Apple CEO Tim Cook testifies in Epic Games trial

Tim Cook, Chairman of the Board of Directors of Apple Inc., Center, arrives at the U.S. District Court in Oakland, California on Friday, May 21, 2021.

Nina Riggio | Bloomberg | Getty Images

Apple CEO Tim Cook was asked on Friday by judge Yvonne Gonzalez Rogers at the end of his testimony in the Epic Games against Apple trial about the Apple App Store’s business model.

The poll previewed Rogers ‘thinking before deciding whether Epic Games’ argument is strong enough to force Apple to install alternative app stores on the iPhone and pay the app store’s 30% fee for in-app Avoid purchases.

Rogers asked Cook what his problem was with allowing iPhone users to choose a lower fee, especially for games. According to Cook, users have a choice between iPhones or Android devices.

She then asked if Apple was having a problem giving users information to get the same in-app purchases through a web browser, bypassing Apple’s 30% fee, and suggested a compromise where Apple would give one Companies like Epic Games would allow app users to link to a web browser to conduct transactions rather than forcing them to use Apple’s in-app purchase mechanism.

“The gaming industry seems to be generating a disproportionate amount of money for the IP you give them and everyone else,” Rogers told Cook. “Basically, it’s almost like they’re subsidizing everyone else.”

According to Cook, Apple faced stiff competition for developers and users.

“They have no competition in these in-app purchases, however,” Rogers replied.

Rogers also expressed doubts that Apple’s Small Business program, which cut App Store fees for small developers in half, was exposed amid small business concerns, Cook testified on Friday.

“That seemed to be the result of pressure from investigations and lawsuits,” said Rogers.

Cook said there were lawsuits on the back of his mind, but what sparked the program was small business concern during Covid.

Rogers noted that she saw a poll that found 39% of Apple developers are dissatisfied with the App Store.

“It doesn’t seem to me that you are under pressure or competition to actually change the way you act to address developer concerns,” said Rogers.

Cook disagreed, saying that Apple is “turning the place upside down for developers.”

Friday marked the first time Cook testified in court, he said.

The three-week trial ends Monday, but Rogers warned this week that it could be weeks or months before she comes to a decision. The dispute will likely be appealed afterward, she said.

Tough competition

Before Cook was questioned by Rogers, he testified on Friday that Apple faces stiff competition in smartphones and that the iPhone only has a “high 30s” market share in the US. Internationally, the iPhone has a market share of around 15%, Cook said.

The market share figures quoted by Cook are a rare example of Apple discussing the market share of its flagship product, the iPhone, to say that it does not dominate the smartphone market.

“There is a whole list of different cell phone competitors. It is highly competitive,” said Cook.

Cook’s US share of Apple is lower than many external estimates. For example, a recent report by Counterpoint Research has set a value between 40% and 65% depending on the quarter since 2019.

Apple has argued that control of its App Store, the only way consumers can install software on iPhones, is critical to the company’s security and privacy promises to its users and a key differentiator in a highly competitive smartphone market .

“We could no longer make the promise of privacy, security and security,” Cook said if Epic Games were to prevail, saying that without Apple’s rules and guidelines, which Epic is fighting against in court, the App Store is a “poisonous one.” Mess “would be.

Epic Games argues that security is an excuse to collect fees and control what software makers do, and that Apple could securely open its platform to competing app stores.

Cook mentioned Samsung, Vivo, Oppo, Huawei, and Google as competitors to cell phones, all of which use some version of Google’s Android. He said Apple is also facing competition from other app stores like Google Play and consoles like Microsoft Xbox and Sony PlayStation.

Tim Cook, Apple’s CEO, testifies in the Epic Games study

Vicki Behringer

When asked by lawyers for Epic Games, Cook declined to answer a question about whether Apple’s iPhone competes with Google’s Android in the operating system market.

“Customers don’t buy operating systems. They buy devices,” said Cook.

According to Cook, Apple is using surveys to determine if iPhone users are switching to Android devices. “It is a very important task for us to get Android users to switch to the iPhone,” said Cook.

Cook said Friday that Epic Games’ move last year to bypass Apple’s 30% in-app purchase fees for Fortnite, its shooter game, was “malicious”. Apple then removed the app from the App Store.

Cook dodges App Store profit and questions about Google licensing

Much of Cook’s testimony on Friday concerned a private, internal Apple document sent to him describing profitability trends for various Apple businesses, including the App Store. Epic’s lawyers said it showed that Apple’s App Store is very profitable and tried to back up the argument that Apple is using its control to increase its own profits.

Cook said that the document is not “fully loaded” with all of the issues Apple puts on the App Store and that it is a “benchmarking” exercise. He said he had a “feel” for the profitability of the App Store but did not provide a number. An accountant hired by Epic Games previously testified that Apple had an operating profit margin of 77.8% in 2019.

Epic Games lawyers also asked Cook about Apple’s contract with Google as the default search for the iPhone browser, which a congressional report, citing a Wall Street research report, estimated at $ 10 billion a year. Cook said he doesn’t remember how much Google paid.

Cook was also interviewed 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 prevented iPhone users from switching to competitors.

Dismissing concerns that people switching from an iPhone to an Android device may miss text messages, Cook said, “You can just turn off your iMessage.”

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