Is Epic Games' showdown with Apple turning out to be a mismatch?
If Epic Games hopes to dismantle the fortress surrounding Apple's iPhone and its own app store, the gaming maker probably will need to roll out some heavier artillery heading in to the second week of a trial threatening Apple's $2 trillion empire.
Up to now, at least, Epic has been having trouble proving its allegations that the iPhone maker's 13-year-old software store has turned into an illegal monopoly.
Epic, the maker of the favorite Fortnite game, contends Apple has been gouging app makers by charging commissions which range from 15% to 30% for in-app transactions because it forbids other options on its iPhone, iPad and iPod. When Epic tried to evade the commissions with an alternative solution payment system in Fortnite last August, Apple ousted it from the iphone app store to set up a legal showdown that could force it to lessen its fees.
Apple contends the commissions certainly are a reasonable toll paid by a minority of the 1.8 million programs in its store to greatly help cover the more than $100 billion it has invested in mobile software, The Cupertino, California, company also maintains its ironclad control over programs allowed on its cellular devices helps protect its customers' security and privacy.
At times, it appeared like Cary, North Carolina-based Epic was helping make Apple's case around its own through the the first week of the trial being held within an Oakland, California, courtroom.
For example, at one point during his two days on the witness stand, Epic CEO Tim Sweeney acknowledged he personally used an iPhone rather than smartphones running on Google's Android software because he thought Apple offered better security and privacy controls.
Sweeney also acknowledged Apple made changes to iPhone's software to help make it easy for Fortnite players to compete keenly against the other person while one was on a phone and the other was on a gaming console. The expansion of so-called “cross-platform" play helped propel Fortnite's growth to a lot more than 400 million users.
Other internal documents showed Epic's executives profusely thanking Apple for the support Fortnite was getting back in the app store.
Other evidence raised questions about whether Epic's efforts to make a competing app store that imposes a commission of only 12% can pay off. The store is likely to post a profit which range from $15 million to $36 million by 2024, nonetheless it will still have run up cumulative losses $654 million to $854 million, according to Epic's internal projections presented at the trial.
Apple's store, by contrast, quickly became highly lucrative soon after it opened with just 500 software in 2008 - a year following the debut of the first iPhone. Epic has repeatedly pointed to evidence that Apple's late co-founder Steve Jobs at first didn't expect the software store to become a profit center, but apparently changed his mind after it accumulated $2.1 billion in billings during 2010, according to an Apple slide presentation.
The trial hasn't yet revealed just how profitable Apple's software store has become. Apple doesn't disclose the store's financial results, nonetheless it is an important portion of the company's steadily growing services division, which made $57 billion in revenue this past year alone. The success of those services coupled with the iPhone's ongoing popularity is an integral reason Apple currently has a market value of $2.2 trillion - more than any other U.S. company. On the other hand, privately held Epic is valued at almost $30 billion.
More financial information regarding Apple's app store are anticipated to be presented during the trial's second week. Possibly the most revealing moments may come when among Epic's experts, Ned Barnes of the Berkeley Research Group, takes the stand to go over his analysis of the application store's profits.
Apple unsuccessfully tried to convince U.S. District Judge Yvonne Gonzalez Rogers to close the courtroom during Barnes' testimony because his financial analysis “unduly confuse" investors and cause wild swings in its stock.
But whether or not the software store's profits are greater than anyone fathomed, that wont necessarily help Epic prove its allegations that Apple is owning a monopoly that hurts competition.
“Being successful isn't an antitrust violation in and of itself," said Daniel Lyons, a Boston College law professor. “The argument that your prices are higher than your costs may play well to a lay audience, but it doesn't endure legally."
For all the drama, Lyons and other authorities say the decision that will ultimately be produced by the judge in this non-jury trial will boil down to market definitions. Epic contends the iPhone has turned into a market alone, while Apple argues it will likewise incorporate other devices, including gaming consoles such as for example Microsoft's Xbox and Sony's PlayStation that also charge 30% commissions on gaming transactions.
“If I were a betting man, I would certainly say Apple gets the more robust case under existing case law," said Larry Downes, project director of Georgetown University's Center for Business and Public Policy. “You should put yourself in the standpoint of the buyer, and that's what the judge really must do. Whether it's not harming consumers, then this is merely a contract dispute between two companies, with one of them trying to use litigation to renegotiate the terms."
Source: japantoday.com
