Apple (AAPL) CEO Tim Cook will take the witness stand Friday morning in the company's closely watched court battle with "Fortnite" developer Epic. Cook's testimony will prove to be an important piece of Apple's defense, as it seeks to fend off allegations that it operates its App Store as an illegal monopoly.
The Associated Press reported that the judge overseeing the case granted Apple's request to allow Cook to be the first witness to take the stand Friday.
Cook, a polished and charismatic public speaker, will have to show that the 30% fee Apple charges larger developers for each sale they make through App Store and the company's control of the marketplace are an integral parts of the iOS platform.
“What he needs to do is show that Apple is not abusing its position with the App Store, which is the only way to get...third party applications onto the iPhone device,” MIT Sloan School of Management professor Michael Cusumano previously told Yahoo Finance.
Apple collects its 30% commission from developers for each sale they make through the App Store, though companies that make less than $1 million in revenue only pay 15%. Subscription services also pay 30% for the first year of a subscription, but that drops to 15% for each subsequent year.
Epic says Apple's requirement that all app developers use its payment system is unfair. By allowing developers to offer their own payment options, the company claims, it can provide goods at lower prices. Epic is also calling on Apple to allow third-party app stores on the iPhone, something Apple says will invite malware and other malicious apps onto users devices.
The conflagration between the two companies kicked off last August when Epic added its own payment option to "Fortnite," circumventing Apple's rules. The iPhone maker removed the app, and it hasn't been available on iOS since. Epic did the same with its Android version of the app, with Google (GOOG, GOOGL) also taking it down. Google has roughly the same rules as Apple for its Play Store.
Apple doesn’t break out its quarterly revenue for the App Store, instead, bundling it with other so-called services like Apple Music, iCloud, Apple TV+, and AppleCare subscriptions. But the services segment brought in a whopping $53.7 billion in revenue in 2020 alone. All totaled, Apple saw $274 billion in revenue for the year.
An expert witness testified for Epic that the App Store enjoys operating margins of 78%, though Apple says only 5% of all apps are paid. Another 9.9% are free, but offer in-app purchases, like "Fortnite," while the rest are free and supported by ads.
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