The ongoing federal court trial in California between Apple and Epic Games has provided some unprecedented levels of insight into the iOS platform and iPhone. But most of all, it has confirmed things we already knew.
Most notably that Cupertino built the wider iOS ecosystem with an aim to deter people from switching to other platforms.
On the seventh day of the bench trial, Epic Games called to the stand Stanford micro-economist Susan Athey, who testified that the peripheral apps that ship with iOS – most notably the App Store, but also the various music, e-book, and video storefronts – are designed to keep users loyal.
The argument follows that if you've already accumulated content on one platform, such as app purchases or e-book downloads, switching platforms means you're effectively forced to repurchase them.
Or, put simply, you can't buy a game on iOS and have it run on Android, a fact Epic Games was keen to highlight, as its own marketplace allows users to run the same software on multiple platforms. Epic is also suing Google along the same lines as its fight against Apple and its ecosystem stranglehold.
"From the user's perspective, the fact that we have these switching costs means they're less sensitive to low prices or new features that a platform introduces," Athey said. "As these change over time, you may be attracted to a new feature that meets your needs, but the switching costs impede the consumer's response to that and also create less incentives for firms to create them."
This, she pointed out, has also meant that it's less likely for an outsider to successfully compete with Android or iOS.
Not only would new smartphone operating systems face a "chicken and egg" dilemma, where they're forced to attract developers to an unproven platform with a negligible userbase, they'd also face the uphill fight of trying to overcome these inherent switching costs. The failure of Windows Phone, BlackBerry 10, and other would-be platforms in the past 10 years are testament to this.
This reality, Athey argued, increased the market power of incumbent platforms, and thus their control over developers and users alike.
Further ammunition in Athey's testimony came from emails obtained during the discovery, with one 2013 message to Tim Cook from Eddy Cue, Apple's senior vice president of Internet Software and Services, describing Apple's stores as the best way to get customers "hooked" to the ecosystem, and would prove more effective than discounting hardware.
"Did we think customers would buy significantly more if we gave them a straight discount instead of an iTunes card? If this isn't a huge difference, I think we are making a mistake. We are discounting our product instead of adding value to them," he wrote.
"Getting customers using our stores is one of the best things we can do to get people hooked to the ecosystem. The more people use our stores the more likely they are to buy additional Apple products and upgrade to the latest versions. Who's going to buy a Samsung phone if they have apps, movies, etc already purchased? They now need to spend hundreds more to get to where they are today."
The slides to Athey's presentation, which include the email from Cue, are available in a public Box folder, which has been updated each day by both parties with new materials from the trial.
It also emerged during the trial that Apple decided against offering its iMessage app to Android users as it could lead to iPhone-owning families giving their kids Google-powered phones.
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While this doesn't address the core of the issue surrounding the trial – namely, whether Apple's payment policies on the App Store are anti-competitive and unfair – Athey's testimony added additional colour to Epic Games' portrayal of Apple as a firm unafraid to weaponize the iOS platform to deter competition and limit customer choice.
Apple is now tasked with making the case that its control of the App Store is a necessary evil designed to protect consumers, rather than fill its own pockets.
Already we've started to see the seeds of that, with Apple announcing earlier this week - the timing was impeccable - that it blocked $1.5bn in potentially fraudulent transactions during 2020, with more than three million stolen credit cards blocked from the platform.
The iGiant also claimed to have blocked 215,000 apps for privacy violations, as well as 48,000 apps containing hidden or undocumented features, ultimately resulting in 470,000 developer accounts terminated.
Whether it could have accomplished this without taking a 30 per cent cut from each sale is a matter for debate. ®