- It's been over nine months since Epic sued Apple
for violating antitrust law
and the trial has just wrapped up.
We've explained the background of Epic versus Apple
in another video, but to recap,
last year Epic decided to bypass
Apple's in-app purchasing system on Fortnite,
one of the biggest games in the world.
Apple banned Fortnite from the iOS App Store
for breaking its rules
and Epic sued for antitrust violations,
saying the whole App Store model was an unfair monopoly.
The trial started in early May.
Since then, we've heard from Epic CEO Tim Sweeney,
Apple CEO Tim Cook,
Apple executives Phil Schiller and Craig Federighi,
representatives from Microsoft and NVIDIA,
and over a dozen other witnesses
talking about everything from Apple's accounting methods
to the definition of a metaverse.
So let's get into it.
- The heart of this case
is about what it's like to be a developer on the App Store.
Apple likes to talk about how much it loves iOS developers,
how much money they're making,
and how easy they've made the process.
- [Man] It's the most incredible app marketplace
that the world has ever seen.
- Actual developers tell a different story.
It's hard to get on the store, hard to deploy changes,
and a lot of your success
depends on the placement Apple gives you.
That means if you're trying something new like Tile,
you might get great placement for years
only to find yourself locked out
once Apple decides to make a competing product like AirTags.
- With iOS 13, Apple introduced a new Find My App.
It's basically their version of Tile.
At the exact same time,
Apple made changes to its operating system
and made it really hard for our customers
to activate their Tiles.
And then of course yesterday, Apple announced
the launch of their competing hardware product, The AirTag.
- Apple's defense is that keeping the app store
as the exclusive source of content protects users from fraud
and enforces basic purchasing standards across the device.
Even Epic CEO Tim Sweeney admitted in emails
that his platform sometimes struggled with fraud.
But during the trial, we got a firsthand look
at how Apple's process works.
And it wasn't all about protecting users.
In a sworn deposition, a former app store official
named Phillip Shoemaker,
testified that apps like Google Voice or Rhapsody Music
ended up taking a surprisingly long time to get approved
as Apple weighed the cost of letting a competing service
onto the iPhone.
He even specifically named Google Voice
as an app that was removed on pretextual
or basically fake grounds.
Shoemaker was skeptical of Apple's fraud protections too,
comparing the app store to a tropical airport
and saying app review was more like
the lady who greets you with a lei
than the drug sniffing dog.
When the lawyers asked how often he heard developers
complaining that the rules were unclear,
Shoemaker said it happened every day.
He saw Apple as just as hypocritical about apps
that sold other apps.
Something Apple doesn't allow,
but hasn't always been clear in communicating.
The conflict came to a head
when Shoemaker had to deal with an app
called Big Fish Games.
Apple wanted it removed as an app store within the app store
but Shoemaker thought the denial was arbitrary
and blew up at an executive
saying there was no guideline to justify the removal.
In-app stores like this aren't a security problem exactly,
but they threaten Apple's control over iOS software.
And the ban means there's a whole category of product
that's almost impossible on iPhones.
That includes the Epic Games store,
which is actually distributing software,
but it also includes cloud gaming services
that are ultimately just streaming video.
That's a bigger problem than a single game like Fortnite,
or even Apple's 30% commission.
(upbeat instrumental music)
- Although Microsoft isn't party to the trial,
it has played a big role with an X-Box executive testifying
and also documents about its Windows and X-Box businesses.
Microsoft is also not happy
with Apple's control over the iPhone.
And it's been pretty vocal about the App Store
over the past year.
Microsoft tried to get xCloud onto the iPhone and iPad,
but after months of back and forth with Apple,
it ultimately ended in Apple refusing
to approve the xCloud app.
We even saw xCloud rival, Shadow,
booted off the app store temporarily,
after Microsoft emailed Apple to ask
why Netflix and Shadow were able to provide apps
with interactive and gaming content.
Apple has defended its reasoning here
as an effort to make sure streamed games
can use Apple's parental controls.
Apple wants Microsoft, NVIDIA, Google,
and others that run cloud gaming services
to package up every single game individually,
which Microsoft has called a bad experience for customers.
Now, Netflix doesn't have to do this for TV shows or movies.
And can you imagine having to download an individual app
for every single TV show you want to watch on Netflix?
Apple claims this is because the content in games
can change and is interactive.
But this doesn't explain why Netflix's
interactive Bandersnatch is still allowed on the app store.
Microsoft, NVIDIA, and Google have all decided
it's all too much friction for consumers
and they've launched web-based versions for iOS instead,
working around Apple's policies.
The difference between game consoles, mobile phones,
and desktop PCs has also been a key part of this trial.
It centers on the PC being an open model
where there are plenty of games and app stores,
and anyone can install anything, basically;
Versus the iPhone and game consoles,
where things are a little bit more locked down
and platform owners control what apps are available.
While Epic and Microsoft are fighting against
Apple's 30% commission on app store digital sales,
they're both happy to keep the same cut on the X-Box side.
This trial has revealed that Epic has
never questioned Microsoft's 30% cut on digital games,
and both companies defend it
because Microsoft sells exports consoles at a loss.
X-Box's executive Lori Wright revealed during the trial
that Microsoft never makes a profit
from console hardware itself.
And Microsoft was quick to point out,
after Wright's testimony, that profits are generated
in game sales and online service subscriptions.
It's a model that's been in place for X-Box and PlayStation
for years and shared marketing campaigns
and partnerships have helped games
like Fortnite become extremely popular.
That might explain why Epic doesn't want to rock the boat
with console makers,
where it generates most of its Fortnite revenue.
Apple argues that its app store
shouldn't be treated differently to the export store,
which also restricts which apps are available to consumers.
Microsoft and Epic have been arguing
that the iPhone should be treated
as a general purpose device, much like a PC,
and should allow for rival stores and payment platforms.
Microsoft even cut the revenue it takes from PC games
just days before the trial to 12%, instead of 30%.
It was a perfectly timed move to position PC gaming
separate to the X-Box
and to backup its argument about console business models,
and that phones shouldn't be treated as specialist devices.
Documents in this trial have also provided a rare insight
into Microsoft's previous back and forth with Apple
over launching Office on the iPhone and iPad.
Microsoft wanted Apple to allow its Office app
to avoid in-app purchases
and advertise its own subscriptions.
But Apple executive Phil Schiller
shut this down in an email, noting
'We run the store, we collect the revenue.'
That line alone tells you everything you need to know
about how Apple feels about its app store.
- One of Epic's big points is that Apple
already uses an open app distribution model on the Mac.
MacOS has an app store, just like iOS,
but it relies on other security techniques,
like code signing,
to let people download apps from across the internet.
Epic dug up a 2007 report where Apple's security team
analyzed the risks of third-party software.
And the author seemed open to a more MacOS- like model,
calling a fully locked down design a policy decision,
rather than an absolute must have.
Epic also claims that Apple's ban on stores within the store
is arbitrary.
It brought up a series of emails about Road Blocks,
an app that lets designers build
and launch their own games and experiences.
Apple's app store reviewers, apparently worried about this,
but they never did anything about it.
To Epic, that shows that Apple doesn't have
consistent guidelines for its platform.
In Apple's rebuttal,
software engineering head Craig Federighi said
iOS couldn't work like MacOS.
Federighi said whatever that 2007 report concluded,
the situation in 2021 is different.
iOS has a lot more users than MacOS.
People's phones collect a lot more data,
and he claimed MacOS is regularly exploited by malware.
If you applied max security techniques to the iOS ecosystem,
it would get run over even more dramatically
than on MacOS.
Apple's concerns don't stop at malware.
iOS restricts content that it considers offensive
or sexualized and Apple argued repeatedly
that without strict app store review,
all that content would come flooding in.
It kept bringing up the fact that
Epic's game store hosts another game store called itch.io,
and that store allows so-called adult games, that Apple's
lawyers couldn't even bring themselves to name in court.
Every new store within a store puts control one more step
out of Apple's reach.
Apple also says iOS users do have third-party store options.
Steam, Sony, and Microsoft have iOS apps that let you
buy and remotely stream games,
as long as it's from a home PC or console,
not a cloud gaming service like xCloud.
All these debates highlight
the biggest stakes for Apple and Epic.
Apple says that people buy the iPhone
to get a safe and trusted experience.
One of its lawyers accused Epic of trying to make iOS
a poor imitation of Android,
depriving Apple of a big selling point for its devices.
Meanwhile, Apple is locking Epic's game store
off a huge mobile platform,
and asking for a big cut of Epic's Fortnite fortune.
Sweeney called Fortnite a metaverse.
A full-fledged social space where players can watch concerts
or build their own creations that, eventually,
they might even be able to sell.
Epic wants to expand the economy inside that metaverse,
and if it gives Apple 30 cents of every dollar,
that adds up to a lot of money.
The verdict might end up hinging on smaller issues, though.
Judge Yvonne Gonzalez Rogers, for example,
spent a lot of time asking about Apple's
anti-steering provisions,
the rules that restrict iOS developers
from mentioning other platforms where people can find them.
Those weren't central to Epic's case,
but they affect a lot of developers of all sizes.
Whatever happens,
we might not know who won this case for months.
Winning could mean a lot of things.
And the verdict will affect not just Epic and Apple,
but console makers, app developers,
rival phone manufacturers,
and countless users on all those systems.
Hey, thanks for watching.
Check out our earlier video, if you're interested
in the background of this case
and stay tuned for more coverage on theverge.com.
And also, like and subscribe.