Source Code: Your daily look at what matters in tech.

gaminggamingauthorNick StattNoneWant to better understand the $150 billion gaming industry? Get Nick Statt's newsletter every Tuesday.03807ace1f
×

Get access to Protocol

Your information will be used in accordance with our Privacy Policy

I’m already a subscriber
Apple Epic Trial

Epic's expert testimony makes the case for an App Store monopoly

Some of the expert testimony strikes at Apple's core defense.

Epic's expert testimony makes the case for an App Store monopoly

The Epic v. Apple trial starts May 3.

Photo: Chris Delmas/AFP via Getty Images

Following Apple's submission Tuesday, Epic has now submitted its own written expert testimony ahead of the start of its landmark antitrust case against Apple, which goes to trial on Monday.


In similar fashion, academics and experts hired by Epic lay out the case the Fortnite maker plans to argue in court. The foundation of Epic's approach is a focus on establishing alleged monopolistic conduct on behalf of Apple and laying out the perils of Apple's walled garden ecosystem with respect to how difficult it is to switch to other mobile platforms.

For instance,. Dr. David Evans, the co-executive director of the Jevons Institute for Competition Law and Economics at University College London, lays out the argument that Apple harms competition in the mobile software distribution market through its App Store restrictions, rules that do not exist on other platforms like macOS and Windows:

I have identified at least 10 third-party app stores that distributed Windows and Mac applications in 2008 when the iOS App Store was launched. Direct distribution was also widely used. Based on a survey of major Windows and Mac apps in 2020, I found that they all distributed their software through multiple app stores and through direct downloads. A survey found that 78% of macOS developers distributed their apps through channels other than the Mac App Store.

Evans also points out how a vast majority of Fortnite players choose to play on only one platform, with a small minority of players opting to use a different platform. Epic's argument is that by denying Fortnite players the option to play on iOS, Apple is restricting that availability completely for players who either choose not to or cannot financially play on other platforms like game consoles:

Most Fortnite users play all or nearly all of their game minutes on a single platform. Of accounts with positive all-time game minutes, 82.7% have played Fortnite on only a single platform. The same pattern holds among players who use iOS as their primary platform—90.9% of those players have only used iOS.39 This means there are basically two types of players who used the iOS Fortnite app: those who predominantly used iOS, and those who predominantly used game consoles and personal computers but occasionally used the iOS app. Neither type of player engages in material substitution between playing Fortnite on their iPhones and playing on another device.

Evans also argues the App Store's abnormally high profit margins are a direct result of Apple's monopoly power over iOS app distribution, striking at Apple's core defense that the App Store restrictions serve mostly user privacy and security instead of its bottom line:

Despite Apple's claim that it would operate the App Store on a break-even basis, it soon earned profit margins that are very high relative to reasonable competitive benchmarks. It has been able to earn these high profits because it has had, and continues to have, monopoly power over iOS app distribution. That power is not constrained by other iOS app distributors because none exist—the App Store has effectively a 100% share in the iOS app distribution market. And, as discussed above, it is not constrained by competition in the foremarket because iOS app users have sunk costs, and switching and information costs, and developers have no choice but to distribute iOS apps to reach the large, stable installed base of iPhone users.

Dr. Susan Athey, a professor of Economics of Technology at Stanford's Graduate School of Business, speaks to the switching costs argument. Epic is raising this point to highlight that Apple's walled garden locks users into iOS and may harm competition by not allowing consumers easy access to alternative platforms if they're dissatisfied by high prices or locked out of access to apps like Fortnite:

Most users already own a smartphone and use numerous apps. Consequently, users are often "locked-in" to a specific smartphone OS because of the costs associated with changing OSs, including two app-related costs. First, a user leaving one platform and joining another faces app-related switching costs, including the costs of re-purchasing apps and in-app purchases that cannot be migrated, and of migrating and synchronizing apps and app data when possible. These switching costs create what I call the 'App Barrier to Switching.' Second, users incur what I call 'mixing-and-matching costs' in accessing and collaborating on apps across different platforms, whether among their own personal devices or the devices of members of a group such as a family or organization.

And Dr. Peter E. Rossi — a professor of marketing, economics and statistics at UCLA — conducted a study pointing out that users of iOS are willing to pay higher prices for in-app purchases and subscriptions rather than decreasing spending, while only 1.3% of users said they would switch to a different device, bolstering Epic's switching costs argument:

Professor Rossi surveyed 2,595 iOS users who had spent money on in-app purchases or subscriptions in the past 30 days. (Rossi.) Of these iOS users, 81% stated that they would have made the same in-app purchases if the cost of the digital content had been 5% higher, or 34.7%. (Rossi.) The remaining 19% of iOS users would have decreased their spending by 27%. (Rossi.) Only 1.3% of survey participants reported that they would have switched from iOS to a different device if the fees for in-app digital content increased by 5%. (Rossi.)
Protocol | China

China’s edtech crackdown isn’t what you think. Here’s why.

It's part of an attempt to fix education inequality and address a looming demographic crisis.

In the past decade, China's private tutoring market has expanded rapidly as it's been digitized and bolstered by capital.

Photo: Getty Images

Beijing's strike against the private tutoring and ed tech industry has rattled the market and led observers to try to answer one big question: What is Beijing trying to achieve?

Sweeping policy guidelines issued by the Central Committee of the Chinese Communist Party on July 24 and the State Council now mandate that existing private tutoring companies register as nonprofit organizations. Extracurricular tutoring companies will be banned from going public. Online tutoring agencies will be subject to regulatory approval.

Keep Reading Show less
Shen Lu

Shen Lu is a reporter with Protocol | China. She has spent six years covering China from inside and outside its borders. Previously, she was a fellow at Asia Society's ChinaFile and a Beijing-based producer for CNN. Her writing has appeared in Foreign Policy, The New York Times and POLITICO, among other publications. Shen Lu is a founding member of Chinese Storytellers, a community serving and elevating Chinese professionals in the global media industry.

After a year and a half of living and working through a pandemic, it's no surprise that employees are sending out stress signals at record rates. According to a 2021 study by Indeed, 52% of employees today say they feel burnt out. Over half of employees report working longer hours, and a quarter say they're unable to unplug from work.

The continued swell of reported burnout is a concerning trend for employers everywhere. Not only does it harm mental health and well-being, but it can also impact absenteeism, employee retention and — between the drain on morale and high turnover — your company culture.

Crisis management is one thing, but how do you permanently lower the temperature so your teams can recover sustainably? Companies around the world are now taking larger steps to curb burnout, with industry leaders like LinkedIn, Hootsuite and Bumble shutting down their offices for a full week to allow all employees extra time off. The CEO of Okta, worried about burnout, asked all employees to email him their vacation plans in 2021.

Keep Reading Show less
Stella Garber
Stella Garber is Trello's Head of Marketing. Stella has led Marketing at Trello for the last seven years from early stage startup all the way through its acquisition by Atlassian in 2017 and beyond. Stella was an early champion of remote work, having led remote teams for the last decade plus.

It’s soul-destroying and it uses DRM, therefore Peloton is tech

"I mean, the pedals go around if you turn off all the tech, but Peloton isn't selling a pedaling product."

Is this tech? Or is it just a bike with a screen?

Image: Peloton and Protocol

One of the breakout hits from the pandemic, besides Taylor Swift's "Folklore," has been Peloton. With upwards of 5.4 million members as of March and nearly $1.3 billion in revenue that quarter, a lot of people are turning in their gym memberships for a bike or a treadmill and a slick-looking app.

But here at Protocol, it's that slick-looking app, plus all the tech that goes into it, that matters. And that's where things got really heated during our chat this week. Is Peloton tech? Or is it just a bike with a giant tablet on it? Can all bikes be tech with a little elbow grease?

Keep Reading Show less
Karyne Levy

Karyne Levy ( @karynelevy) is the West Coast editor at Protocol. Before joining Protocol, Karyne was a senior producer at Scribd, helping to create the original content program. Prior to that she was an assigning editor at NerdWallet, a senior tech editor at Business Insider, and the assistant managing editor at CNET, where she also hosted Rumor Has It for CNET TV. She lives outside San Francisco with her wife, son and lots of pets.

Protocol | Workplace

In Silicon Valley, it’s February 2020 all over again

"We'll reopen when it's right, but right now the world is changing too much."

Tech companies are handling the delta variant in differing ways.

Photo: alvarez/Getty Images

It's still 2021, right? Because frankly, it's starting to feel like March 2020 all over again.

Google, Apple, Uber and Lyft have now all told employees they won't have to come back to the office before October as COVID-19 case counts continue to tick back up. Facebook, Google and Uber are now requiring workers to get vaccinated before coming to the office, and Twitter — also requiring vaccines — went so far as to shut down its reopened offices on Wednesday, and put future office reopenings on hold.

Keep Reading Show less
Allison Levitsky
Allison Levitsky is a reporter at Protocol covering workplace issues in tech. She previously covered big tech companies and the tech workforce for the Silicon Valley Business Journal. Allison grew up in the Bay Area and graduated from UC Berkeley.
Protocol | China

Livestreaming ecommerce next battleground for China’s nationalists

Vendors for Nike and even Chinese brands were harassed for not donating enough to Henan.

Nationalists were trolling in the comment sections of livestream sessions selling products by Li-Ning, Adidas and other brands.

Collage: Weibo, Bilibili

The No. 1 rule of sales: Don't praise your competitor's product. Rule No. 2: When you are put to a loyalty test by nationalist trolls, forget the first rule.

While China continues to respond to the catastrophic flooding that has killed 99 and displaced 1.4 million people in the central province of Henan, a large group of trolls was busy doing something else: harassing ordinary sportswear sellers on China's livestream ecommerce platforms. Why? Because they determined that the brands being sold had donated too little, or too late, to the people impacted by floods.

Keep Reading Show less
Zeyi Yang
Zeyi Yang is a reporter with Protocol | China. Previously, he worked as a reporting fellow for the digital magazine Rest of World, covering the intersection of technology and culture in China and neighboring countries. He has also contributed to the South China Morning Post, Nikkei Asia, Columbia Journalism Review, among other publications. In his spare time, Zeyi co-founded a Mandarin podcast that tells LGBTQ stories in China. He has been playing Pokemon for 14 years and has a weird favorite pick.
Latest Stories