Ex-Apple marketing bigwig tells Epic judge: Our revenue-sharing model is designed to stop money laundering
Oh, and remember when Tim Sweeney himself demonstrated Metal API? Awks
Three weeks have passed since the high-stakes California bench trial between Epic Games and Apple commenced. On Monday, it was the turn of Phil Schiller, Apple Fellow and former senior VP of Worldwide Marketing, to take the stand.
Schiller, who joined Apple in 1997 upon the return of Steve Jobs, re-emphasised Apple's argument that the App Store's costs are necessary to protect the health of the platform, citing the $99 entry-fee to the developer programme, which he claimed would prevent the App Store becoming swamped with spam or low-quality apps.
He also added that the company feared that if Apple reduced its commission significantly, the App Store may become a conduit for money laundering.
"There were concerns about fraud," he said. "There were many concerns from our finance and anti-fraud teams about money laundering. Mechanisms that could get manipulated when rates go below."
"I proposed other commission levels even lower [than 15 per cent] and our finance and anti-fraud team was pretty adamant that if we get much below 15 per cent, the rate of money laundering attempts will increase dramatically," Schiller added. You can listen to his testimony here.
He further argued that the company's App Store policies were reasonable given the expense of maintaining and supporting the ecosystem for third-party code, as well as its investment in hardware and software development. This total R&D spend, he said, amounted to $100bn since 2005, with $18bn spent in 2020 alone.
The most pertinent item on Schiller's list, considering the nature of Epic Games, was Apple's Metal APIs.
Debuting at WWDC 2014 and launching with iOS 8 (and later on MacOS 10.12 El Capitan), Metal was pitched as a low-overhead replacement for the ageing OpenGL APIs. It provided developers with near bare-metal access to the CPU and GPU, allowing them to wring more performance out of the iPhone and Mac when running computationally heavy 3D graphics applications.
Ironically, Apple selected Epic CEO Tim Sweeney to demonstrate Metal's potential at the launch event, with the company exec gushing about its ability to create large-scale real-time particle effects on the iPad.
Sweeney also noted that Metal was comparatively less taxing on the device's CPU, giving it the opportunity to run dozens of AI NPCs concurrently – in the case of his presentation, a school of koi fish. Footage of his WWDC 2014 appearance was submitted as evidence, which you can find in the trial's Box folder here.
Schiller also pointed to the expense of running WWDC, its annual developer jamboree, which he said costs $50m annually to run.
Apple charged $1,599 for a ticket to its last in-person event, held in the pre-pandemic halcyon days of 2019. Six thousand people attended, of which 320 received a scholarship from Apple that waived their entry costs. Multiplying 5,680 paying attendees by $1,599 gives you roughly $9.08m in revenue, although the catering, lectures, hosting and so on would have cost Apple.
Per Schiller's deposition, the company has also started work on a dedicated facility on its Apple Park campus for third-party developers, where they'll be able to easily access support. It was not revealed when this facility will open.
It remains unclear whether Judge Yvonne Gonzalez Rogers will accept Schiller's attempt to conflate the App Store with the underlying technology it runs upon – like the custom Apple Silicon chips and the iOS platform.
In the last financial year ending 26 September 2020, Apple's iPhone sales were almost three times higher ($137.7bn) than its operating expenses ($38.6bn). These include R&D, marketing, and administrative costs. Its services category – which includes the App Store, Apple Music, Apple TV+, and iCloud – raised $53.7bn.
The trial is expected to conclude next week. ®