Apple CEO Tim Cook Takes a Stand in Epic App Store Fight
SAN RAMON, Calif .– Apple CEO Tim Cook has described the company’s absolute control over its mobile app store as a way to make things easier for customers while protecting them from security threats and intrusions into privacy during testimony on Friday denying claims he ran an illegal monopoly.
The rare courtroom appearance by one of the world’s best-known executives came during the closing phase of a three-week trial over an antitrust case brought by Epic Games, the creator of the popular video game Fortnite.
Epic is trying to overthrow the so-called “walled garden” for iPhone and iPad apps that welcomes users and developers while blocking out the competition. Created by Apple co-founder Steve Jobs, a year after the iPhone debuted in 2007, the App Store has become a key revenue stream for Apple, a money-making machine that has enabled the company to make a profit of $ 57 billion in its most recent fiscal year.
Epic is trying to prove that the store has turned into a price-jacking vehicle that not only earns a 15% to 30% commission on in-app transactions, but prevents apps from offering others. payment alternatives. This extends to simply showing a link that would open a webpage that offers commission-free ways to pay for subscriptions, in-game items, etc.
Guided by a friendly questioning from an Apple lawyer, Cook’s testimony often resembled an advertisement for the iPhone and other products he hailed as the best in the world. The tone was no coincidence. In addition to relying on Cook to help win the lawsuit against Epic, Apple saw his appearance in the closely watched courtroom as an opportunity to tell his story, while the App Store is also being watched by lawmakers and regulators. in the United States and Europe.
“For us, the customer is everything,” Cook explained while wearing a face shield but no mask in a courtroom in Oakland, Calif., Which has limited access to a handful of people due to the pandemic. This commitment includes ensuring that the technology remains “simple and uncomplicated” for users of Apple products, Cook said, and protecting their privacy, which he called “one of the most important issues in the world. century”.
Cook is expected to face a much more intimidating challenge later on Friday when Epic lawyer Gary Bornstein gets a chance to grill him. This fight could take around two hours and will likely delve into the strategies Cook developed since he took over as CEO almost a decade ago, just months before Jobs died of cancer in October. 2011.
Apple fiercely defends commissions as a fair way for app makers to help pay for innovations and security checks to achieve these goals, while providing benefits to app developers, including Epic. Apple claims to have invested more than $ 100 billion in such features.
It also argues that App Store commissions reflect fees charged by major video game consoles – Sony’s PlayStation, Microsoft’s Xbox, and Nintendo’s Switch – as well as a similar app store run by Google for more. of 3 billion Android mobile devices. That’s roughly twice the number of active iPhones, iPads, and iPods that rely on Apple’s app store.
The App Store was one of Apple’s greatest successes during Cook’s reign. Since its debut with just 500 apps in 2008, the store has grown to 1.8 million apps, most of which are free. Apple leveraged its commissions and proprietary in-app payment system to help more than double its service division’s annual revenue from $ 24 billion in fiscal 2016 to $ 54 billion. billion dollars last year.
“I think it’s been an economic miracle,” Cook boasted on Friday.
This boom was not something Jobs expected. Shortly after the store opened, Jobs said publicly that Apple didn’t expect the App Store to be very lucrative. Epic’s lawyers have repeatedly cited the comments as evidence that Apple has reshaped the store to fuel profit growth once the popularity of mobile apps became clear.
The exact profitability of the App Store was a point of contention throughout the trial. An accountant hired by Epic estimated its profit margins to range from 70% to 80%, based on a review of confidential Apple documents. But Apple has insisted those numbers aren’t accurate because they don’t reflect expenses spread across the company’s operations.
Phil Schiller, a longtime Apple executive and former Jobs confidant, admitted earlier this week that the company’s commission system had generated more than $ 20 billion in revenue until June 2017. The Epic lawyer Katherine Forrest presented him with this estimate, based on figures Apple publicly released in mid-2017.
Apple CEO Tim Cook is pictured on January 21, 2020 at the World Economic Forum in Davos, Switzerland. Cook took the witness stand on Friday to defend the company’s iPhone app store against charges that it has become an illegal monopoly, far more profitable than its predecessor Steve Jobs had ever envisioned.