Entrepreneurs

6 Fascinating Findings From the Epic Games-Apple Trial

Almost halfway through the anticipated three weeks of testimony in one of tech’s biggest court cases in a decade, it remains unclear whether Epic Games or Apple has the upper hand. But already a few fascinating facts about both companies’ inner workings have come to light in the antitrust suit.

Epic, the private Cary, North Carolina-based business behind the the hit videogame Fortnite, alleges that Apple has abused its power over software and game developers by charging commissions of roughly 30 percent on any purchases customers make within their iPhone apps. Epic also argues that Apple’s app-review process holds back developers from opportunities and from competing fairly.

In U.S. District Court in Oakland, California, Epic’s lawyer, Katherine Forrest, alleged that Apple, the $2 trillion company, charges commissions unfairly, and compared its app marketplace to a car dealership: “Apple takes a cut of every stop at a gas station after the car has been purchased, with no payment alternatives.”

Apple has argued that its app marketplace is fair and provides a secure platform with solid technology that benefits developers, and that Epic planned its breach of contract, which occurred in August 2020, when it tried to circumvent Apple’s in-app payment system.

The Epic Games v. Apple trial, which began on May 3, could have significant ramifications for Apple–already under antitrust pressure from Washington and the E.U.–and might set a precedent for how other online marketplaces function, and how money moves through devices such as phones and gaming consoles. Here are the biggest takeaways so far from  Apple and Epic executives’ testimony and the troves of document submissions in the case.

1. Epic’s own games store has yet to turn a profit

Epic CEO Tim Sweeney said in his testimony that the Epic Games Store is “hundreds of millions of dollars short of being profitable,” and wouldn’t be in the black for three or four years. His company projects that the store will incur $719 million in losses by 2027, he added. Other testimony illuminated that Epic’s break-out game, Fortnite, made more than $9 billion in its first two years, and that the company had revenue of more than $5 billion in 2020.

2. A lot of publicity went into Epic’s protest of Apple’s system

It was internally called “Project Liberty”: Sweeney admitted that on August 13, 2020, Epic intentionally breached its contract with Apple, and that he knew Fortnite’s removal from the app store was a possibility. He said he hoped that by launching the project, which involved in-app code that evaded Apple’s payment system, Fortnite could cause Apple to “seriously reconsider its policy.”

Apple didn’t reconsider, so Sweeney sued on the same day, and simultaneously urged Fortnite gamers to rally around the #FreeFortnite hashtag. Epic also published a video parodying Apple’s iconic 1984 advertisement, Sweeney said in court,”to demonstrate to smartphone owners that removing the platform fees would result in savings for them.” His testimony was not entirely surprising, given that he had previously stated that his company spent months preparing for the battle with Apple–and that for him the case is about more than Apple’s 30 percent fee: “I felt all along that open platforms are the key to free markets and the future of computing.”

3. Walmart was building a secret streaming service

Documents submitted to the court revealed the previously unknown fact that Walmart had been working on a streaming service, which seemed to have been called “Project Storm.” It is not clear when the company planned to launch the service, nor its current status.

4. Apple regularly negotiates with top companies about their apps

At least 60 binders of documents showed that Apple regularly engages in negotiations with companies such as Facebook, Microsoft, and Netflix. The documents show while Apple upheld its policies when complaints arose, it did offer those companies concessions, including front-page placement on the App Store and publicity through Apple product launches. 

5. Apple-Epic relations haven’t always been contentious

Apple negotiated with Epic about promoting Fortnite just as it has about other major apps. The conversation began even before the game’s launch in 2015, when it was demonstrated on-stage playing on a Mac at Apple’s annual developer conference.

There’s more history of friendly relations between the two companies as well:

  • Apple modified the iPhone’s software so that Fortnite players could compete against each other if one was on a phone and another on a video-game console, according to Sweeney.
  • Epic’s executives thanked Apple for the support Fortnite was getting from the App store, according to documents.
  • Sweeney said he personally uses an iPhone, because he thinks Apple offers better security and privacy than smartphones running on Google’s Android software.

6. The judge caused parents to raise eyebrows

When Sweeney was questioned about in-app purchases, U.S. District judge Yvonne Gonzalez Rogers asked whether the company’s desire to be free of Apple’s in-app purchase requirements meant that it wanted game players, including minors, to have access to “what I would call, as a parent, an impulse purchase.” Sweeney’s reply: “Yes, customer convenience is a huge factor in this.”

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