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CEO Tim Cook testifies in Epic Games v. Apple trial

Credit: Apple

Apple CEO Tim Cook is testifying Friday in the Epic Games v. Apple trial, answering questions from both Apple and Epic lawyers and offering a recap of the Cupertino company's arguments.

Cook will be on the stand for a total of an hour and 40 minutes. Though his testimony likely won't impact the trajectory of the trial, it's a noteworthy event because it marks the first mark that Cook himself has testified in a legal case.

The Apple chief executive kicked off his testimony by reiterating his limited involvement in managing the day-to-day operations of the App Store. He described his role as "limited, obviously, in a review capacity."

Cook says Apple's mission is to "make the best products in the world that really enrich people's lives." To that end, Apple invests "like crazy in R&D," Cook added.

"We've invested $100 billion since the start of the iPhone's development, and that number has just accelerated," Cook said. "We have a maniacal focus on the user and doing the right thing by the customer."

He also reiterated that safety, privacy, and security are key components of Apple's strategies. He emphasized the importance of the App Review process and new features like App Tracking Transparency as safeguards against malicious apps or companies that "vacuum up data."

On the ATT feature, which has been criticized by some companies reliant on user data, Cook says that the reaction among developers has been mixed. "Some applaud it, and some are not happy with it." However, Cook said that, when a developer disagrees with the policy, Apple listens.

"We listen. We don't have a tin ear, but we're making decisions in the best interests of the user. And I think it's important to know that sometimes there's a conflict between what the developer may want and what the user may want," Cook said.

Security and R&D spending

The Apple chief executive also bashed the security of competing platforms like Android and Windows. Citing third-party data, Cook said "it's literally an off-the-chart level of difference" between those platforms and iOS.

When Judge Yvonne Gonzalez Rogers asked him to clarify what the data said, Cook said that 1% to 2% of malware is on the iPhone. By contrast, it's about 30% to 40% on Windows and another 30% to 40% on Android. Although App Review process isn't perfect, Cook said "we do a really good job."

On the subject of R&D spending, Cook says that its research efforts do benefit the App Store. He also maintained that R&D has increased each year. In 2018, Apple invested $14.2 billion in R&D. By 2019, that number hit $16.2 billion, up 14% year-over-year. In 2020, R&D spending reached $18.8 billion.

Anti-steering rules, App Store programs, and 'stickiness'

When questioned about the App Store small business program that slashes commissions to 15% for companies making less than $1 million per year from the App Store, Cook denied that antitrust scrutiny was the primary driver of the program.

Cook said that antitrust regulation "was in the back of my mind," but maintained that the primary reason for the program was the COVID-19 pandemic.

He also addressed Apple's anti-steering guidelines that prohibit developers from advertising services outside of the App Store within their apps.

"It would be akin to Apple down at Best Buy saying 'Best Buy, put in a sign there where we are advertising that you can go across the street and get an iPhone," Cook said.

When asked about competing app stores like those from Sony, Microsoft, and Nintendo, Cook confirmed that he's "not a gamer."

Cook also shot down notions that Apple's iPhone is a dominant player in the smartphone industry. He says iPhone has a 15% share of the market globally, and that Android is dominant.

Additionally, the Apple executive denied that the company makes it more difficult to switch from iPhone to Android. He cites features like the Data Transfer Project and says that Apple is focused on "making efforts to get Android people to switch to iPhone."

On that note, Cook was also questioned about the term "sticky," as well as emails from Steve Jobs about "locking" people into the Apple ecosystem. Cook says the term "sticky" is rarely used within Apple, but defines it as Apple having "such a high customer satisfaction that people don't want to leave."

When asked whether he believes the App Store is profitable, Cook said he does. However, he noted that Apple does not break down profitability in a granular manner. In other words, he said "we don't do profitability at that level."

Citing earlier testimony from Epic witness Ned Barnes that suggested that the App Store had profit margins in the 70% to 80% range, Apple maintains that this doesn't account for investments in research and development or other areas. Cook said that number applied to both the iOS and macOS App Stores.

Cook's comments on Epic prayers for relief

If Epic Games got its way and Apple was forced to allow side-loading apps and third-party app stores, Cook said the result would be a disaster.

"I think it would be terrible for the user because if you look at it today we review 100,000 apps a week and reject 40,000 for different reasons," Cook said, adding that it wouldn't take long for the ecosystem to become a "toxic mess."

Developers would also be hurt since they rely on the App Store being a "safe and trusted place where customers want to come," Cook said.

On Epic's argument to allow third-party payment processing, Cook said it would be problematic for a couple of reasons.

"It would wind up where customers would then have to [fill in] their credit cards for all these different apps, so it would be a huge convenience issue, but also the fraud issues could go up."

"Also, we would have to come up with an alternate way of collecting our commission. We would then have to figure out how to track what's going on and invoice it and then chase the developers," Cook said. "It seems like a process that doesn't need to exist."

Cross-examination, questions from Epic lawyers

During the cross-examination portion of the testimony, Cook was asked by an Epic lawyer about whether Apple competes with Google in the operating system market. Cook said "customers don't buy operating systems, they buy devices."

Epic's lawyers continued to press Apple about its App Store margins. Cook continued denying that it separates out its businesses like that, but noted that revenue from the iOS App Store is a lot larger than the Mac App Store.

Cook also confirmed that he agreed with the decision to terminate Epic's developer account. He noted that it would benefit users if Epic returned to the App Store, though he maintained that Apple doesn't want Epic to return because of the money.

When questioned about how an App Store could be curated if it has 1.8 million apps, Cook said apps "only have to live up the rules." He notes that Apple features apps, but doesn't pass a "moral judgement" on them.

Cook said that there are only "just a few" developers who don't like the App Store ecosystem. However, Epic's lawyers also brought up the fact that no developers were testifying on behalf of Apple. Cook said that doesn't surprise him, since "I don't see that there would be a natural way to include them."

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