Apple brings CEO Tim Cook to court in defense the app store

On May 21, 2021, Apple CEO Tim Cook appeared in court to defend the App Store against allegations that it has become an illegal monopoly. One that will be significantly more profitable than Steve Jobs predicted 13 years ago. The reason for this is that Apple is counting on Cook's participation to wrap up its antitrust case against Epic Games, the creator of the popular video game Fortnite. Epic is aiming to dismantle the so-called "walled garden" model for iPhone and iPad apps, which welcomes customers and developers but excludes competition. Apple's App Store, which Jobs introduced a year after the iPhone's launch in 2007, has grown into a key revenue source for the company, pushing it to a $57 billion profit in its most recent fiscal year. Epic is aiming to show that the store has turned into a price gouging vehicle that not only reaps a 15% to 30% commission from in-app purchases, but also bans apps from offering alternative payment methods. Simply presenting a link to a web page that offers commission-free payment choices for subscriptions, in-game merchandise, and other similar services falls under this category. Apple strongly defends the commissions as a legitimate way for app developers to contribute to the cost of inventions and security protections that have benefited both iPhone users and app developers, including Epic. These features are said to have cost Apple more than $100 billion. It also claims that App Store commissions are the same as those charged by major gaming consoles such as Sony's PlayStation, Microsoft's Xbox, and Nintendo's Switch, as well as Google's own app store, which serves over 3 billion Android devices. Apple's app store has nearly doubled the number of active iPhones, iPads, and iPods. Apple's tight grip over the App Store is already being investigated by regulators and lawmakers in Europe and the United States. Epic lawyers are sure to grill Cook for several hours on the stand. Cook's tactics, which he established since becoming CEO over a decade ago, just months before Steve Jobs died of cancer in October 2011, are likely to be the focus of the interrogation. During Cook's tenure, the App Store was one of Apple's major triumphs. Since its inception in 2008 with only 500 apps, the store has grown to 1.8 million apps, the majority of which are free. Apple's commissions and proprietary in-app payment system helped the company's services sector more than double its yearly revenue from $24 billion in fiscal 2016 to $54 billion last year. This boom was not predicted by Jobs. Jobs stated publicly shortly after the store's launch that Apple did not expect the App Store to be extremely profitable. Epic's lawyers have used those remarks as proof that Apple changed the store to boost revenue once the popularity of mobile apps popularity was clear. Throughout the three-week experiment, there was debate over how profitable the App Store is. Based on an analysis of private Apple records, an accounting expert engaged by Epic calculated that its profit margins vary from 70% to 80%. Apple, on the other hand, claims that those figures aren't realistic because they don't account for expenses incurred across the company's operations. Apple's commission structure generated more than $20 billion in revenue through June 2017, according to Phil Schiller, a senior Apple employee and former Jobs confidant. Katherine Forrest, an attorney for Epic, had supplied him with that estimate, which was based on figures published by Apple in mid-2017. Epic's interrogation of Schiller could be a preview of how Epic's lawyers plan to go after Cook, who is normally unflappable in public and laser-focused on his message when dealing with reporters and legislators. Epic's lawyers have often cited internal Apple communications involving Jobs and other officials to portray Apple as leveraging its investment in security and personal privacy as a justification for protecting its massive app store earnings. Epic's lawyers, for example, presented a 2008 email Jobs sent to Schiller and another executive during Schiller's testimony. Jobs wondered in the message if Google was targeting the nascent ad industry that was forming on the iPhone, which runs on the iOS operating system. Jobs wrote to Schiller, "The more focus they commit to iOS, the better." Forrest then posed two questions to Schiller. She asked, "You wanted Google to be subservient to Apple?" and then, "You were relishing in the power to destroy a company's business?"