Day 9 in #epicvapple. Apple's Loren Hitt will be up first, then more experts! Today's in-court reporters are @mslopatto and @doratki
And now back to court! Hitt is up
Hitt says consumers do switch between Apple and Google's platforms, citing a statistic that 26 percent switch when they need to buy a new device.
"People do indeed switch platforms when they can," Hitt says.
Hitt says 78 million smartphones are sold each year. Some of those are people buying new devices and some are first-time smartphone buyers. As many as 21% are new buyers.
Judge YGR notes that while some games are free to download, if you are switching between devices, your game play or in-game currency might not move with you. Hitt acknowleges that's true, but says it's a developer choice.
Hitt says he identified 14 different transaction platforms that connect game developers and consumers including Nintendo, Google Play, Steam, developer-centric stores like EA Origin and Microsoft xBox store.
Here's his list
(This is intended to show that developers have other options besides iOS for games)
Hitt is now talking about the options consumers have for games and how they allocate time/spending across platforms.
"Consumers play the same game on multiple platforms," he says. Using Fortnite as an example. (Here's what they are looking at in court)
And now he is walking through where Fortnite users buy
This is all transactions and users for the six months before Fortnite was removed from the App Store, Hitt says.
Epic is able to access users on other platforms, Hitt says. Most of the gameplay and activity is on non-iOS platforms.
Hitt says he wanted to examine if consumers move across platforms when they have an incentive to do so. He looked at the Hotfix and Fortnite's removal; the introduction of Nintendo Switch; and when Spotify/Netflix removed the ability to buy subscriptions on iOS
On the Hotfix, Hitt says he did an analysis to evaluate what happened to the spending that consumers were doing after that change.
Between 22-51 percent of spending was retained and shifted to other platforms, Hitt says.
“Consumers are willing to and able to move across platforms when they have incentive to do so,” Hitt says.
Hitt also compared how the introduction of the Nintendo Switch impacted Fortnite play on iOS
For consumers who adopted the Switch, did they change their behavior?
Those spikes in July and December have to do with the release of new seasons of Fortnite.
Hitt is now talking about when Spotify and Netflix stopped allowing subscriptions to be bought through the App Store.
Whether consumers will switch between platforms depends on the "friction" they experience. Hitt says that friction is within developer control because they can offer a sign-on and cross-platform play
As an example, Tinder (the app no one in court will admit to ever using)! You can use it on your phone or a website, Hitt says (though he acknowledges the swiping isn't the same on a web browser)
Hitt says Epic's expert Cragg offered some new data recently but he hasn't had enough time to analyze it.
Hitt denies that he uses Tinder! Though he says his grad students do, so they tend to have a "rich discussion" about it in his classes.
And now Epics' Yonatan Even is going to cross examine Hitt.
Even is asking about the switching number Hitt used earlier. If you assume 10% of users switch and there are 78 million phones sold, that's 7-8 million users, Hitt agrees.
Given that there are about 300 million active phones in the US, 7-8 million users switching would be about 3 percent of the user base switching each year, Hitt acknowledges, doing the math on the fly.
Hitt acknowledges that patent licensing frequently uses percentage commissions. Even notes that patents only last for 20 years. "Apple’s position is its entitled to 30 percent forever," Even says. Hitt says there is "no temporal element" to Apple's commission structure
And now he's talking about a graph from a report that's not in Hitt's written testimony, so hard to follow.
Hitt acknowledges this is his first antitrust case and he has never testified before about market definitions.
Even is asking Hitt about Apple's small business program, which lowered the commission to 15 percent for developers who have less than $1 million in revenue.
Hitt says he understands Apple to have lowered its price to promote innovation. Even asks if that indicates it wasn't pricing in response to supply and demand. Hitt disagrees "It’s a response to enhance ...the ecosystem.”
Even notes that Hitt showed several graphs and models that showed growth and developer revenue. Hitt acknowledges he hasn't done any modeling to see how that might have been different if Apple didn't have the developer restrictions it has.
Hitt acknowledges he did not do a hypothetical monopolist test, which helps economists determine whether a company is a monopolist. He also says he didn't research whether a court has ever accepted a market definition that doesn't include one.
And we have our first morning break. Back in 20 mins.
Back with Hitt on the stand. Epic's Yonatan Even examining.
Even points out that the market Apple has defined is game transactions, which would not include Spotify or Netflix (two companies that Hitt looked in his analysis about switching)
Judge YGR asks about how they got to game transactions. "There were some analysis that the underlying economic considerations that apply to games are different" from other apps.
YGR: why didn't you look, for example, at entertainment where in-app purchases are driving developers as opposed to other types where everything is free.
Hitt said they did some analysis looking at the monetization mechanisms. "Games in particular are unique but very, very different because they rely on in-app purchases of items. Entertainment is subscription driven. Social media is advertising driven."

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