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Day 3 of the Apple vs Epic trial: What actually is an iPhone anyway?

Microsoft Xbox exec called up to explain differences with gaming console

The legal spat between Epic Games and Apple entered somewhat philosophical territory on Wednesday as the battling sides debated over whether the iPhone legitimately constitutes a general-purpose computing device, or is merely a locked-down platform with a specific purpose, such as a games console.

Epic Games, which has alleged Apple's tight control on the way iOS software is distributed and monetised is tantamount to an antitrust abuse, called up Lori Wright, Microsoft's head of Xbox business development, as a witness.

During her testimony (audio-only link to the hearing here), Wright divided devices into two categories. Special-purpose devices like the Xbox, she said, are purchased by consumers because they perform a specific function. While the Xbox can be used to stream content on Spotify or Netflix, its raison d'etre is playing games.

By contrast, general-purpose devices (a category she described as including Windows PCs and iPhones) are less defined. If you want to do a certain thing, you can – provided the software exists. Moreover, general platforms typically (but not always) afford developers a greater degree of freedom when it comes to the types of software they can build, and how they distribute it.

The Microsoft exec also pointed out that special-purpose devices often have a different business model. Whereas Apple earns a crust from the sales of devices, with App Store revenue ancillary, games consoles are effectively loss leaders, sold for less than the manufacturing cost in the hope the vendor will recoup the difference through software and content sales.

The distinction, based on Wright's testimony, is that nobody would purchase the Xbox with plans to use it like an open-ended platform. By contrast, there's an entirely different expectation when it comes to iOS.

That expectation isn't always realised, with Wright citing Apple's refusal to approve Microsoft's fledgling games streaming service xCloud for the iOS platform without first meeting a set of onerous requirements.

Bringing xCloud to the iPhone (the service launched in preview mode on Android last September) would have required Microsoft to break out each title into its own individual app – which would have proven unworkable, and meant that each game would be subject to the App Store's restrictions on violence and nudity.

The service would have also been subject to Apple's policies on in-app payments, with Cupertino swallowing almost a third of all revenue generated directly on the iPhone and iPad.

Wright's testimony contradicted Apple's argument that its policies governing the App Store were no different to those on competing platforms, like the Xbox.

Wright said of the Store: "You access the Xbox store as part of the integrated experience." She added that the Xbox doesn't compete for transactions with the Apple store.

There are parallels, though. Microsoft also skims 30 per cent from all game sales and in-app downloads. This has proven lucrative, and Wright said the company makes between $600m and $700m from Epic Games alone.

Microsoft also exerts a huge deal of control over what ultimately gets published. Redmond has a long-standing ban on emulators on the Xbox store, for example, and enforces this rule as best as it can, playing a long-running game of whack-a-mole with developers that try to slip through the cracks.

Despite that, there are disparities in how they work, and what they ultimately do. At the end of the day, an Xbox is not an iPhone.

Whether that's enough to convince US District Judge Yvonne Gonzalez Rogers remains to be seen. ®

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