Early in his testimony for Epic Games v. Apple on Friday, Apple CEO Tim Cook described his company’s mission: “To make the best products in the world that really enrich people’s lives.” For the rest of the day, Epic’s lawyers sought to demonstrate that what Apple most wanted to enrich was itself, at the expense of consumers.
What does greed prove? For the past three weeks, Epic has doubled down on its allegations of Apple’s monopoly power over the iOS ecosystem. The Fortnite publisher is desperate to show that Apple’s core is rotten and that its business practices are too.
Apple is worth over $2 trillion today, and one reason is the structure of that ecosystem: It manufactures and owns Apple devices, the iOS operating system, the Apple App Store, and the payment system consumers use for those apps. In defending itself from Epic’s lawsuit, Apple insists that its iron grip on the iOS market isn’t a simple play for massive profits; rather, it’s all in the service of keeping its customers safe, its user experience simple, and its developers happy. As Apple’s highest ambassador, Cook had a big job ahead of him.
Cook spent today on the defensive, fielding pointed questions both from Epic’s lawyers and US District Judge Yvonne Gonzalez Rogers. A key issue in the case has been the commission Apple collects from the App Store, up to 30 percent on in-app digital purchases. In its lawsuit, Epic is framing that 30 percent commission as a “monopoly tax.” Just before Cook took the stand, Judge Rogers said, “The lack of competition on the 30 percent is something that is troubling.”
Digital marketplaces have taken 30 percent commissions for decades. Cable companies charged it for pay-per-view movies in the 1990s. In the mid-2000s, Apple convinced record labels that it deserved a 30 percent commission from song sales on the iTunes Store. The labels, desperate to cut down on rampant online music piracy, went along. Today, Apple makes a similar argument for its App Store commission—only instead of fighting off Napster, it’s iOS’s relatively low rate of malware infection.
The commission is standard in games, too. Now that the lion’s share of video game sales have migrated online, digital game marketplaces like Steam, the Nintendo Online Store, the Microsoft Store on Xbox and the PlayStation Store all charge 30 percent on game sales.
Epic has been crusading against the 30 percent commission for years, part of its long quest to paint itself as gaming’s good guy. In 2018, it launched the Epic Games Store, which took just a 12 percent cut from game sales, leaving developers with a bigger piece of the pie. Microsoft followed suit this year, but just with its PC app. “We want to make sure that we’re competitive in the market,” said Microsoft vice president Sarah Bond at the time.
Epic argues that game companies like Sony and Nintendo are different from Apple, even though they’re also reaping the benefits of total hardware, software, and marketplace synergy.
“There’s a rationale for this on console where there’s enormous investment in hardware, often sold below cost, and marketing campaigns in broad partnership with publishers,” Epic CEO Tim Sweeney said in an interview with GamesIndustry.biz. During the Epic versus Apple trial, Xbox business development vice president Lori Wright testified that Microsoft sells its Xbox consoles at a loss. And if it did not charge a commission on the Xbox store, it would lose money on Xbox systems. Sony sells its PlayStations at a loss, too. Epic has also revealed that its Epic Games Store is not yet profitable, in part because it is new, and in part because the company has paid massive sums to game developers for licenses to offer free games.