App Store Profits Look Disproportionate: US Judge to Apple CEO

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A federal judge on Friday asked the CEO of Apple Inc., Tim Cook, whether the App Store of the iPhone manufacturer is justified by developers such as the “Fortnite” manufacturer Epic Games and whether Apple is exposed to real competitive pressure, his behavior to change.

Cook testified for more than two hours in Oakland, Calif., As the final witness in Apple’s defense against Epic’s allegations that the iPhone maker’s app store controls and commissions created a monopoly that Apple illegally abused.

App makers like music service Spotify Technology, European regulators and US politicians wondering if the company that once urged the world to think differently is now too big and too powerful.

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At the end of the testimony, Judge Yvonne Gonzalez interviewed Rogers Cook, urging him to admit that game developers generate most of the revenue from the App Store and help subsidize other apps in the store that do not pay commission.

Gonzalez said the profits Apple is making from game developers “seem disproportionate”.

“I understand the idea that Apple somehow makes customers dance,” she said. “But after that first time, after that first interaction, the developers keep customers up to date with the game. Apple only seems to benefit from it.”

Cook disagreed. “The free apps bring a lot to the table. Only the people who really benefit pay 30 percent commissions,” he said.

Epic has tried to show that Apple’s iPhone is a lucrative platform that includes users, referencing an internal Apple document that Epic claims the App Store has 78% operating margins. According to Cook, the document did not reflect the full cost of running the App Store.

The testimony represents Cook’s largest public statement on the App Store, which anchors Apple’s $ 53.8 billion service business.

Gonzalez Rogers also cited a poll that found 39% of software developers were dissatisfied with Apple’s app distribution services.

“It doesn’t seem to me that you are feeling pressure or competition to actually change the way you interact with developers,” said Gonzalez Rogers.

Cook responded that “we’re turning the place upside down” to respond to developer complaints, but later admitted that he doesn’t receive regular reports on how developers feel about working with Apple.

At the beginning of the three-week test phase, Gonzalez Rogers also pushed Epic CEO Tim Sweeney with difficult questions about how changes in the software world would force Apple to make changes. Sweeney said he hadn’t thought the problem through.

The maker of “Fortnite”, an online game in which players compete against each other in an animated “Battle Royale” battle to the last survivor, has launched a PR and legal campaign against Apple.

Epic parodied Apple’s iconic 1984 commercial, arguing in court that it was acting anti-competitive by only allowing approved apps on the world’s 1 billion iPhones and forcing developers to use Apple’s in-app payment system, Apple’s sales commissions charged up to 30%.

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Apple tried to convince Gonzalez Rogers that its rules for developers are aimed at keeping its customers’ information private and safe from malware.

“We have a manic focus on the user and do what is right for the customer,” said Cook. “Security is the foundation on which privacy is built. Technology has the ability to suck all kinds of data from people, and we’d like to give people tools to work around it.”

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