Apple users are trapped in the App Store, Epic says at the first day of antitrust trial

Epic Games says that Apple users and developers “trapped” in the App Store in an anticompetitive marketplace, while Apple accuses Epic of setting up a PR campaign to make the iPhone maker look like a “bad guy” to “revive flagging interest in Fortnite. 

Epic attorney Katherine Forrest argued in the opening statement that Apple has “brick by brick” built the App Store into a “walled garden”. “The most prevalent flower in the walled garden is the Venus fly trap,” Forrest argued before Judge Yvonne Gonzalez Rogers.

“The garden could’ve had a door. It’s artificially walled in,” said Ms. Forrest, an attorney with Cravath, Swaine & Moore LLP who is a former New York federal judge.

As the first witness to take the stand in federal court in Oakland, California, Epic Games CEO Tim Sweeney said  the lawsuit is “entirely about Apple’s Apple’s practices. Sweeney also said he waited to sue the iPhone maker until last year because it took him to realize “the negative impact” of App Store policies. 

“It got to the point when Apple was making more profit from a developer’s app in the App Store than the developer was making himself.” Sweeney said. 

Epic’s fight against Apple started back in August when Apple removed Fortnite from the App Store because the developer put its own direct payment system to the game. 

U.S. District Judge Yvonne Gonzalez Rogers asked Epic CEO if he knew its company was violating its App Store contract when it released a “hotfix” update to roll out its own direct payment system in Fortnite.

Tim Sweeney said that he knew he was breaking the App Store rules by adding Epic’s own in-app payment system into Fortnite last year. He wanted, however, to highlight Apple’s monopolistic approach over all users and developers. 

“I wanted the world to see that Apple exercises total control over all software on iOS, and it can use that control to deny users’ access to apps,” Tim Sweeney said on the first day of an antitrust trial, which is expected to run three weeks.

Fortnite generated over $9B in revenue in its first two years

According to the new financial documents revealed as part of the trial, Fortnite generated more than $5 billion in revenue in its first year. The battle royale title made over $9 billion in total in 2018 and 2019. 

According to Sensor Tower data, in May 2020, Fortnite had hitted $1 billion in lifetime player spending on Google Play and the App Store.  The data also had found that After the removal, Fortnite had left a $1.2 billion opening in the battle royal market on the App Store alone. 

In the two-year period, Epic reported over $5.5 billion in profit. The document revealed also predicted that Epic would have almost $3.6 billion in revenue in 2020. 

Tim Sweeney said Epic’s overall revenue for 2020 totaled $5.1 billion. 

The App Store had 78% profit margin in 2019, Epic says

According to court testimony from an Epic expert witness based on documents obtained from Apple, the App Store ran at a 78% profit margin in 2019. Based on the calculations of the expert witness Ned Barnes, the App Store’s profit margin rose from 75% in 2018 to 78% in 2019. 

Apple disputed the accuracy of Barnes’s calculations and urged a judge to restrict public discussions of its profits. Apple said Barnes’s calculations of the operating margins for the App Store are simply wrong and we look forward to refuting them in court.”

According to Sensor Tower data, users spent $72 billion on the App Store and the App Store generated $22 billion in commissions in 2020. Currently Apple takes up to 30% of the revenue from paid apps, in-app-purchases and subscriptions. In the first year for subscriptions, the company charges 15% instead of 30%. 

Both Apple and Epic have released their opening statements. 

Epic’s Opening Presentation

Epic Opening Demonstratives by Chance Miller

Apple’s Opening Presentation

Apple Opening FINAL by Chance Miller