CEO Tim Cook takes the stand: Apple v. Epic Games gets star witness Friday as trial nears close

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Apple and Epic Games' legal battle royale is nearing an end.

The courtroom drama between the tech giant and "Fortnite" publisher, now in its third week in an Oakland, California federal court, will see star witness Apple CEO Tim Cook take the stand Friday.

Apple's lawyers will likely use Cook's testimony to buttress the iPhone company's assertion that its App Store benefits developers like Epic Games, as well as consumers. Those are contentions Apple included in its countersuit to Epic's suit charging that Apple and its App Store violate antitrust law.

"He can be pivotal in describing Apple’s mission to protect the privacy and security of its users through Apple’s integrated development environment, its focus on assessing and verifying apps prior to release and the cost the company incurs to make sure user’s have a seamless and user friendly experience," said Ari Lightman, professor of digital media and marketing at Carnegie Mellon University's Heinz College.

Should Apple be forced to temper its App Store guidelines, user experiences "might diminish," Lightman said.

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Apple CEO Tim Cook, shown here speaking during a special event at Apple Park in Cupertino, California, on April 20, 2021, is expected to testify Friday in the trial pitting Apple vs. Epic Game, publisher of the video game 'Fortnite.'
Apple CEO Tim Cook, shown here speaking during a special event at Apple Park in Cupertino, California, on April 20, 2021, is expected to testify Friday in the trial pitting Apple vs. Epic Game, publisher of the video game 'Fortnite.'

Breakdown: Apple v. Epic Games

The App Store is at the heart of the legal contest. The ongoing tension took a turn when Epic gave players of its mobile games such as "Fortnite" a way to pay directly for items, bypassing the App Store and Google Play store.

Noting that Apple and Google each take a 30% cut of most purchases made in their online stores, Epic priced items that typically cost $9.99 in those stores at $7.99, giving players a discount. That led Apple and Google to remove "Fortnite" from their app stores, which not only halted the influx of new players but also made it harder for those who already had the app to update it and keep playing.

Epic sued Apple and Google, arguing their in-app payment systems, requiring a cut of Epic's sales, were anti-competitive and monopolistic. Its argument, Lightman said, is that "Apple monopolizes access to its user base by charging exorbitant rates and breached antitrust laws by removing the app from the App Store."

Conversely, Apple argues that Epic breached a contract and, as a result, the company took what it considered "appropriate measures," in pulling the Fortnite app, he said.

At stake in the trial is Apple's business model for iOS devices, said Jennifer Rie, a senior litigation analyst for Bloomberg Intelligence. "It operates the iOS as a walled garden, and Epic is seeking to force Apple to open the system to other app distributors and/or other services of payments made for apps and for in-app purchases," she said. "It would be a major change in the way Apple controls iOS devices and could result in a big hit to its revenue."

Epic Games CEO Tim Sweeney, second right, approaches the Ronald V. Dellums building in Oakland, Calif., to attend his company's federal court case against Apple on Monday, May 3, 2021. Epic, maker of the video game Fortnite, charges that Apple has transformed its App Store into an illegal monopoly.
Epic Games CEO Tim Sweeney, second right, approaches the Ronald V. Dellums building in Oakland, Calif., to attend his company's federal court case against Apple on Monday, May 3, 2021. Epic, maker of the video game Fortnite, charges that Apple has transformed its App Store into an illegal monopoly.

Apple v. Epic: The trial so far

The trial began May 3 with Tim Sweeney, CEO of the Cary, North Carolina-based Epic, taking the stand for the first two days of the trial. Some of Sweeney's statements seemed to bolster Apple’s defense including his acknowledgment that he personally used an iPhone instead of smartphones running on Google’s Android software because he thought Apple offered better security and privacy controls.

Sweeney also acknowledged Apple made changes to iPhone’s software to help make it possible for "Fortnite" players to compete against each other while one was on a phone and the other was on a video game console. This “cross-platform” expansion helped the game grow to more than 400 million users.

Ahead of Cook's testimony, other Apple executives have been questioned this week including Michael Schmid, head of game business development for the App Store, who on Wednesday said Apple had spent $1 million on marketing for "Fortnite" in the 11 months prior to its removal from the App Store and had made $100 million on the game.

Epic Games CEO Tim Sweeney enters the Ronald V. Dellums building in Oakland, Calif., to attend his company's federal court case against Apple on Monday, May 3, 2021. Epic, maker of the video game Fortnite, charges that Apple has transformed its App Store into an illegal monopoly. (AP Photo/Noah Berger)
Epic Games CEO Tim Sweeney enters the Ronald V. Dellums building in Oakland, Calif., to attend his company's federal court case against Apple on Monday, May 3, 2021. Epic, maker of the video game Fortnite, charges that Apple has transformed its App Store into an illegal monopoly. (AP Photo/Noah Berger)

Epic Games made $700 million on "Fortnite" through the App Store, Apple said earlier in the trial.

Apple’s software chief Craig Federighi also took the stand Wednesday to discuss the various ways the company insulates its products from hackers. "We try to stack up many layers of defense," he said.

While on the stand earlier in the week, Phil Schiller, who is now an Apple fellow but previously had been the company's senior vice president of worldwide marketing and was a confidant of the late Apple co-founder Steve Jobs, detailed how Apple developed the App Store.

When asked whether Apple's 30% "commission (is) still competitive?” by Apple lawyer Richard Doren, Schiller said, “We believe it is, yes,” MarketWatch reported. Schiller added small-business developers with less than $1 million in sales now pay 15% commissions as part of a program that went into effect last year due to the coronavirus pandemic.

And Schiller pointed out the App Store has competition from Google Play and app stores from Microsoft, Samsung, Huawei, and Amazon, as well as on game consoles such as Xbox, PlayStation and the Nintendo Switch, the site reported.

Members of Apple's legal team roll exhibit boxes into the Ronald V. Dellums building in Oakland, Calif., as the company faces off in federal court against Epic Games on Monday, May 3, 2021.
Members of Apple's legal team roll exhibit boxes into the Ronald V. Dellums building in Oakland, Calif., as the company faces off in federal court against Epic Games on Monday, May 3, 2021.

Overall, Apple's goal is to establish that "the iPhone is a unique environment that is very complex and integral to daily life," Lightman said. He noted that ensuring quality control and compatibility for the apps that go on the phone is essential to the overall experience. "This has an impact on Apple’s brand since there is association with the iPhone and iOS even if they are not at fault....It is a complex platform and ecosystem that needs to be understood to assess the significance of this trial."

What does Roblox have to do with this?

During the testimony of Apple marketing manager Trystan Kosmynka was asked about whether "Roblox" and "Minecraft" were games.

“If you think of a game or app, games are incredibly dynamic, games have a beginning, an end, there’s challenges in place," testified Kosmynka, 9to5Mac reported. "I look at the experiences that are in Roblox similar to the experiences that are in Minecraft. These are maps. These are worlds. And they have boundaries in terms of what they’re capable of."

Why could this matter? "Because Apple maintains different App Review standards for gaming apps, especially gaming apps that stream unreviewed gaming content from the cloud, as Roblox does on iOS," Ars Technica reported.

The line of questioning, The Verge reported, "seemed like Epic was attempting to establish that Apple is inconsistent — and passing the buck.

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Interestingly, Roblox has replaced the word “game” with the word “experience” across much of its website, The Verge also reported. Roblox iOS and Android apps also got a Discover tab to replace the Games tab, even though both apps remain classified as games in those stores, the site reported.

What is the definition of a "game," has been a question that has cropped up numerous times, The Washington Post reported. Attorneys for Epic Games asked both Steve Allison, vice president and general manager of the Epic Games Store, and Matt Weissinger, vice president of marketing. "Defining what a game is might sound pointless to listeners, but it gets to the heart of the Epic v. Apple antitrust case: Narrowing down a market definition to determine if Apple is running a monopoly," The Post wrote.

Apple or Epic: Who is winning?

The Associated Press asked on May 9, "Is Epic Games' showdown with Apple turning into a mismatch?

For Epic to prevail, the video game company must persuade U.S. District Judge Yvonne Gonzalez Rogers that Apple’s app store allows the Cupertino, California, company to engage in price gouging.

That argument will likely require the judge to embrace Epic’s contention that the iPhone’s software and the app store are large enough to represent a market by themselves. That has been a tough case to make, largely because the same commission rates have long been charged by similar stores operated by the leading video game consoles – Microsoft’s Xbox, Sony’s PlayStation and Nintendo’s Switch – as well as on smartphones and other devices running on Google’s Android system.

"While Epic Games has chipped away a little bit on market definition issues, it doesn't seem like they have done enough given skepticism by the judge on the way Epic has defined the market," Rie said. "It faced an uphill climb at the outset to convince the judge that a single-brand market is appropriate in this instance."

How important is Tim Cook's testimony?

Cook's testimony may be less important than that of various industry experts who testified last week, Rie says, "but his testimony will be important for the rationale behind Apple's business model."

Cook, who has testified before Congress on antitrust issues, reportedly has been prepping for his testimony with "hours or practice," The Wall Street Journal reported.

"This is key testimony for Cook as the App Store and its fee structure represents the golden jewel of Cupertino’s services business," said Daniel Ives, an analyst with Wedbush Securities, who expects Apple to be the victor in court. "All eyes are on this testimony as the Epic trial hits on the broader App Store fee structure and antitrust swirls which remain a risk around the Apple story in the eyes of the Street."

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Cook will likely be asked to describe "just how complex it is to develop and support a smartphone system," Lightman said, perhaps going into details such as chipsets, carriers, and the range of applications available.

"The smartphone is an essential device not just for communication but working, studying, entertaining, etc and Apple needs to support all of those purposes," he said.

What happens next?

Both sides are expected on Monday to make their closing arguments and answer the judge's questions about the evidence.

Even the judge doesn't think her decision will be the final word on the showdown. Before testimony began Thursday, MarketWatch reported, Judge Gonzalez Rogers said she had not “decided what I’m going to do” but “one or both of you won’t be happy, so it’s going to go to the court of appeals.”

Even if the judge sides with Apple and upholds the status quo, Epic could still win if the issues aired out in the trial raise consumers’ awareness about the different options available to them, Daniel Lyons, a Boston College law professor following the case, told The Associated Press.

“Even if they lose the case, they have been playing a court-of-public-opinion game,” Lyons said. “You spend a few million dollars on lawyers and you are a company that winds up being in the headlines for sticking up for the little guy. Maybe that’s a win in itself.”

If Apple wins, it still has hurdles, Rie said. "There are ongoing purported class actions against the company by classes of developers and app buyers making similar accusations against Apple as Epic Games," she said. "These lawsuits have yet to play out. And the Department of Justice is investigating Apple and and may file a suit, as well, as could State Attorneys General. So if Apple wins, it is not necessarily the end of the story."

Contributing: The Associated Press

Follow Mike Snider on Twitter: @MikeSnider.

This article originally appeared on USA TODAY: 'Fortnite' lawsuit: Apple CEO Tim Cook to testify in Epic Games trial

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