The trial between Epic Games and Apple on Thursday and Friday seemed to spend an inordinate amount of time focusing on testimony about payment processing and if Fortnite and Roblox are games, experiences, or virtual worlds (the real answer is they are all these things, of course, but let’s not get in the way of the narrative). When Apple banned Fortnite last year after Epic implemented a server-side hotfix that allowed customers to buy directly from the developer in-game, the platform owner cited security risks and possible danger to users’ personal data.
On Monday, while there was some talk of a naked banana, Epic’s first expert witness may have more of an impact.
Epic is making the point with its line-up of witnesses that Apple is selective in its fear of third-party payment processors, and has given preferred status to some companies such as Lyft and Uber, while rejecting others (such as Epic). It also highlighted through its witnesses that Apple’s review process is inconsistent because it allows/fails to catch a lot of questionable apps for iOS in the App store.
Epic Head of Business Strategy Thomas Ko, Apple App Store VP Matt Fischer, and Apple Director Trystan Kosmynka were called to testify by Epic on Thursday; and on Friday, Kosmynka continued his testimony, alongside Epic VP and GM of Epic Game Store Steve Allison and Epic VP of Marketing Matthew Weissinger testified.
A majority of the time in the last three days (including Monday) was spent talking about the dangers of “stores within stores,” Apple’s preferential treatment or “whitelisting of some app developers” that have been exempted from the in-app purchase system, and what came across as some “what about the children” pearl-clutching cross-examination by Apple counsel about itch.io access on the Epic Games Store and Fortnite character “Mr. Peely” appearing without his clothes. On the surface, the in-court back-and-forth about Itch.io (which contains adult content) and a naked banana seems silly but Apple seems to be trying to paint Epic as careless when it comes to gatekeeping adult content and some of that may well be resonating with U.S. District Court Judge Yvonne Gonzalez Rogers.
Then there is the matter of Roblox. There was plenty of testimony last week on the game not being a game, and Fortnite not being one either (from Epic’s perspective). Apple’s point was that Roblox is classified as an app and an experience platform, which is why it allows content to be sold within it. Epic tried to argue that Fortnite is also an experience, offering music concerts and movie screenings in addition to creative and battle royale game modes. Apple says it is not. It’s perhaps a silly argument outside of a courtroom and amongst people who use both of these products (namely gamers), but both sides are trying to explain why one does not have to use an in-app payment system and the other does.
Some interesting quotes from Thursday and Friday on the whole question of Roblox and Fortnite and the industry standard on commissions:
Trystan Kosmynk: “My own understanding of a metaverse is a virtual world where you go with your particular character and are with players that you know, players you do not know, and you navigate around that which could include additional worlds and various experiences.”
Steve Allison: “The sentiment by 2018 was, fairly broadly, that the 30% could be considered unreasonable,” referring to Valve’s Steam.
Matthew Weissinger: “It’s one of the remarkable things about Fortnite, we’re building this thing called the metaverse – a social place. One of the ways I’ve tried to explain it is, think about all of us in lockdown, and how we try to stay socially connected. Some of the most meaningful experiences I’ve had were logging into Zoom and we had our friends and parents and we celebrate grandpa’s birthday -we have a shared moment together – we connect for a cooking class or a happy hour – we come together in these ways even though we’re hundreds or thousands of miles apart.”
But the most potentially impactful testimony began on Monday as Epic rolled out the first of several expert witnesses this week: University of Chicago economist David Evans.
In his testimony, Evans argued that Apple has a monopoly because it sells the platform (iPhone, iPad) and locks users into its ecosystem for acquiring programs for these devices. It is not illegal to have a monopoly, it’s how you wield power related to it (as Jeffrey Jacobowitz told The Esports Observer last week). Developers can offer cheaper apps via the web or within the app, but Apple does not allow users to access these things outside of its own ecosystem, Evans testified.
Evans laid out why Apple has a “substantial” market share that he attributes to the barrier to entry and high switching costs. Those switch costs, according to Evans, include buying a new smartphone, losing access to data and apps, the learning curve for new devices, and the repurchase of paid apps or in-app purchased content.
One interesting moment in his testimony Monday: Evans had to clarify comments from the past where he praised Apple’s iOS; he said in court that Apple left off an important caveat in the quote it was using. He wrote, “There isn’t much controversy that Apple’s rules have enabled it to create a high-quality app ecosystem for the iPhone,” but Apple omitted this part: “That doesn’t mean however that Apple couldn’t abuse these rules.”
Evans will continue his testimony Tuesday, but we’ll leave you with a mildly amusing comment from Weissinger about a naked banana:
“It’s just a banana,” Weissinger said when shown a picture of Mr. Peely without his clothes.
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