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Apple Epic Trial

4 big takeaways from Epic v. Apple, day one

There was a fair amount of courtroom chaos, some enlightening courtroom arguments and a whole lot of video game jargon.

4 big takeaways from Epic v. Apple, day one

Epic CEO Tim Sweeney's early testimony revolved around answering basic questions about the nature of Epic's business.

Photo: David Paul Morris/Bloomberg via Getty Images

The first day of the Epic Games v. Apple trial kicked off Monday in California, featuring opening statements from both sides and hours of testimony from Epic CEO Tim Sweeney.

As befitting of what is arguably the most consequential tech antitrust trial since Microsoft, it's been a fair amount of courtroom chaos, some enlightening courtroom arguments and a whole lot of video game jargon.

Here are the biggest takeaways from our first day in court.

1. The court was not prepared for a Fortnite lawsuit

In the half hour leading up to the trial's start on Monday morning, the courtroom public access phone line was swarmed by young Fortnite fans clamoring for access to the game's long-lost iOS version. "We just want mobile back please," was a common refrain from the call participants, all of whom were talking freely over one another as the court struggled to figure out how to mute those dialing in.

It was an absurd, hilarious and also quite illustrative debacle. It showed both how unprepared the court was for an antitrust trial drawing eyes and ears from all age groups and also illuminated how invested even a teenage Fortnite player is in the outcome of this case. The big picture is an antitrust battle over app distribution, but for regular consumers, this has always been about losing access to a favorite mobile game because of a complex corporate squabble.

2. Talk of the metaverse, and basic video game facts

Much of Sweeney's early testimony revolved around answering basic, procedural questions about the nature of Epic's business and the fundamentals of Fortnite, including what the Unreal Engine is and what a "cosmetic" and video game "avatar" are. At one point, Judge Yvonne Gonzalez Rogers told Sweeney, "I'll just stop you and ask you to explain to the court what a 'server-side change' is."

But one of Sweeney's more animated answers came when he was asked to elaborate on all the various elements that make up Fortnite. "[Fortnite is] a phenomenon that transcends gaming. It's a social and entertainment experience that includes a variety of gaming experiences and non-gaming experiences within it," he said, before dropping the term metaverse, prompting the court reporter to ask for elaboration.

"The metaverse was defined in early science-fiction literature and novels such as 'Snow Crash,'" Sweeney explained. This concept is cited more generally as both Epic's inspiration and its ultimate goal with Fortnite, with the developer having turned its virtual island into an ever-evolving pop culture mashup capable of housing Marvel superheroes, real-life actors and celebrities and much more.

And now the metaverse is part of the court record in Epic's fight against Apple, no doubt something Sweeney will relish when this is over, regardless of the outcome.

3. The 70-30 cut becomes a central character

Part of the intense interest in this trial has been gaining unprecedented access to competitive industry secrets. Apple is loath to ever talk about its business in any meaningful fashion, making the court system one of our few ways to look behind the curtain of the iPhone maker's business. And the game industry is well known for keeping a tight lid on the contractual details around, say, console exclusives and licensing deals. That's precisely why the 70-30 revenue share built into both the App Store and the game industry's digital distribution platforms has become a central character in the trial.

Epic wants to bypass that cut, and Epic's opening arguments sought to establish the revenue split as both unjustified and designed primarily to line Apple's pockets. Apple wants to protect it, and its opening arguments tried to establish the split as an industry standard agreement established well before the App Store's introduction. A key finding here includes emails from Apple executive Phil Schiller in which he reveals reservations way back in 2011 about the 70-30 cut remaining "unchanged forever," while Apple's lawyers hit back at Sweeney during cross examination for once upon a time offering developers a 60-40 publishing split.

We also saw some other bombshell figures leak out of the court through uploaded exhibits and other submitted documents: Fortnite made an eye-popping $9 billion in just two years; Epic's gross revenue in 2020 was $5.1 billion (and Fortnite, with more than 400 million players, contributed an overwhelming majority of that); and the App Store has an estimated profit margin of 78%, according to an analysis from an expert Epic witness.

4. Apple thinks prior court rulings give it the win

In her opening statement, Apple's lawyer, Karen Dunn, made sure to cite, by name, some of the freshest rulings in antitrust, particularly Ohio v. American Express, which was decided at the Supreme Court in 2018, and FTC v. Qualcomm, which ended in a federal appeals court last summer.

Both are seen as defendant-friendly decisions, further narrowing the definitions in antitrust law and requiring plaintiffs to show more. Antitrust suits aren't just about what's unfair. Most plaintiffs have to show that the other side has a monopoly in a relevant market, exclusionary conduct by the defendant in that market, harm to consumers as a result of that conduct (usually through higher prices or lower output) and a lack of justification. None is really expendable, but rulings like the ones the Apple lawyer cited have made a lot of these difficult to demonstrate. "Epic has to run the table on this," Moyé said, and for the most part, she's right.

That's not to say Epic came unprepared. Its lawyer, Katherine Forrest, alluded to documents suggesting Apple is extracting its commission arbitrarily: "There's a name for business that set prices without regard to costs: monopolies," she said. Showing that sort of pricing power could help Epic get around some of the precedent. Even if it doesn't, though, Forrest said Epic's experts have shown that Apple has a monopoly because it carefully ensured users, including Epic's, won't switch to Android or other platforms, a line of thinking that popped up in Europe's charges against Apple last week and that the Fortnite lovers on the call echoed.

Correction: An earlier version of this article mistakenly identified Apple's counsel. It was lawyer Karen Dunn who delivered opening remarks, not Veronica Smith Moyé. It also incorrectly stated who was affected by recent defendant-friendly antitrust decisions. It is the plaintiffs that must provide more evidence, not the defendants.

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