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Games bring enormous value to the iPhone by creating something interesting on the smartphones that people will actually pay for, above and beyond paying for the phone. Gonzalez Rogers’ questions noted that she is aware it’s a two-way street. In other words, those are monopoly profits, from Epic’s view. Epic’s legal expert estimated that Apple’s profit margin on the App Store was 78%. Still, Cook steadfastly denied that he knew how much money Apple makes in profits on the App Store. He noted Apple has never raised its royalty rate since it created it, and he noted that the store would be a “toxic mess” without reviews. The 30% fees that Apple charges helps it recover those fees and a return on its intellectual property investment, which Cook said amounted to more than $100 billion since the launch of the iPhone. Apple has argued that it spends a lot of money on 150,000 application programming interfaces, store maintenance, security, app reviews, and other platform responsibilities.
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This part of the case was important because it exposes some of the narrative that Apple has been espousing in the trial as flip-flopped.
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Epic compared this to Apple getting a share of the purchase price of a car and then getting a 30% share of money paid for gas for the car every time the driver refuels. In its opening argument, Epic said Apple no longer earns the 30% fee it has charged since the launch of the App Store, and that Apple should not get a royalty every time someone makes a purchase in a game they have already downloaded.
They’re creating commerce at scale, she said. In other words, she said the game developers are keeping the customers in the games. But after that first time that someone opens a game, the game developers are on their own after that.
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“It’s disproportionate.”Īnd she noted that Apple may bring a lot of customers into the store as they download free apps.
“You use gamers to subsidize Wells Fargo,” she said. But among those free apps are those like Wells Fargo’s banking app, the judge replied. That benefits everybody, including Apple and game developers, who can get more downloads and eventually more paying users out of the people who are drawn to the free apps. Cook replied free apps have value, as those free apps generate a huge amount of traffic for the store. Of the 1.8 million apps in the App Store, about 85% are free. “It’s almost as if they’re subsidizing everybody else,” Gonzalez Rogers said. The judge then noted that it seems that Apple is putting the burden of paying for the costs of the store and other investments on the backs of the game developers in a disproportionate way.
Apple doesn’t charge for a cut of advertising in games and apps, and so those developers don’t contribute toward alleviating the costs of running the store. She also noted that the majority of revenue for the Apple App Store comes from games, which are monetized through in-app purchases. Cook shook that off as he said that Apple rejects 40,000 of the the 100,000 apps that it gets every week and that can put it on an adversarial footing with developers. During her questioning, she brought up a survey that found that 39% of Apple’s developers were unhappy with Apple.
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