Suited

The Epic trial that could change Apple's iPhone app control as we know it

Tuesday, May 4, 2021 by Robinhood Snacks | Disclosures
_Suited up for the Battle Royale [Drazen/E+ via GettyImages]_

Suited up for the Battle Royale [Drazen/E+ via GettyImages]

Battle Royale... But instead of crossbows, these warriors have briefcases and JDs. Yesterday was Day #1 of the landmark trial over Apple's App Store dominance. The lawsuit was brought by Fortnite-maker Epic Games, and could seriously damage Apple's app-power. It all started in August last year, when...

  • Shot #1: Epic added its own in-app payment system to bypass the "App Tax" — the ~30% cut of in-app purchases, downloads, and subs that Apple and Google take across apps in their stores.
  • Shot #2: Apple and Google said "not today," expelling Fortnite from their stores for rule-breaking.
  • Shot #3: Epic filed lawsuits against both tech giants, and launched a loud PR campaign (see: Nineteen-Eighty Fortnite). A date for the Google trial hasn't been set yet.

Bring these lawyers some Advil... Yesterday, Epic argued that Apple has an iPhone app monopoly, and purposely locks customers into its ecosystem. Apple argued that it gets to set the rules for its own App Store, which it says are needed to ensure quality and security. Epic disagrees.

  • Facepalm: A key part of the debate revolves around the market that Apple allegedly dominates. Epic says it's iPhone app distribution.... Apple says it's game distribution.
  • Google's Android controls ~85% of the operating system market — but it allows software downloads outside of Google's app store. With iOS, you can mostly only download via App Store.
  • If Epic wins, Apple could be forced to give up control of app distribution, allowing customers to freely install software on iPhones.
THE TAKEAWAY

This could be Apple's make-or-break moment... The App Store created an explosion of opportunity (and $$$) for developers... but at a cost. That could change if Apple loses this suit — especially since it's facing other (related) antitrust scrutiny: last month, it got grilled by the Senate over its smartphone ecosystem power, and last week the EU charged it with allegedly abusing its control over music app distribution. CNBC estimates that Apple made $64B last year from the App Store (~30% of its annual revenue). Changes on the app side could cost it big.