Epic Games is the company that made
the popular game Fortnite and
currently they are suing Apple for
antitrust violations.
Now what they're arguing is that
Apple forces them to use their
payment processing system
through their app and of
course they take a giant percentage
of the revenue 30% of all app
developers who use the platform.
Now to get around it, Epic Games
decided to go in a different
direction and Apple didn't like it.
So the trial that's taking place
right now will center on a legal
debate over whether
Apple is a monopoly.
Epic's lawyers have argued that
companies need iPhones
to reach customers and that Apple,
unfairly forces app makers to use
its payment system and
pay its fees, which in many cases
is 30% of revenue.
So the trial which is expected to
last about three weeks,
carries major implication, so this
could set precedent for the future.
If Epic wins, for instance,
it will upend the economics of
the $100 billion app market and
create a path for
millions of companies and
developers to avoid sending up to
30% of their app sales to Apple.
Epic has pointed to the commission
it charges in its own marketplace
for game developers 12%.
Now what epic did was essentially
create its own payment processing
system and it encouraged users to
use that processing
system as opposed to Apple's.
Apple didn't like it, and booted
Epic Games off of its platform, and
that's really what kind of sparked
this lawsuit and
this epic antitrust battle.
Now after Epic sued, Apple,
Apple did halve its commission
to 15% for developers that make
less than $1 million on their apps.
The new rate applies to about 98%
of the developers that Paid Apple's
commission.
According to Sensor Tower,
more than 95% of Apple's app
revenues come from
companies paying the full 30% rate.
>> Okay, so
I'm a little mixed on this, I think
it's a really interesting case but
it's already worth it on that last
part that Anna just told you.
So the people who need the break on
it the most are the people who make
less than a million dollars and
are small time apps that are trying
to survive in the world.
And it's clear that if,
some company like Epic didn't force
Apple, into that decision, they
wouldn't have made it, they would
have kept it at 30% for everybody.
There's no question that,
Epic putting public pressure on led
to that decision and
that's great for the little guy.
So here here to Epic for at least
forcing that to happen, right?
And look at the second part of what
Anna told you, it actually doesn't
cost Apple that much money because
they're making most of the money
from the people making tons and
tons of money at the top of the app
game, right?
So it's the right thing to do they
should have done it before they got
pressured into it.
Okay, now, does Apple have a right
to charge 30%?
Sure they do, so they can charge
whatever they want and
in the beginning it's possible that
the app market wouldn't have worked
and they might've charged 30% to
a couple of people and
then it dies out.
It might've been the day that
the price was too high, right?
But people said, no,
we're willing to pay that
price because the market
that you have set up it's worth it.
By the way, one of the companies
that does that is us,
we pay Apple 30% when you get
the app through an iOS,
our app TYT app which you should.
Okay, now, do I like the 30%?
No, I don't,
I think it's too high and so, and
by the way, now it might be 15% for
us I'm going to have to look into
it, but at the same time would I
take it off that market?
I wouldn't, so I think Apple has
an interesting case to make, but
here's the last twist on it there's
many twists but
the one really important one here.
Is Epic says yes but, if you make
the market, remember you're making
money off the phones, right?
And then you're making money off
the apps,
getting 30% of all apps but then
you say another app company cannot
compete with us on our platform.
That's interesting because then
you're beginning to use what is
a near monopoly on the phones to
squeeze out your competition
in the other area of your business.
That's an interesting
legal argument and
I can't wait to see how the courts
are going to decide that.
>> Apple has countered this
argument regarding the monopoly on
phones by saying, look,
we have created this revolutionary
platform for apps.
Apple has said, that it developed
a world-changing product in
the iPhone that led to economic
miracle, the iPhone that led to a,
I'm sorry,
an economic miracle in mobile apps.
Apple has spent billions of dollars
developing the iPhone and another
$100 million on its App Store,
the company said, and charging
a commission on app sales is partly
how it recoups that investment and
keeps apps safe.
Epic has countered that Apple's
commission's do very little for
security.
So, Epic Games basically saying,
look, what you're saying that
you're offering us in your platform
isn't as great as you claim it is.
But I would also counter Apple's
argument by saying listen,
30% is quite a cut of what you're
demanding here.
And when you look at how much money
they make in pure profits, cutting
down that amount to something
that's a little more reasonable
isn't the end of the world, right?
They have created a monopoly and
then at the same time,
there's a little bit of price
gouging going on in order to be
able to exist on that platform.
>> Yeah, well, so look, two bad
arguments in this case are clear.
One is Apple's in a little bit of
trouble here because, look,
nobody would pay the 30% unless it
was a near monopoly, right,
you would have competition and
the number would come down
30% a very high number.
So I don't know how they're
going to get around that
I'm curious to see how it's
going to play out.
Apple has another very bad
argument, they say, as Anna told
you, $100 million, it costed $100
million to develop the app store.
And do you know how much they make
in the App Store, per month, $30
billion, that is a stunning number.
Well the only reason why Epic can
battle them is because they also
make a ton of money.
And so the lawyer costs for
a small company is devastating, for
these giant companies, the legal
costs, they're, who cares,
what the trial is going to cost 10
million, 50 million.
It's nothing because Epic is now
valued at $29 billion, okay?
Now, but remember Epic's 29
billion, Apple averages 30 billion
in revenue a month, I'm sorry,
not just from the app store, but
overall for Apple, right?
Don't tell me that the 100 million
you spent on the app store you
haven't made it up yet?
No, of course you have,
of course you made giant,
giant profit on that,
don't bother making bad arguments.
>> Man, it's just never enough,
it's incredible, it's never enough.
>> Of course, but by the way,
just understand how we set
up the system wrong.
So I frustrate a lot of our left
wing audience by saying
that I still believe in capitalism,
I think it has to be checked by
democracy.
But one giant mistake we've made
that is cost us everything is that
when we set
the laws on corporations,
they're legal fictions.
We can create them any way we want
and we set any rules we want
on them but we only set one rule,
maximize profit.
And if you don't maximize profit,
actually you're violating your
fiduciary responsibility in
a public corporation like Apple.
So if Tim Cook did not maximize
profit by charging the absolute
maximum that he could charge no
matter what the circumstances are,
he'd be fired and he'd be replaced
by someone who is more ruthless.
because we designed the system
wrong and said don't worry about
anything, but making every red
penny you can, no matter who you
crush in the process.
That's not Apple's fault,
that's our politicians fault.