{"id":246767,"date":"2021-05-11T01:16:00","date_gmt":"2021-05-10T22:16:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/epic-takes-aim-at-apples-financial-advantage-in-app-store-model\/"},"modified":"2021-05-11T01:16:00","modified_gmt":"2021-05-10T22:16:00","slug":"epic-takes-aim-at-apples-financial-advantage-in-app-store-model","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/epic-takes-aim-at-apples-financial-advantage-in-app-store-model\/","title":{"rendered":"#\n  Epic takes aim at Apple\u2019s financial advantage in App Store model"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a42508165d80\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a42508165d80\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/epic-takes-aim-at-apples-financial-advantage-in-app-store-model\/#Jon_Swartz\" >Jon Swartz<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong>#<br \/>\n  Epic takes aim at <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">App<\/a>le\u2019s financial advantage in App Store model<br \/>\n<\/strong>&#8221;<\/p>\n<h2 class=\"article__subhead\" itemprop=\"alternativeHeadline\">\n<\/h2>\n<p><\/p>\n<div class=\"column column--full article__content\">\n<div class=\"article__side\">\n<div class=\"container--sticky not-active\">\n<div id=\"cx-next\">\n              <\/div>\n<\/p><\/div>\n<\/p><\/div>\n<div id=\"js-article__body\" class=\"article__body article-wrap at16-col16 barrons-article-wrap\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0000262978\">\n<div class=\"barrons-article-ad-wrapper\">\n<div data-track=\"barrons-article-ad-wrap\" class=\"barrons-article-ad sticky_item\">\n<div class=\"barrons-main-article-ad-target sticky_target body_ad\" aria-hidden=\"true\"><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<p>       Define the market, then follow the money.<\/p>\n<p> This was the crux of Epic <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/game\/\" data-internallinksmanager029f6b8e52c=\"7\" title=\"Game\" target=\"_blank\" rel=\"noopener\">Game<\/a>s Inc.\u2019s legal argument much of Monday, and in all likelihood most of the week, as it makes its case in an antitrust lawsuit against Apple Inc.<br \/>\n        AAPL,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/202934861\/composite\" class=\"negative\">-2.58%<\/bg-quote><br \/>\n       in federal court in Oakland, Calif. <\/p>\n<div class=\"paywall\">\n       The beginning of week two of the closely watched trial, the most significant in Silicon Valley in more than a decade, centered on the financial might of Apple\u2019s App Store. Epic argues the 30% commission fee charged by the store to developers, as well as a \u201cwalled garden\u201d strategy that makes it difficult for cloud-gaming services to compete on the platform, constitutes anticompetitive behavior.<\/p>\n<p>Epic\u2019s main economic expert, David Evans, chairman of Global Economics Group, detailed Apple\u2019s monopoly in smartphone operating systems as the relevant market in question. Smartphones and consoles are different types of markets, he added, with iOS and Android examples of a \u201c<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a> purpose operating system\u201d used for multiple apps while games consoles are a special operating systems dedicated to gaming.\u00a0<\/p>\n<p>Of the top 50 games on iOS, based on downloads and revenue, the majority aren\u2019t available on game consoles, according to Evans\u2019 testimony Monday. Game consoles, he continued, aren\u2019t \u201csubstitutes\u201d for smartphones \u2014 and vice versa. What is more, switching costs for consumers between the two computing platforms is pricey.<\/p>\n<p>\u201cApple has substantial market power\u201d in smartphone operating systems, Evans said. It and Google\u2019s Android, he concluded, are a duopoly that have controlled 100% of the smartphone OS since 2013. Globally, excluding China, the split is 60%-40% Android; in the U.S., it\u2019s about even, he said.<\/p>\n<p>\u201cDevelopers need to be where customers are,\u201d Evans said. \u201cThey have to create iOS apps to reach iOS users and have to have an Android app to reach Android users.\u201d<\/p>\n<p>\u201cMy opinion is Apple has monopoly power in the iOS app distribution market\u201d based on \u201chigh and persistent profit margins,\u201d Evans said. (Those numbers, calculated by Evans based on data Apple provided in the lawsuit, were only shown to federal Judge Yvonne Gonzalez Rogers, who is deciding the case.)<\/p>\n<p>\u201cApple\u2019s restrictions harm competition\u201d for app developers and consumers, leading to higher prices, poorer distribution and slower innovation, Evans concluded. Without providing numbers, he said the App Store\u2019s R&amp;D-to-sales ratio \u201cis very low,\u201d and below the <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">media<\/a>n R&amp;D ratio of online retailers Alibaba Group Holding Ltd.<br \/>\n        BABA,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/201948298\/composite\" class=\"negative\">-2.57%<\/bg-quote><span>,<\/span><br \/>\n       eBay Inc.<br \/>\n        EBAY,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/204653455\/composite\" class=\"positive\">+2.78%<\/bg-quote><span>,<\/span><br \/>\n       Rakuten Group Inc.<br \/>\n        4755,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/201861450\/delayed\" class=\"positive\">+0.08%<\/bg-quote><span>,<\/span><br \/>\n       Etsy Inc.<br \/>\n        ETSY,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/202790087\/composite\" class=\"positive\">+0.98%<\/bg-quote><br \/>\n       and Mercado Libra Inc.<\/p>\n<p>Underpinning Evans\u2019 testimony is the notion that Apple customers are locked into its digital ecosystem, unaware of its overall costs. He estimated about 60% of iOS users exclusively play games on a smartphone. When Apple booted \u201cFortnite,\u201d Epic\u2019s popular game, off the App Store following the companies\u2019 dustup last year, more than 80% of iOS players of \u201cFortnite\u201d didn\u2019t find a replacement.<\/p>\n<div id=\"cx-membership-tile\"><\/div>\n<p>Evans\u2019 lengthy scheduled testimony is to be followed by Stanford University\u2019s Susan Athey, Microsoft Corp.\u2019s<br \/>\n        MSFT,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/207732364\/composite\" class=\"negative\">-2.09%<\/bg-quote><br \/>\n       former top economist. (Apple will first counter with MIT\u2019s Richard Schmalensee, who has a different definition of the market at issue in the case. He will testify that Apple owns a small share of the \u201cdigital games transaction market.\u201d Ironically, Schmalensee and Evans are co-authors of <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.amazon.com\/dp\/B01BO6QMCI\/ref=dp-kindle-redirect?_encoding=UTF8&amp;btkr=1\" class=\"icon none\">\u201cMatchmakers,\u201d<\/a> a book on \u201ctwo-sided markets\u201d where a company helps connect two types of customers.)<\/p>\n<p><strong>Read more: Apple v. Epic: Time is running out for Epic to make its antitrust case<\/strong><\/p>\n<p>Evans heads a group of economic experts from Epic tasked with showing the market dominance of the App Store \u2014 they argue it is an antitrust-busting monopoly \u2014 has catapulted Apple to a dizzying $2.2 trillion market value, the most of any U.S. company. (Privately held Epic is valued at $29 billion.)<\/p>\n<p>An Apple legal representative late Monday deemed Evans\u2019 testimony \u201cnonsensical\u201d and wildly inconsistent with his prior academic work. \u201cThese are sweeping, broad conclusions\u201d in assessing market power, the rep said.<\/p>\n<p>Ultimately, the case hinges on what Judge Gonzalez Rogers considers the relevant market in this case.<\/p>\n<p>Epic\u2019s economic analysis and market definition of App Store, and its impact on the greater app economy, is a linchpin of its legal argument. Epic has devoted more hours to Evans than any other witness, and Apple has frequently cited him in its legal documents and comments. Another Epic witness, Ned Barnes of the Berkeley Research Group, is expected to offer an analysis of the App Store\u2019s profits, which Apple has strongly objected to. <\/p>\n<p>The Epic Games Store, a digital videogame storefront for Microsoft Windows and macOS as an alternative to the App Store, charges a commission of only 12%. By 2024, Epic projects the store will post a profit of between $15 million to $36 million, although it will run up total losses of between $654 million to $854 million to get there, according to Epic\u2019s internal projections presented at the trial.<\/p>\n<p>Apple\u2019s App Store, which opened in 2008 \u2013 a year after the iPhone launched \u2013 quickly became profitable after ringing up $2.1 billion in billings in 2010, according to an Apple slide presentation last week.<\/p>\n<p>Still, the trial has not revealed the precise profitability of the App Store. Apple doesn\u2019t disclose the store\u2019s financial results, but it is a crucial piece of the company\u2019s services division, which generated $57 billion in revenue last year. <\/p>\n<p>Apple contends Epic, through the guise of an internal corporate plan called Project Liberty, has angled for years to bypass in-app payment processing systems from Apple and Alphabet\u2019s<br \/>\n        GOOGL,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/202490156\/composite\" class=\"negative\">-2.56%<\/bg-quote><\/p>\n<p>        GOOG,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/205453964\/composite\" class=\"negative\">-2.38%<\/bg-quote><br \/>\n       Google, each of which charge a 30% commission. In doing so, Apple attorneys said, Epic breached its contract with Apple. \u201cEpic purely aimed to enrich itself to the exclusion of other developers,\u201d an Apple legal strategist told MarketWatch.<\/p>\n<p>Apple could start arguing its case as early as Friday.<\/p><\/div>\n<\/div><\/div>\n<p><\/p>\n<div class=\"byline article__byline\">\n<p>      <span>By<\/span><\/p>\n<div class=\"author  hasMenu\" data-scrim='{\"type\":\"author\",\"header\":\"Jon Swartz\",\"subhead\":\"The Wall Street Journal\",\"list\":[]}' itemscope itemprop=\"author\" itemtype=\"http:\/\/schema.org\/Person\">\n<h4 itemprop=\"name\"><span class=\"ez-toc-section\" id=\"Jon_Swartz\"><\/span>Jon Swartz<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/p><\/div>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"http:\/\/www.marketwatch.com\/news\/story.asp?guid=%7B21005575-02D4-D4B5-4572-D4034221B597%7D&#038;siteid=rss&#038;rss=1\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Epic takes aim at Apple\u2019s financial advantage in App Store model &#8221; Define the market, then follow the money. This was the crux of Epic Games Inc.\u2019s legal argument much of Monday, and in all likelihood most of the week, as it makes its case in an antitrust lawsuit against Apple Inc. AAPL, -2.58%&#8230;<\/p>\n","protected":false},"author":1,"featured_media":238647,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[],"class_list":["post-246767","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/246767","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=246767"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/246767\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/238647"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=246767"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=246767"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=246767"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}