Judge Yvonne Gonzalez Rogers, who is presiding over the Epic v. Apple antitrust trial, saved her best for last. As Apple CEO Tim Cook prepared to leave the stand on Friday afternoon on the 15th and final day of courtroom testimony, Gonzalez Rogers took nearly 10 minutes — the longest singular line of questioning she's put to a witness in the trial — to grill Cook about both the business model of the App Store and the very nature of its relationship with developers.
The end result was the best hint yet how Gonzalez Rogers is thinking about the Fortnite dispute, which one of Epic's many complaints she finds credible and how she may decide to rule when the trial ends. In particular, the judge seems concerned about the rigidness of the 30% cut and Apple's rules against allowing developers to communicate ways to purchase digital goods off-platform.
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At the beginning of her questioning, she got Cook to admit that gaming, and in particular in-app purchases for mobile games on the iPhone, generate the majority of the App Store's revenue. From there, Gonzalez Rogers forced Cook to answer a series of increasingly uncomfortable questions about whether Apple's conduct with regard to game developers is fair and not in fact anticompetitive.
"What is the problem with allowing users to have choice, especially in a gaming context, to find a cheaper option for content?" she asked Cook, who answered that users have "a choice between many different Android models and an iPhone" if they're looking for choice. "If they wanted to go and get a cheaper Battle Pass or V-Bucks, and they don't know they've got that option, what is the problem with Apple giving them that option?" Apple's App Store guidelines forbid developers of notifying users of alternative payment options, and both sides have argued in court about the limits of Apple's restrictions, though Cook has clarified that developers can ask for a user's email address and market to them over email.
Cook, who seemed taken aback at the line of questioning, said Apple needs to get a return on its intellectual property investment, and that's essentially why the App Store takes 30% and why the model has been so rigid over the years. "The gaming industry seems to be generating a disproportionate amount of money relative to the IP you have given them, and everyone else. In a sense, it's almost as if they're subsidizing everybody else," Gonzalez Rogers said.
Read more:Tim Cook argues only Apple can protect iOS users from themselves
Even Cook's rather deft attempts to deflect didn't seem to work out well for Apple. He said that Apple allows free apps on the iPhone, as well as apps selling physical goods without requiring they pay a commission, because "it increases the traffic on the store dramatically." Gonzalez Rogers said that using that logic, the App Store's design is not about a return on investment so much as it is about controlling access to the iPhone customer base. And with regard to games, "You're charging the gamers to subsidize Wells Fargo."
Cook said the gamers transact on the platform, so the game makers owe Apple the cut. "People do lots of things on your platform," Gonzalez Rogers said, to which Cook replied, "There are clearly other ways to monetize, but we chose this one because we think it's the better way." The judge shot back again: "It's also quite lucrative."
"I understand this notion that somehow Apple's bringing the customers to the users. But after that first time, after that first interaction, the [developers] are keeping the customer with the games. Apple's just profiting off that, it seems to me," Gonzalez Rogers said, nearing the end of her questioning. (At that point, Cook simply said, "I view it differently than you do.") The judge added, "It doesn't seem to me you feel any pressure or competition to actually change the manner in which you act to address the concerns of the developers."
Read more:Apple's Craig Federighi throws Mac security under the bus
The judge also hammered Cook over the App Store commission reduction last year, as part of its new small business program, saying it "seemed to be a result of the pressure that you're feeling from investigations, from lawsuits, not competition," and she also took issue with Cook deflecting by using the game console market. "When other stores reduced their price, Steam reduced their price, you felt no pressure to reduce your price," she countered.
The general takeaway is that Gonzalez Rogers expressed deep skepticism of Apple's claims that it operates the App Store the way it does out of the goodness of its heart. Apple executives have reiterated throughout the trial that they built iOS and the App Store this way out of concern for user security and privacy and for an end-to-end experience. But Gonzalez Rogers says there were also clear financial incentives to do so and that it appears Apple is incapable of responding to any concerns that may threaten the benefits it receives. Her back-and-forth with Cook struck at the heart of the dispute between Apple and Epic Games and what it says about the larger relationship between a platform owner and the developers of its most successful software segment.
Read more:Fortnite made Apple hundreds of millions of dollars
It was also an astonishingly rare moment to see one of the most powerful executives in the country be forced to answer questions without a public relations handler and a well-prepared script, in effect laying bare a fundamental disconnect in how Apple appears to see its business and the reality of its public perception. What happens next could still very well end in Apple's favor, or it could result in a rather minor adjustment to App Store guidelines — perhaps even something more.
Update May 21st, 5:25PM ET: Clarified that Friday, May 21st was the final day of courtroom testimony and the evidentiary portion of the trial. The case will conclude on Monday, May 24th.
