Tim Cook has harsh questions from the judges about the App Store in the Fortnite trial

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Apple invited CEO Tim Cook to complete the three-week certificate year Epic v. Apple – and as the end of the trial approached, Judge Yvonne Gonzalez Rogers engaged in Cook’s surprisingly tense discussion of Apple’s business model.

Rogers noted that most of Apple’s App Store revenue comes from games, and he asked Cook why developers can’t use other payment methods to sell in-app purchases, or at least tell users that they can make those payments elsewhere. “If they wanted to go get a cheaper Battle Pass or V-Bucks, and they don’t know they have this option, what’s the problem with Apple giving them this option?” he asked.

“If we allowed people to connect with each other, we would basically give up our total output [intellectual property], ”Cook said bluntly. Apple has repeatedly talked about the work it does in maintaining the App Store and iOS platform, and has accused companies like Epic of wanting a free trip.

Rogers put the opposite case. “The gaming industry seems to be generating a disproportionate amount of money compared to the IP you give them and everyone else. In a way, it’s almost like supporting everyone else,” he said.

Cook objected that Apple’s many free apps attracted a larger audience than the developers themselves would get. “We need revenue for our IP address. We have 150,000 APIs created and maintained, numerous developer tools, and customer service that handles all of these transactions,” he said.

But Rogers didn’t sound convinced. He asked why Apple wouldn’t make the cut from the banking app: “You don’t charge Wells Fargo, do you? Or Bank of America? But you charge players for supporting Wells Fargo.” When Cook said it was because Apple charged specifically for digital products, Rogers pointed out Apple itself had defined this rule – saying it was a deliberate choice of business model.

“I understand this notion that Apple is somehow bringing customers to customers. But for the first time, after the first interaction, [developers] keep the customer in the games. It seems to me that Apple is only benefiting from it, ”Rogers said.

He also said it doesn’t sound like Apple’s own recent App Store prices are falling competition-driven mere fear of regulation and litigation. “It’s a question of a million-dollar SME program, at least from what I’ve seen so far: it really wasn’t the result of competition. It seemed to come from pressure from research, lawsuits, not competition,” Rogers said.

Cook replied that after Apple reduced some commissions to 15 percent, Google did the same, indicating competition existed, but the judge rejected that argument. “I understand that [was the issue] when Google changed the price, but the operation was not the result of competition, ”he said.

According to Rogers, the crux of the problem seems to be research showing that 39 percent of developers were “somewhat” or “very” dissatisfied with Apple’s distribution services. “How acceptable is that and how is it – assuming those numbers are true – how do you feel motivated and motivated to meet their needs?” he asked Cook.

Cook said the needs of developers and users sometimes conflict – and Cook stressed in previous testimonials that Apple puts users first. But he admitted that he did not receive regular surveys of developer satisfaction.

We do not know the verdict Epic v. Apple weeks or months, and the court has one day of arguments. The exchange with Cook doesn’t necessarily tell us how Rogers will eventually rule, and that doesn’t mean Epic would get some of his bigger demands. However, it suggests that Rogers seriously consider Epic’s claim that Apple has too much control over a particular part of iOS.

You can find the full exchange between Rogers and Cook below.

Judge Yvonne Gonzalez Rogers: At the beginning of your certificate, you indicated that you want to focus on users. I’ve seen evidence that a significant portion of the revenue from in-app purchases comes from players. Have you seen any evidence of that?

Apple CEO Tim Cook: I have the honor.

Rogers: And that’s incredibly significant – compared to other users, the revenue comes from players more than anyone else, am I right in my current understanding?

Cook: Most of the App Store’s revenue comes from games.

Rogers: And especially in-app purchases, right?

Cook: Right.

Rogers: The other thing you said is that you want to give users control.

Cook: Right. Their information.

Rogers: So what’s the problem with users being able to choose a cheaper option for content, especially in the context of the game?

Cook: I think they have a choice today. They have a choice of many different Android models for smartphones or iPhones, and that the iPhone has certain principles, from security to privacy.

Rogers: But if they wanted to go get a cheaper Battle Pass or V-Bucks, and they don’t know they have this option, what’s the problem with Apple giving them this option? Or at least the knowledge that they can go and have a different option for shopping?

Cook: If we allowed people to connect in this way, we would basically give up the total revenue from our IP revenue.

Rogers: But you could also make money differently, right? I mean, the gaming industry seems to be generating a disproportionate amount of money compared to the IP you give them and everyone else. In a way, it’s almost like they support everyone else.

Cook: Most apps in the App Store are free, so you’re right that there’s some kind of support. However, I look at it, honorable respecter, that when you have such a large number of apps that are free in the store, it increases traffic to your store dramatically, so someone gets to benefit a much higher sold audience. than they would otherwise do if there were no free apps.

Rogers: So your logic is that it’s more of a customer base, not an IP address?

Cook: It’s both because we need revenue for our IP address. We have 150,000 APIs created and maintained, numerous developer tools, and customer service that handles all of these events.

Rogers: But let me ask you, so banking applications. I have several banking apps, I haven’t paid for them, but I suspect other than $ 99, you don’t charge Wells Fargo, right? Is it Bank of America? But you charge players for supporting Wells Fargo.

Cook: In the example of the players, they trade on our platform.

Rogers: People do a lot of things on your forum.

Cook: But this is a digital event where a change in currency is noticeable.

Rogers: It’s just a model choice.

Cook: We have made a choice. There are clearly other ways to make money, but we chose this because we think this is the best way overall.

Rogers: Well, it’s pretty lucrative. But it seems to be profitable and focused on purchases made honestly on impulse – it’s a completely different question of whether it’s a good thing or not, it’s not really right for competition law – but it seems disproportionate. I understand this notion that Apple is somehow bringing customers to customers. But for the first time, after the first interaction, [developers] keep the customer in the games. Apple just seems to benefit from what I feel.

Cook: I look at it differently from you, honor. I think we’re creating an entire store for the store, and we’re doing it by focusing on getting the largest audience there. We do it with many free apps, so [even if] we don’t collect commissions from them, they bring a lot to the table. And then we have most of the other people who pay 15 percent, and only the people who really benefit in a big way pay 30 percent.

Rogers: Yeah, but those 15 percent, wouldn’t you … agree with the basic assumption that competition is good?

Cook: I think the competition is great. Competition is hard.

Rogers: However, you have no competition for in-app purchases.

Cook: Sure, I mean, someone could go, if he’s a player, he can buy it from a Sony PlayStation, Microsoft Xbox, or Nintendo Switch.

Rogers: Only if they know, right?

Cook: Yeah, but it’s up to the developer to communicate.

Rogers: And only if they decide to switch things, right?

Cook: Usually people have both.

Rogers: The million-dollar SME problem, at least from what I’ve seen so far: it really wasn’t the result of competition. It seemed to come from the pressure you feel from investigations, lawsuits, not competition.

Cook: It was because of the feeling that we should do something from a COVID perspective, and then choose to do something permanent, instead of doing something permanent. And of course we had lawsuits and all the other stuff behind our heads, but it triggered that we were very worried about small businesses.

Rogers: Okay, but it wasn’t competition.

Cook: It was a competition after we made 15, the competition made Google drop its own to 15 percent.

Rogers: I may understand that when Google changed the price, but the action was not the result of competition.

Cook: It was because of the feeling that we should do something for small businesses.

Rogers: So when other stores lowered the price, Steam lowered its prices, you did not feel the pressure to lower the price.

Cook: I am not familiar with Steam and their financial model. One thing that is missing here is that developers are competing tremendously. It’s not just competition on the user side, but also on the developer side in addition to the users. You can imagine that if we had a premium above the market, people wouldn’t just evolve for us.

Rogers: Let’s talk about developers. I see evidence of a developer survey in the record – I share the results of this bar chart presented to me. I don’t know how accurate it is because I was looking for the source document and couldn’t find it. But this study showed that 39 percent of developers were either very dissatisfied or slightly dissatisfied with Apple’s distribution services. 36 per cent were somewhat satisfied or very satisfied, and 19 per cent did not go either way, they are in the middle. So 39 percent of your developers are dissatisfied, how acceptable is that and how is it – assuming these numbers are true – how do you feel motivated and motivated to meet their needs?

Cook: I am not familiar with the document you are referring to, so it is difficult to comment on certain details. But keep in mind that we reject 40 percent every week [of apps sent for review], so there is definitely some friction in the system. But this friction provides users with a curated experience that they love and can go somewhere and be sure it’s safe and reliable. So the developer and the user, sometimes their interests do not intersect.

Rogers: But I don’t feel like you’re feeling the pressure or the competition as you change the way you work to address developer concerns – once again, if those numbers are correct.

Cook: I would look at it differently. We turn the site upside down for developers. Look at the complaint I may receive and see how long the change needs to be made in the company. It’s really amazing.

Rogers: We’ve seen several income statements, and once again you see the 100 binders behind – I don’t remember seeing any other surveys or other company data showing that you’re doing routine surveys on developer satisfaction and that you’re actually moving or making changes. I take a grain of salt from both sides for anecdotal evidence. I’m looking for are aggregates. Do you do that?

Cook: I don’t know if we will. That would be something Phil [Schiller] would know.

Rogers: You certainly don’t get regular reports on it as CEO.

Cook: That’s right.

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