Thread by @eringriffith

Opening arguments for Epic vs. Apple will begin shortly. I'm here in the courtroom and can report that Epic CEO Tim Sweeney has ditched his cargo shorts and t-shirt for a suit. 🕴️

Read our preview of the trial here: nytimes.com/2021/05/02/tec…

And given that it's #WorldPressFreedomDay - shoutout to @leah_nylen for pushing to get better press access to this trial given covid restrictions. here we go!

@leah_nylen Epic's lawyers are running through a series of emails between Steve Jobs, Tim Cook, Phil Schiller, Eddy Cue and other Apple execs to make the case that the App Store was designed as a "walled garden" that locks people in.

@leah_nylen ”The garden could have had a door. There was no reason it needed to be closed."

@leah_nylen How did Apple implement this plan for a walled garden? "Carefully and methodically, grift by grift."

Epic lawyer arguing that Apple created IAP (in-app payment for digital goods) because no app developers would use it otherwise. Says Apple has never studied whether other payment processing systems were less secure than Apple's.

Now to the heart of this case: The 30% fee. Epic says the 30% Apple charges for in-app fees was not based on costs required to maintain the app store or make it secure. "There's a name for businesses that set prices without regard to costs: Monopolists."

REALLY leaning into this walled garden metaphor. "The most prevalent flower in the walled garden was the venus fly trap."

This case is also an argument about the definition of the market. Apple will argue it is gaming (including gaming platforms like Playstation, mobile web, etc) and Epic is arguing it is mobile apps, specifically iOS. "None of these devices are substitutable for smartphones."

A new metaphor! Epic argues that Apple's fees on in-app purchases is like a car dealership that sold you a car charging commission every time you buy gas.

Switching to Apple's opening statement. The argument: the App Store has created millions of businesses and jobs and "unleashed more than a decade of economic growth." Epic's case is "fundamental assault" on that ecosystem.

Apple argues: Epics requested relief would undo everything Apple and app developers have built and everything consumers "have trusted and loved."

It would also force them to license their IP to anyone. "The law just does not permit this."

Apple discusses how great the App Store has been for app makers, including Epic, which has made more than $750m on the App Store.

"So what are we doing here in an antitrust trial?" Project Liberty and Epic's new business model.

Apple argues that Epic would not be suing if Apple had just agreed to a side deal for better terms. "Rather than investing in innovation, Epic invested in lawyers, PR and policy consultants."

as a sidenote this quiet empty courtroom is really showing off how loud macbook pro keyboards are during apples testimony 🙃

Apple shows a slide summarizing its arguments in blunt statements, ending with "Epic cannot prove a lie."

We are back to the market question - do people switch across different devices? Epic has experts saying they do not. Apple's experts say the opposite and just argued it is "absurd" and "not the commercial reality" to argue that iOS is the only way people access games.

non-fungible apps! Apple shows a slide explaining that apps in its store are "not interchangeable substitutes."

There is also a "tying" claim that Apple forces app users to use IAP (its payment system) - but Apple argues that is not a separate product but tied into the App Store.

Apple: "Epic speculates about a world where Apple was a different company and asks this court to place a big bet that the world is better than the one we live in. It isn't."

Tim Sweeney up to testify wearing a clear facemask. He is soft-spoken and a fast talker. Discussing learning to code on an Apple II as a kid and starting Epic in 91. Getting lots of interruptions to clarify the names of games and operating systems he's throwing out.

Sweeney made a point he's made a lot, which is that Apple can make more money on a game with its commissions than the developer of the game - Apple objects to this.

What is Fortnite? "It’s a phenomenon that transcends gaming. It’s a social and entertainment experience that includes a variety of gaming experiences and non-gaming experiences within it."

Sweeney then drops "metaverse" which the court reporter needs clarified.

I really wish there was a jury here just to see their reactions to this in-depth discussion of the contours of the metaverse.

Now going into excruciating detail about the various non-gaming activities that happen inside Fortnite's metaverse to expand the market beyond Apple's narrower definition of just gaming.

Sweeney says Epic employs 3200 people, has offices around the world and (this might be new info?) made $5.1bn in gross revenue in 2020.

Spent the last 20 minutes going into lots of detail about Epic's business, mostly explaining how all its various products work in the market. Breaking for lunch now.

I broke this thread somewhere along the way but we're back with Sweeney testifying. Talking about the differences between a smartphone and feature phone.

We're looking at some gaming consoles as evidence and comparing the commission paid to console makers vs app stores. This answer is basically this

https://twitter.com/timsweeneyepic/status/1273276548569841667?lang=en

The judge jumped in and noted that both consoles and iPhones have had to build a lot of tech to support a game like Fortnite. Sweeney says yes, his comparison is with their business models.

There was also a side story from the judge about a wine trademark case she heard where 30 bottles of "evidence" were left over and a bunch of clerks apparently got lit 🤠

We're now talking about what happened last summer and the purported "special deal"-Sweeney says there were more than a dozen outreach attempts to arrange a meeting with Apple leadership about operating its own store and payment service. Apple did not want to engage.

He also read from the part of the letter he sent where he wrote he hoped Apple would implement the changes he was asking for for all developers.

Why did Epic spend so much time on "Project Liberty"? Sweeney: "We’re challenging the two most powerful companies in the world and it would have been foolish to do anything else."

Hotfix time. Judge jumps in to point out that Epic's hotfix was a major update, in violation of Apple's terms, and also that Epic knew there was already another developer lawsuit in the works.
"yes."
"and you just ignored that and went on your own?"
"yes"
"proceed."

The cross examination is a rapid fire series of yes/no questions about app stores, fees, contracts etc. Making the overall point that Sweeney controls Epic, agreed to its initial iOS terms and contracts, and offers Fortnite on a number of app stores.

Annnd we have finally confirmed the percentage that Tencent owns in Fortnite - 37% which is not a lot of dilution given Epic's big $$ fundraising since that round in 2012. Tencent also has 2 board seats.

Apple put up a chart to show that Sony, MSFT and Nintendo all take 30% commission, prohibit sideloading, and require developers to use in-house - all the things Epic is asking Apple to change - and is having Sweeney answer each box 1 by 1

Apple lawyer makes a slightly sneering reference to the metaverse, Sweeney seems to be getting a mildly annoyed, and the judge tells Sweeney he's mumbling again. 20 minutes left...

Drilling down into what fraction of Fortnite players play across different devices - Sweeney says he isn't sure how many so Apple pulls up an internal Epic analytics report that shows mobile players are most likely to play on other platforms (~38%).

Ok - today's testimony, along with this long broken tweet thread, is done for the day. Here's the first version of my story nytimes.com/2021/05/03/bus…

Story: nytimes.com/2021/05/03/bus…