This Monday starts an epic trial. Or should we say, the trial between Epic Games and Apple starts this Monday. The latter tossed Epic’s popular Fortnite game out of the App Store after it was discovered that the developer allowed users to make in-app payments through Epic’s own payment platform.
Epic Games says that the Apple App Store had profit margins of 78% in 2019
The Apple App Store makes the company a vault load of money
Despite Barnes’ comments about obtaining the numbers from Apple and the files of Tim Cook, the company denies the accuracy of his calculations. Apple is also asking the court to order that a tight lockdown be placed against the public discussion of App Store profits. While Barnes was told by an Apple employee that the numbers he obtained from Apple don’t show the whole story, he did the rest of the calculations himself to determine that the App Store had a 79.6% operating margin for 2018 and 2019.
To reiterate, Apple has asked the court not to allow Epic to mention App Store financial data in the courtroom. Apple said that it was concerned that by doing so, the data could “unduly confuse the securities markets and participants in those markets, including the many pension funds, mutual funds, and other ordinary investors who own Apple stock.”
Today, Apple released a statement that says that Epic’s “calculations of the operating margins for the App Store are simply wrong and we look forward to refuting them in court.” The App Store margins-and thus App Store profits-have supposedly continued to move higher from 2019 forward. Sensor Tower says that the App Store generated $22 billion in commissions for Apple last year while Toni Sacconaghi of Bernstein says that the App Store has an 88% gross profit margin.
Apple executives say that the company doesn’t look at P/L numbers for individual units. Cook said in his pre-trial testimony that, “Apple’s business is not structured that way that allows a person to push a button and obtain an App Store” profit and loss statement. Apple chief compliance officer Kyle Andeer said last month at a congressional hearing, “When we look at the App Store, it’s not a separate standalone business for us. It’s an integrated feature of our devices.”
It is strange to see that the better the expected performance of the App Store is, the more anticompetitive the company is considered.