Thread by @nickstatt

Starting a shiny new thread for Epic v. Apple Day 2.

Trial resumes at 11:15AM ET with the continuation of @TimSweeneyEpic testimony, followed by Yoga Buddhi's Benjamin Simon, Nvidia’s Aashish Patel, and Xbox’s Lori Wright.

protocol.com/apple-epic-tri…

Judge Yvonne Gonzalez Rogers going through logistics in the court, and commenting on how hard staff have worked to fix day 1’s audio issues and ensure everyone can tune into the trial online.

"I am a big advocate of court access,” YGR says.

Judge YGR speaks to the documents revaeled that companies like Sony now want sealed.

"I don’t know at this point with the genie out of the bottle… if there is a point in sealing them.” theverge.com/2021/5/3/22417…

Apple’s lawyer to Sweeney: “Do you know what % of people who have downloaded Fortnite on iOS have made transactions exclusively within the App Store?

Would it surprise you to know it’s in the neighborhood of 5%?”

Apple trying to establish scope of Fortnite mobile here.

Apple’s lawyer moving onto Epic’s relationship with Sony, in particular the deal for cross-platform play.

"You got pretty aggressive with Sony on the attempt to get them to agree?”

Sweeney more or less says yes, that Epic engaged in business negotiations.

Apple cites email from Sweeney saying Fortnite players’ friendships were “being torn apart” by Sony’s restrictions on cross-platform play for Fortnite.

Apple points out iOS supported cross-platform, and Sony later eventually invested in Epic and agreed to cross-platform.

"Sony finally agreed to cross-platform play, but it has never agreed to cross-wallet transactions, is that correct?”

Yes, Sweeney says, and Apple’s lawyer points out that this is true even today following Sony’s massive investment in Epic. Your v-bucks are stuck on PSN.

Apple’s line of argument here is essetntially that Epic is unfairly targeting Apple, when the console makers are the cause of more financial burden and logistical nightmares for its business. Sony in particular, which accounts for a majority of Fortnite players/revenue.

I am genuinely curious how much Sony’s relatinship with Epic can factor into the outcome of the trial, considering they’re now so financially intertwined. Sony isn’t on trial, and Epic will never sue them. But it does bolster Apple’s arguments.

We’re talking about Apple’s Metal now.

"That’s a graphics API. It contributed to Epic’s ability to effeiciently build a top-quality version of Fortnite for iOS?’

Sweeney says yes. Here, Apple is establishing Epic’s reliance on its tools, in theory justifying commission.

We’re getting pretty in the weeds here about how Epic negotiated cross-platform play between Xbox, PlayStation, and iOS.

Apple’s lawyers saying Epic used Fortnite on iOS as a motivating factor to get Microsoft onboard.

Apple’s lawyer taking a smart path by transititioning to talk of Google Stadia and cloud gaming, as Sweeney has been a public proponent of both but now may be forced to criticize streaming and browser apps compared to native performance.

We’re digging into game store competition now, including itch.io on PC and Sweeney’s past statements on what the game store businesses should look like.

Sweeney’s position here has been that the iPhone has no alternatives, while PC does.

Apple’s lawyer asking again about Epic Game Store profitability in 3-4 yrs.

“You expect to lose hundreds of milions of dollars relative to the amount of minimum guarentees.”

Sweeney says yes. Apple is targeting Epic’s spend on PC relative to what it says it's losing on mobile

Apple’s lawyer digging into the Epic’s minimum guarentees, which are the hundreds of millions it spent since December 2018 to secure PC game exclusives and offer free games to gain users and compete with Valve.

Quoting Sweeney: “Obviously direct ROI scenario is super crappy.”

This is really key. Apple’s laywer here is trying to establish the Epic Game Store, with its 88-12 rev split, as a ploy to push the industry toward a model that would benefit Epic and its products.

Apple projecting Epic Game Store losses to be massive over the next decade. "By 2027, the store is still estimated to be in a cumulative negative state of a loss of $719 million dollars.”

Sweeney says yes. Those are… not great numbers, if those projections ever panned out.

Back to Project Liberty, Epic’s master plan to launch antitrust suits against Apple/Google over Fortnite’s removal.

Apple’s lawyer quoting Epic COO Daniel Vogel via email on Liberty as “way to get Apple and Google to reconsider without us looking like baddies.”

This is interesting. Sweeney privately feared that when AR went mainstream it would cement 30% cut. “Time is now to solve this problem before AR takes off and that rate is set at 30%,” Sweeney quoted as saying.

Probably bc Apple could point to iPhone hardware as justification.

We’re getting into the #FreeFortnite campaign now, Epic’s pretty funny / trollish campaign to paint Apple as a greedy monopolist villain. Including the “Nineteen-Eighty-Fortnite” video parodying the iconic Ridley Scott Macintosh ad.

Apple’s lawyer hits Sweeney over Epic’s direct sale of v-bucks on its website, and Judge YGR interjects to ask why this wasn’t done earlier — before the lawsuit.

"It wasn’t a very attractive option for customers,” Sweeney says, though he admits they could have done it.

well well now we’re onto Sweeney using an iPhone.

"Privacy and security are fundamental differentiators for Apple… and you personally prefer to use iPhone because Apple’s approach to protecting your privacy is superior to Google’s?

"That is among the reasons,” Sweeney says.

Sweeney, now back on direct with Epic’s lawyer, given the chance to clarify the 60-40 split Epic employed in the ‘90s, which Apple implied proved hyprocrisy.

It’s a publisher split, not a distrbutor one, so more justified because of publisher’s investment/marketing spend, etc.

Epic’s lawyer pointing out that Apple does not allow negotaiting, while console makers do. So the 70-30 split isn’t neccesarily comparable in a game console context because extra perks + specific terms and conditions can be added.

Important though is Sweeney saying Epic "never negotiated a different commission structure with the console makers,” which implies the 70-30% split is in fact a universal standard that is then negotiated on top of.

Judge YGR seems somewhat annoyed when Sweeney is asked to explain why a game console can’t be used to access your bank account while you’re at the doctor’s office.

The answer is of course obvious, but Epic is trying to establish the distinction between phones and consoles.

Oh no Sweeney is explaining Nintendo Joy-Con for the court… he’s being asked to plug them in!

“You can see I’m not a Switch player,” he says.

“And now the whole world knows,” Judge YGR says.

Amazing.

Wow. Epic’s lawyer asks Sweeney whether Stadia is still an active product, and Judge YGR steps in fearing Sweeney may disclose private information.

"My understanding is that after a public launch Google Stadia has been very significantly scaled back.”

Feeling like this line of testimony from Sweeney is deep in a labyrinthe. We’re talking about Fortnite’s role as a Ready Player One-style metaverse application, and whether it’s predominantly competitive.

Judge YGR now asks Sweeney how he would even define a “game.”

Okay now we’re getting somewhere significant. Epic’s lawyer asks Sweeney why paltform fees are existential crisis for Fortnite.

Sweeney says it’s because longterm goal is to “open up Fortnite as a platform for creators,” name-dropping the metaverse again.

Epic’s goal is to turn Fortnite into a real-life Ready Player One, and it can’t do that if one of the major platforms it’s on restricts how it can monetize, in Sweeney’s explanation.

Judge YGR is grilling Sweeney on in-app purchase options.

"Why should you want them to have the ability on impulse to buy something?”

Sweeney says it’s a matter of convenience.

Hmmm. Epic’s lawyer asks Sweeney, “If Apple told you the deal would only be with you and no other developers,” referencing a carve-out for lower App Store commission, “would you have accepted that deal?”

"Yes I would have,” Sweeney says.

Sounds like Epic’s lawyer is trying to get out ahead of Sweeney’s attempts to negotiate a unique App Store deal, similar to ones Amazon has made with Apple.

They’re doing so by arguing Appel was unwilling to negotiate, like a console maker would have been.

Well that’s a wrap for @TimSweeneyEpic. Judge YGR concludes by asking Sweeney if he has a backup plan in case Epic fails, with regard to Unreal Engine and other apps.

Sweeney says it’s up to Apple if they want to keep Epic out of its developer program in the future.

@TimSweeneyEpic Here’s my write up of @TimSweeneyEpic’s day two testimony in Epic v Apple.

Most consequential imo is Sweeney’s admission that Epic wants Fortnite to be a creator platform, and App Store fees would ruin that. protocol.com/apple-epic-tri…

@TimSweeneyEpic Here’s Sweeney laying out the existential threat the App Store poses to a Fortnite metaverse.