Thread by @thedextriarchy

a treat of a piece from @mslopatto as we get ready for Apple/Epic to kick off today! we’re expecting early testimony from Epic CEO Tim Sweeney. theverge.com/2021/5/3/22412…

I’m on the press line for the Apple/Epic call, being regaled with a jaunty 30-second synthpop loop. We’re expecting to start in the next half-hour.

Alright, clerk is testing the line! Court is not in session yet. It sounds like they’re having a little confusion over the conference calling system.

“If I end the call nobody will hear anything.” - not exactly what you want to hear on a trial conference line! but I have faith

I’m on the deadly silent press line for this trial, getting vivid memories of being left off the fun bus and having to ride with the teachers on a field trip

https://twitter.com/nickstatt/status/1389234992908283905

Okay, we’re underway! Epic’s opening statement is its big overarching talking point: Apple deliberately built a walled garden to capture profits in an already profitable space (the iPhone).

This doesn’t come through on the phone line, but Epic’s opening statement is backed by a slideshow where every slide gradually builds a clipart wall over an iPhone.

Epic’s quoting Apple App Store exec Matt Fischer on whether Apple studied potential security issues with third-party payments — something Apple has used to justify restrictions. Fischer’s saying no. “Apple performed not a single study” on its system’s security versus any other.

“Apple asserts that its 30% commission rate is just industry standard,” but evidence “will demonstrate otherwise.” Other platform owners engage in negotiation, Epic says, while Apple has refused.

“Apple’s choice is based on policy and has nothing to do with price or security."

“Not only did Apple not stop charging the 30%, it started adding more ways to charge developers” when the App Store became profitable. There were detailed documents on the App Store’s profitability, while Apple claimed that it didn’t know how much the App Store makes.

“Developers found themselves caught in a trap of Apple’s making.” The most common flower in Apple’s walled garden “was a Venus Flytrap.” Apple built its ecosystem on top of developers, but Epic says those developers couldn’t leave Apple even when it offered them bad terms.

Epic’s citing some previously reported testimony from its expert witness Ned Barnes, who estimates Apple’s App Store profit margins in the 70-80% range theverge.com/2021/5/1/22414…

The overarching theme here is that Apple’s 30% fee is based on an arbitrary unilateral decision rather than any kind of response to a market, and (in Epic’s reckoning) this is the hallmark of a monopolistic business.

Meanwhile, Epic’s making the case that the App Store experience sucks for consumers and developers alike, particularly with regards to security. “Those with expertise who understand the app review process know that it’s not about security, but about business.”

"iOS users are not told, and Apple does nothing to market, how much they will spend on apps over the life cycle of their device. Consumers are locked into an eosystem without ever knowing that cost."

Epic’s arguing that given the limited switching within phone ecosystems because of the high costs to consumers, iOS app distribution is a distinct market that Apple shouldn’t be able to monopolize, rather than just part of the iPhone.

Epic is citing Fortnite as being a multifaceted product that includes the game part (Battle Royale), the social part (Party Royale), and a creation tool. And yes, it’s funny hearing a lawyer soberly cite “Party Royale” in court.

My colleague @mslopatto noted this in the piece linked above, but Fortnite is a bid at the Neal Stephenson metaverse and Epic is alluding to it here.

Epic’s still hammering via depositions on the substantial lock-in effect once people buy an iPhone — so if Apple raises prices or does other things that should drive people to other platforms, that’s going to be suppressed.

There are other limits to switching too. If somebody’s playing Fortnite on an iPhone in a waiting room, they’re “not going to, and practically cannot” make an in-app purchase on a device sitting miles away at home.

“Consumers make a choice of ecosystems at the OS level and once having chosen persistence within that ecosystem is strong."

"iOS App Distribution is the rare instance of a single brand product market” that can count as a monopoly. It’s “far bigger and far more entrenched in every way that matters” than Kodak, subject of this case Epic is gonna be relying on heavily: en.wikipedia.org/wiki/Eastman_K….

This is a big fulcrum for the case: can Epic establish that iOS apps are a market that can be monopolized, as opposed to just Apple putting applications on a device it builds? And with that, Epic closes out.

“Our technologist needs to switch the AV,” so we’re going to take a breather before we get to Apple’s opening statements.

Never mind, they got it! Apple starting off its arguments.

This case is “a fundamental assault on Apple’s secure and integrated ecosystem,” Apple’s lawyer says. And it’s all because “Epic, a $28 billion company, has decided it doesn’t want to pay for Apple’s innovations anymore."

“Apple did not create a secure and integrated ecosystem to keep people out. It created a secure and integrated ecosystem so it could invite developers in,” without sacrificing the security and experience consumers wanted. Epic’s case would “undo everything” it’s built.

Epic’s opening statement mostly focused on third-party payment processing, but Apple’s focusing on Epic’s bigger reach: making Apple give up its total control over what apps go on the iPhone. The former would be a big financial blow, the latter would be a huge system shock.

Get ready for a lot of tweeting about how great iOS/Fortnite/Apple/Epic are, by the way! I’m relaying lawyers’ statements and this is a case about whether various companies and consumer products are awesome and/or suck.

We’re getting a little history of app development, btw — starting with the old days of separate free and paid apps, leading developers to ask for in-app purchase functionality. “Game developers in particular benefited from IAP functionality."

“IAP is what the antitrust laws would call a genuine product improvement,” especially for games like Fortnite.

Apple is now moving onto its next argument: Epic’s lawsuit is a calculated business decision (called “Project Liberty”) to reduce its costs and get “the benefits that Apple provides for free."

There’s always something very funny about a court case where “despite its high-minded rhetoric, this company was... trying to make money!” is used (by both parties) as evidence of sinister intent rather than, you know, capitalism.

Epic claims Apple’s 30% cut is an arbitrary (and monopoly-enabled) number; Apple is countering by pointing to predecessors like Steam. And noting that 84% of apps are free and “developers pay zero percent to Apple."

Now we’re onto Apple’s take on whether you can define iOS apps as a monopolized market. Apple’s take: “There are many, many, many platforms where consumers engage in game transactions."

“Epic is really down on the web browser,” but Apple says web services are a viable competitor to apps.

Apple’s showing numbers (similar to expert testimony we’ve covered) estimating that iOS is a small fraction of the Fortnite user base. “Makes you kind of wonder what we’re doing here.” theverge.com/2021/4/28/2240…

Apple’s also noting that V-Bucks can be purchased anywhere, and then you can use them on any platform once they’re in your wallet. “Epic’s internal data show that most people who play Fortnite on iOS are not engaging in transactions on iOS. This is a very big issue for Epic."

“Epic’s relevant market is wrong.”

That was Epic’s exact play to demonstrate the value of its in-app purchases and/or get kicked off the App Store so it could sue theverge.com/2020/8/13/2136…

https://twitter.com/chrisFnicholson/status/1389271903974563843

We’re taking a 20-minute recess to fix some teleconferencing issues that continue to plague the trial. And hopefully we’ll be getting some Tim Sweeney not too long from now.

As someone who did tech support I really feel for the court people who have to talk through troubleshooting with a bunch of randos listening in.

Issues resolved! Apple’s lawyer spinning back up.

“Businesses cannot have a duty to deal with competitors,” Apple’s lawyer says. Third-party stores “can only exist on iOS with Apple’s IP,” and Apple shouldn’t have to license that IP to untested products.

“They are seeking a requirement to deal, a requirement to license, and forced interoperability. … The law just does not require that and it does not permit it."

Most developers pay lower than the 30% number. “Epic likes to dismiss this small business program, but even if it doesn’t matter to Epic, it does matter to a lot of small businesses.”

“Epic’s argument here is basically why can’t you protect the iPhone like you protect the Mac?” But Apple knew the iPhone was going to be different, because it has to be more reliable and private — you need a phone to work all the time, and it contains a lot more sensitive data.

We’re getting a preview of a drag-out fight over whether the App Store is seriously reviewing the apps it accepts for privacy/security, or if this is a pretext for maintaining exclusivity. (Apple favors the former, obv.)

Apple says Epic is “asking us to remove an extra layer of security” by trying to end App Store exclusivity. “It sounded like Epic said that was a bad thing. But consumers think it’s a good thing."

the little bricks! also, some context for the emails here theverge.com/2021/4/9/22375…

https://twitter.com/reckless/status/1389281819619639300

“If Epic prevails, other ecosystems will fall too.” As court previously noted, Sony, Nintendo, and Microsoft all operate similar platforms. “There will be nothing to distinguish any of these transaction platforms.”

“Epic is going to have to convince this court of so many things that don’t make sense,” says Apple lawyer. “But the most dangerous thing that Epic is going to try to sell the court is the idea that consumers would be better off if Epic had its way."

Apple’s lawyer wraps up, and with that, Epic CEO Tim Sweeney is being called.

Tim Sweeney is about to testify in the Apple/Epic trial. He’s promised a “fireworks show.” Right now he is spelling his name for the court.

Tim Sweeney’s laying out his case for why Epic sued Apple. He’s painting the issue as a long-running point of contention that culminated in Project Liberty.

Two major points of disagreement for Sweeney: the policy prohibiting competing stores on iOS and the requirement that apps pay the 30% commission for in-app purchases.

Sweeney’s briefly running through his history with Apple, starting with Epic Citadel and Infinity Blade — a demo and game that were a pretty big deal for the iPhone. But Apple’s policies became “more and more” restrictive.

“Epic didn’t initially take a critical view of Apple’s policies.” But “it took me a very long time for me to come to the realization of all the negative impacts of Apple’s policy."

Sweeney says Apple’s IAP system means it can’t offer refunds to customers who ask for help and “certainly impacts Epic’s pricing decisions” because of the commission. It’s also prevented them from doing things they would on other platforms thanks to “a myriad” of restrictions.

I might be a little light on direct quotes here, because Tim Sweeney sounds like he’s being filtered through a million spiderwebs while talking in his sleep.

Tim Sweeney’s explaining what Epic does now, including the Epic Games Store, which will be a significant part of this suit despite not being directly involved in the dispute. “Apple is a competitor of Epic and a number of businesses in many ways.”

“Apple bars us from operating a store, a digital app store that could operate on the iOS platform.” Apple also operates the Mac App Store, which to some extent is in competition with the Epic Games Store.

Lawyer: “Let’s talk now about Fortnite. What is Fortnite?”
Sweeney: “Fortnite is a phenomenon that transcends gaming."

Fortnite concerts getting another shout-out here, along with other social experiences. Again, Fortnite as Metaverse.

Tim Sweeney is now recapping the metaverse from Neal Stephenson’s Snow Crash to the court to explain what Fortnite is.

Now we’re talking about the history of concerts in Fortnite. This is getting arguably somewhat gratuitously granular.

Lawyer: “Have any of these concerts involved non-cartoon characters performing?"

THANK YOU finally someone has told the court that nobody can hear Tim Sweeney, although the experience does not seem to have gotten clearer. In any case, we are now recapping which films have been streamed in Fortnite.

If questions keep going down their current path Tim Sweeney’s going to be listing every single licensed skin on Fortnite soon.

Probably clear to most people reading this, but we’re in the portion of the trial where a sympathetic lawyer asks questions that let Sweeney lay out everything he wants to say about Fortnite and Epic. Which is how you get questions like “can you define the Metaverse."

I’ve got an interview now, so I’m gonna take a little break. Back soon for more Sweeney.

Alright, I’m back and I see we are still in the process of Tim Sweeney briefing the court on Epic’s business.

Sweeney’s outlining the Epic Games Store business now, drawing a contrast with the App Store, particularly Epic’s handling of in-app purchases.

“Is the Epic Games Store currently profitable?” asks lawyer.

No, says Sweeney. It’s “hundreds of millions of dollars short of being profitable” because of the upfront costs of setting it up.

“We have a general expectation of becoming profitable within 3 or 4 years."

Sweeney’s making the case for why even on the iOS App Store, it’s good to have your own payment system instead of using Apple’s. “We have no way to help a customer who needs a refund,” have to direct them to Apple.

Court pauses the Sweeney testimony; we’ve got a recess till 4:15 Eastern. Tim Sweeney was tentatively scheduled for a 3-hour examination and 3-hour cross-examination, so we’ve got a ways to go.

And we’re back, with Tim Sweeney defining a smartphone and a feature phone.

Lawyer is asking Sweeney whether the Xbox operating system “has a particular name.” He seems sort of befuddled by the question, and I’m not familiar enough with trial lawyering to know if there is a good reason to ask it.

Generally speaking this is an exhaustive explanation of the feature sets of Fortnite and app ecosystems, including why Fortnite is on the platforms it supports. “Web apps are not nearly powerful enough” to run a version of Fortnite, says Sweeney.

“Epic is working with Nvidia and their GeForce Now service to experiment and privately test a version of Fortnite” that streams on iOS, but “in my experience using it, it has significantly higher latency and lower graphical quality,” and there’s an additional cost for users.

Nvidia outlined Fortnite plans for GeForce Now last year blogs.nvidia.com/blog/2020/11/1…

Lawyer: “Are you familiar with the power source for the [Nintendo] Switch?”

Okay yes this is a chance for Sweeney to explain the Switch’s mobile gaming vs. home console capabilities, but it’s also getting into hilarious Tim Sweeney Explains Literally Everything territory.

i hope this just gets broader and broader until they’re asking Tim Sweeney to define the concept of love

https://twitter.com/tomwarren/status/1389316336166318085

Here’s the point: is there any difference in the 30% fee paid to Apple and one paid to console developers, asks lawyer?

Sweeney says there’s a “general bargain” in the console industry: consoles sell at a loss and need developers. Apple sells iPhones at a profit.

Judge is stepping in. She asks if there have been significant iPhone upgrades that better support Fortnite — and by extension, whether Apple is making technical advances that Epic is building on.

Lawyer asking if Epic ever deliberately broke Apple’s rules outside Project Liberty (i.e. the thing that got it kicked off.) Sweeney says no.

There were “about a dozen” attempts to reach out to Apple and discuss the issues at stake in Project Liberty. We’re now getting into the events that led to Apple kicking Fortnite off the App Store. Sweeney responding to Apple’s claim that Epic asked for a “special deal."

“Epic was under a non-negotiable contract,” and before “going to war” with Apple, Sweeney wanted to come to an agreement. So he sent a letter asking for what Apple would later call a request for special treatment. See here: theverge.com/2020/8/21/2137…

Sweeney now going over the events recapped here: theverge.com/2020/8/13/2136…

“I’ll just stop you and ask you to explain to the court what a ‘server-side change’ is.”

“Even though hotfixes are used for minor features, you used it for different purposes,” judge notes re: adding a new Fortnite payment method. Sweeney concurs. "I wanted the world to see that Apple exercises totol control over the availiabiliity of all software on iOS.”

We’re switching to cross-examination now. Apple questioning Sweeney.

“I have looked at you through a Zoom screen and now I’m lookiing at you through four pieces of plastic.” Apple’s lawyer starting off with the kind of speech you’d give your nemesis upon meeting in the flesh.

Apple lawyer saying there were two reasons for the V-Bucks discount last year: PR for Project Liberty, but also “you were concerned that interest in the game was flagging.” Sweeney says the latter part’s not right.

Sweeney just spent hours presenting a sweeping unified Epic strategy. Apple’s lawyer now trying to separate the pieces out — saying Unreal Engine still isn’t banned from iOS, for instance.

Apple’s asking Sweeney about his goals for the case — whether they include Apple having to allow sideloading of competing app stores. Sweeney says yes.

There’s a long line of questioning meant to establish that “at the time you signed the contract, you didn’t voice any complaint or have any dispute with Apple” over its policies. Sweeney basically says he didn’t try to renegotiate, which isn’t necessarily the same thing.

“I was not completely certain” that Apple would kick Fortnite off after the hotfix, says Sweeney. “I hoped Apple would reconsider its policies.”

This is Apple getting Sweeney to admit to an already very public narrative: Epic has been okay with paying game stores and publishers for decades, and it was cool with Apple for a decade, but then it changed its mind and hatched a plan that would probably get it kicked off iOS.

Apple bringing up Valve as a point of comparison to the App Store. Interestingly, Steam is now facing its own antitrust suit: theverge.com/2021/5/1/22413…

Apple’s now grilling Sweeney about GeForce Now and game streaming in general, disputing his narrative that it's not a substitute for a native iOS app.

The basic idea is that if Epic has announced GeForce Now Fortnite, it must be functional enough, because Epic wouldn’t allow a substandard version of Fortnite to go online. Sweeney does a general hedge and they move on — now talking about console platform policies.

Samsung has some documents about its app store under seal in this case — it argued they revealed confidential details/emails about its deal with Epic. But we might get questions about those later, Apple says.

We’ve had a long line of questioning about the differences (or lack thereof) between the App Store and other console/device app stores. Sweeney admits, for instance, that Sony requires a payment for revenue generated on other platforms.

The court is moving into a sealed session, which effectively wraps up Day 1 of the Apple/Epic trial. Tim Sweeney still has time on the schedule, and I’m sure we’ll be hearing much more about whether the iPhone is like a PS5.

Here’s my writeup of the day, in which I continue to find Tim Sweeney defining the metaverse in court hilarious. See everyone tomorrow, thanks for tuning in. theverge.com/2021/5/3/22417…