers did a lot for Apple too. They made the iPhone far more powerful and useful than Apple ever would have on its own, they pushed the limits on performance so that customers had reasons to upgrade, and even when Android came along iPhone developers never abandoned the platform. Sure, they had good economic reasons for their actions, but that’s the point: Apple had good economic reasons for building out all of those APIs and developer tools as well.
I am not sure if I wrote this publicly, but in discussions with friends, I have long maintained that Epic is a bad plaintiff in this case. It is hard to sympathize with a developer that is suing over a single-digit percentage of its revenues because of a contract dispute that it initiated in bad faith, and where it is clear that it hopes to develop its own platform that will have similarly stringent rules. But this trial has surely put a big dent in Apple’s reputation. If you thought before that Apple was an overly controlling corporate giant that squeezed money at every possible opportunity, its executives’ testimony reinforced that. Even if you are comfortable with Apple’s business case, Tim Cook’s cold remarks must have shaken some of that confidence.
In a little under two weeks, WWDC will begin. Like last year, I am sure Cook and Federighi are relieved they will not have to face developers in person. That would be awkward.
In his opening keynote for Microsoft Build, Nadella takes a slight swipe at Apple
Previously:
- Epic v. Apple, Day 15
- What It Was Like to Sell Apps Online in 2003
- EU and Australia on App Store Antitrust
- Apple to Pay $450 Million E-Book Settlement
Update (2021-06-02): Russell Brandom:
Both images and audio from the proceedings were tightly controlled (as is often the case in federal courtrooms), so the only images came from courtroom artist Vicki Behringer, who saw much of the trial from an assigned seat to the right of the jury box. We invited Behringer to share eight of her favorite sketches from the trial, showing off both her skill as an artist and her unique perspective on the case.
Call this scourge what it plainly is, the Apple tax — the billions of dollars a year that Apple collects from large swaths of the technology industry for the privilege of offering paid apps and in-app purchases to iPhone and iPad users.
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But for how many years should Apple get to milk billions of dollars of almost pure profit from an invention first released back when George W. Bush was president?
The 30% is certainly a problem, but the bigger issue the products that, because of the App Store’s restrictions and review process, can’t be built, aren’t allowed to be distributed, or must be made worse.
Update (2021-06-04): Nilay Patel:
Here’s our complete (and fun!) video recap of the Epic v. Apple trial[…]
9 Comments RSS · Twitter
"it was possible Epic’s proposed remedy — allowing other app stores onto the iPhone and allowing side-loading of apps — *destroyed* consumer choice. After all, she suggested, people are generally aware of Apple’s tightly controlled ecosystem and are choosing it on purpose"
The elephant in the room is that it's not all that easy to transition between platforms, unless developers have undertaken literally double the amount of work to build all your apps separately for each platform already, and maybe not even then.
Gas station X sells fuel X, and gas station Y sells fuel Y. If you don't like how your gas station treats you, just sell all your cars and buy new ones, and then you can use the other gas station! And if that one is just as bad, well, we tried *two* things. What else could we possibly do?
Because clearly, choosing either X or Y means full approval of everything that that company stands for.
I've long felt Michael's blog was the best source for what was happening in the Apple world and this trial has only reinforced that feeling. The fallout from this trial will likely affect everyone but if you relied on the usual suspects in the Apple world you likely wouldn't know anything was happening. There is Michael, then daylight, then everyone else. It's actually pretty sad that a Mac developer who does this in his spare time can so comprehensively outclass the Apple pundits who do this for a living. Thank you Michael!
> I have long maintained that Epic is a bad plaintiff in this case
Where is the 'good plaintiff' that has the money to stand up to Apple Legal?
> it is clear that [Epic] hopes to develop its own platform that will have similarly stringent rules
Epic is not claiming that the Epic Games Store should be the sole software distribution mechanism for any platform they're on.
> Epic is not claiming that the Epic Games Store should be the sole software distribution mechanism for any platform they're on.
Perhaps not that exact circumstance. But they would have accepted a special deal from Apple, per Tim Sweeney's own sworn testimony, which means it's absurd to think that this tantrum they're throwing is anything other than entirely about them, their desire for money, and their dream of world domination.
They're also very intent on foreclosing consumer choice by throwing money at developers to only release their game on EGS, at least for a certain amount of time (usually a year). And the amount of games they actually let into the store in the first place is miniscule.
And the idea of Epic criticizing Apple's lack of "innovation" in anything is absolutely absurd. They launched a store that had no cart, no wishlist, no reviews, US currency only, basically nothing except HTML listing pages and a buy button. In the YEARS since that launch, they've gotten around to fixing only a handful of those things, all of which are basically table stakes for an ecommerce website, let alone something purporting to be a distribution platform, in the late 2010s/early 2020s. If they actually gave a shit about anything except Epic making obscene amounts of money (as opposed to "the little developers" and "consumers" getting something out of it) they would have launched with a store that didn't feel like it had been ripped from the Internet Archive circa 1995.
They "borrowed" the formula for their only cash cow game, shoehorning it into the confines of a completely unrelated game that had been in development hell for SEVEN YEARS, and ended up completely screwing over the customers that had supported that game during that time (part of which it was in a closed public alpha). Fortnite: Save the World went from a AAA release, to a freemium game where you had to buy it in "preview" but everybody later would get it for free, to just straight-up on life support without ever implementing like half the stuff they were supposed to during preview. And the people who supported it by buying those preview editions, some of which ran into the hundreds of dollars, shortly before Fortnite battle royale became a thing get nothing.
The contract breach they initiated for literally no reason other than publicity was not the first time they were a shitty company, and everything they say should be looked at assuming it's a lie until proven otherwise.
We could have cut the entire trial short, because that’s really the only question that matters: What is the market?
If iOS apps are their own independent market (which doesn’t make sense to me) then Apple has a monopoly and there is no way Apple can do half the things they do.
If mobile apps are one market, there is a duopoly and there probably will be some restrictions and regulations in the US. In the EU Apple‘s market share is small enough that they could get away with it.
If the market is all computers and software, well, there‘s really little justification for restrictions.
I think we can all agree that Epic is a shitty company. What I don't quite get is why this matters. Epic being shitty doesn't make Apple any better, and it has no bearing at all on which party is right. In fact, the obsession with how shitty Epic is that the Apple media has developed is pretty good evidence that Epic is probably in the right here. Otherwise, the Apple media would spend more energy explaining how wrong Epic is, instead of how shitty Epic is.
> [Epic are] also very intent on foreclosing consumer choice by throwing money at developers to only release their game on EGS, at least for a certain amount of time (usually a year).
A game bought on EGS can be added easily to Steam's launcher or any other game management app.
If the issue is about consumer choice on where to purchase these games, well, timed exclusives are a common practice in the game industry to fund development. Apple do the same thing with Apple Arcade. If this state of affairs is unpalatable, please advocate upstream for things like Universal Basic Income so game developers don't have to be in this situation where they have to sign exclusives to keep a roof over their heads while making their software.
It's worth pointing out that a small portion of Epic's Fortnite windfall goes into their megagrant program, which does not require the recipient to use EGS. It would be nice if Apple had a similar grant program to help foster quality apps, but it's clear from their testimony that they feel developers should be thankful for the opportunity to pay Apple a commission to use their APIs.
Finally, for all of Epic's focus on making money, they've (perhaps unintentionally) made more of a difference in this space than Apple, despite being much smaller than Apple. EGS launched with a 12% cut when everyone else was at 30%. After the lawsuit, Apple introduced the 15% small business program (which is opt-in and has gotchas), then Google announced going down to 15% for similar situations, now Microsoft are reducing their cut on PC to 12%.
All that said, I do agree that Epic is doing this for their own bottom line. I would guess that most antitrust cases have been about how anti-competitive behaviors interfere with other companies' bottom lines. And yet, despite Epic's motives, their store's terms and the megagrant program make Apple's behaviors look even more selfish than Epic's.
@remmah, I am sure once I more thoroughly read your comment I will have other responses. One thing that stuck out to me, though, is the idea that their exclusivity payments are “keeping a roof over [developers’] heads” while they complete development. Perhaps that applies in some cases, but I’m guessing not most. (Also, the fact that the rest of the industry does it doesn’t make it consumer-friendly. Part of the toxicity in the gaming community is the fanboi mentality of “my console is superior” because of whatever exclusives.)
The very first thing that went that way was a game in the very popular, very successful Metro series that was so close to release that it actually had already been accepting preorders on Steam. IIRC they ended up having to create a special build for Steam to avoid refunding all the preorders and doing even more damage to their reputation than they did by signing the agreement in the first place.
Borderlands 3 is a little game that was in absolutely no danger of not being released, seeing as it’s also a massively popular franchise ultimately owned by one of the biggest publishers in the business.
Ooblets, which was certainly pitched as exactly the heartwarming story you describe, was self-funded but in no danger of not releasing, and had to screw over a whole bunch of Patreon patrons who were expecting the very heavily implied Steam release that was scrapped when they signed the deal.
Like I don’t have the list in front of me to see which ones were actually legit “we couldn’t have released without that” but to my recollection the proportion of those is not very large.
> the fact that the rest of the industry does it doesn’t make it consumer-friendly
Yeah, I'm not saying it's right. I too would prefer to live in a world without exclusives, because I would prefer to live in a world where rich corporations don't have influence over what gets made and what gets distributed widely (and therefore enters mainstream culture). However, such a world would require many fundamental changes to how our economy and society work. Do you advocate for those changes? If so, that's great. If not, the opportunity is there to start focusing on some of the upstream causes of our discontent.
There is a lot more I could say about what we're discussing, but to bring it back to the debate raised as part of this lawsuit: Epic's EGS deals involve timed payment processor exclusivity for games on systems where the developer is not required to use Epic's services. Apple are defending their absolute and perpetual control over payment processing and distribution for all software on an important computing and communications platform. Apple's behavior is far more concerning from an anti-competitive standpoint. A duopoly of smartphone platforms is precarious enough: Giving Google a monopoly on smartphone platforms that can run software of one's own choosing is an even worse situation to be in.
